In the limelight
8 March 2015 10:18 PM GMT
The Media and Entertainment industry in India, be it the visual media or active fun and games, is headed north as the country’s burgeoning population including the rich and middle class seek the latest in fun and frolic activity. Be it witnessing the latest in television, film, radio, print, music, internet, animation, gaming, outdoor media and digital advertising; or getting physically involved in amusement activities in parks and themed areas, the market has become virtually a goldmine waiting to be rediscovered by every incoming entrepreneur.
The Indian Media and Entertainment industry has been one of fastest-growing industries over the last few years with growth from Rs 821 billion in 2012 to Rs 918 billion 2013, registering an overall growth of 11.8 per cent. The industry was estimated to achieve a growth of 13.18 per cent in 2014 to touch Rs 1,039 billion. Going forward, the sector is projected to grow at a healthy Compound Annual Growth Rate (CAGR) of 14.2 per cent to reach Rs 1,786 billion by 2018.
Television is the largest medium for media delivery in India in terms of revenue, representing around 45 per cent of the total media industry, and the number of households in the country with television increased to 161 million in 2013, implying a penetration of 60 per cent. The number of C&S (Cable and Satellite) subscribers increased by nine million in 2013 to reach 139 million. Excluding Doordarshan direct, the number of paid C&S subscribers in India is estimated to be 130 million. This C&S subscriber base is expected to grow to 181 million by 2018, representing 95 per cent of households with television of which paid C&S base is expected to be 171 million in 2013, representing 90 per cent of all TV households with television.
India’s television distribution industry falls in three categories: Terrestrial television, Cable television; and DTH (Direct-To-Home). As per industry estimates, the television industry is expected to reach a size of $12.3 billion by 2018, growing at a CAGR of 10.7 per cent through subscription and advertising revenues. The subscription market is likely to be driven by enhanced penetration and expansion of digital delivery infrastructure. While rollout of the mandatory DAS (Digital Addressable System) is almost complete in Phase I (The four metropolitan cities) and Phase II cities (38 cities in India with population of over one million), industry projections indicate subscriber growth remaining strong between 2015-2017 as the DAS is implemented in Phase III and Phase IV cities. Pay-TV subscription revenues are projected to grow at a CAGR of 11 per cent between 2013-2018 and, in contrast to the industry’s volume-led growth between 2009-2013, the growth for the next five years will be led by increase in ARPUs (Average Revenue Per User per month). Pay-TV subscribers are expected to reach 165 million by 2018 and 180 million by 2023, implying a long-term penetration of 80 per cent, adjusted for multiple subscriptions.
Industry projections further indicate that total digital cable subscription will reach around 50 million by 2018, and around 55 million by 2023. Growth in cable ARPU will be a function of analog and digital subscriber mix, the package mix, and the contribution of HD services. While monthly digital cable ARPU will grow from $3.5 in 2013 to around $6.0 by 2023, overall cable ARPU growth will lag from $2.9 in 2013 to $4.4 in 2023 due to the prevalence of analog subscribers.
India’s cable television industry has grown rapidly since its inception almost 20 years ago, spurred by entrepreneurship and innovation from distribution platforms and content providers. It is now established as a mass medium for entertainment and information, available to over 134 million subscribers across India – representing 79.9 per cent of television-owning homes in the country. This involves uplinking a broadcaster’s channel to a satellite, which then provides a downlink signal to a particular region, where it is received by the MSOs (Multi Systems Operators) network operating center through dish antennas and other equipment. This signal is then distributed to end-user/subscribers, generally by LCOs (Local Cable Operators) who provide the “Last Mile” cable link to subscribers homes. Each LCO typically manages around 1,000 to 2,000 subscribers.
The dominant business model in the Indian cable industry involves MSOs providing signal to the LCOs following an agreement with the latter being “franchisees.” As per the MPA Report 2012, the top five MSOs generated $700 million in revenues with more than half derived from C&P income. The MPA report 2013 states that within the media and entertainment segment, companies having last mile connections remain among the most profitable and scalable. As per same, cable companies in countries like USA, Japan, Korea, Taiwan and Europe generate significant levels of cash flow and EBITDA margins trending between 40 per cent to 60 per cent on average.
As per industry estimates, the total capital requirement for upgrading to digital cable network could be to the tune of Rs 20,000 crores and Rs 25,000 crores. To support the process of mandatory digitalisation, the Government raised the limit of foreign investment in broadcast services from 49 per cent to 74 per cent – a move that is likely to help MSOs in attracting new funding to supplement funding requirements for digitalisation apart from enabling partnerships with foreign strategic players that will help bring in better technological knowhow.
As per MPA Report 2013, broadband cable television operators remain a key driver of value creation for investors and consumers alike in the global context; and such value is anchored to last mile ownership, digitalisation of network infrastructure and ability to offer multiple media and communication services including television (SD and HD channels), high speed Broadband, and Telephony over a single network and in a bundle.
Ortel Communications Limited is one such company that is now entering the share market as one of the first private sector companies in India to be granted an ISP (Internet Service Provider) license by the Indian Government, while presently being a regional cable television and high speed broadband services provider – with last mile control – focused on Odisha, Chhatisgarh, West Bengal and Andhra Pradesh. Ortel made its presence in the share market with issue of 12 million equity shares of Rs 10 each even as its Non-Executive Director cum Chairman Baijayant Panda stated that the company had benchmarked itself to global standards including the last mile operation, every inch of cable being laid with proper clearances, and not over tree tops and rooftops. Panda noted that Broadband is still in its infancy in India and represented more opportunities to tap.
VOIP and Telecom provided Voice and this could be a potential business going forward, besides cable modems today coming in hi-fi versions. Bibhu Prasad Rath, President and CEO, Ortel Communications Ltd., said the focus on the company’s growth was through increased penetration (both through voluntary digitalisation and through TRAI mandated Phase III & IV digital conversion), inorganic acquisition and increased broadband penetration. At present, B2B models are predominant in India where MSOs such as ORTEL are the “backbone” of the system but hand over the last mile to cable operators, franchisees and LCOs.
“MSOs and broadcasters do not get a fair share of revenues due to under-reporting by LCOs. Overdependence on placements fees is one of the biggest risks in the B2B model. We are in the process of digitisation of analog TV, broadband, video on demand, HD TV,” he said, adding that ORTEL has entered into agreements with 490 MSOs/LCOs between April 2009 and December 2014 – resulting in acquisition of 221,155 cable television subscribers. ORTEL has entered the share market for the purpose of raising capital to ensure that the last mile component is much larger and – in going forward – to ensure maintenance of this last mile stretch, he said while pointing out that many companies in India had not yet aligned to the global model of covering the last mile – in which ORTEL will play a leading role as not just TV broadcaster but also as broadband platform.
While digital entertainment is pleasing to the eyes, action-packed entertainment too calls the shots in India’s massive tourism industry where domestic tourism has shown a growth of 9.6 per cent in 2013 over 2012. In 2013, the top five states for domestic tourists were Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Karnataka, and Maharashtra. Total number of foreign tourists arrivals in India in 2013 were 6.9 million, a 5.9 per cent increase from 2012. In 2013, the top five states visited by foreign tourist arrivals in India were Maharashtra, Tamil Nadu, Delhi, Uttar Pradesh, and Rajasthan.
The Indian Media and Entertainment industry has been one of fastest-growing industries over the last few years with growth from Rs 821 billion in 2012 to Rs 918 billion 2013, registering an overall growth of 11.8 per cent. The industry was estimated to achieve a growth of 13.18 per cent in 2014 to touch Rs 1,039 billion. Going forward, the sector is projected to grow at a healthy Compound Annual Growth Rate (CAGR) of 14.2 per cent to reach Rs 1,786 billion by 2018.
Television is the largest medium for media delivery in India in terms of revenue, representing around 45 per cent of the total media industry, and the number of households in the country with television increased to 161 million in 2013, implying a penetration of 60 per cent. The number of C&S (Cable and Satellite) subscribers increased by nine million in 2013 to reach 139 million. Excluding Doordarshan direct, the number of paid C&S subscribers in India is estimated to be 130 million. This C&S subscriber base is expected to grow to 181 million by 2018, representing 95 per cent of households with television of which paid C&S base is expected to be 171 million in 2013, representing 90 per cent of all TV households with television.
India’s television distribution industry falls in three categories: Terrestrial television, Cable television; and DTH (Direct-To-Home). As per industry estimates, the television industry is expected to reach a size of $12.3 billion by 2018, growing at a CAGR of 10.7 per cent through subscription and advertising revenues. The subscription market is likely to be driven by enhanced penetration and expansion of digital delivery infrastructure. While rollout of the mandatory DAS (Digital Addressable System) is almost complete in Phase I (The four metropolitan cities) and Phase II cities (38 cities in India with population of over one million), industry projections indicate subscriber growth remaining strong between 2015-2017 as the DAS is implemented in Phase III and Phase IV cities. Pay-TV subscription revenues are projected to grow at a CAGR of 11 per cent between 2013-2018 and, in contrast to the industry’s volume-led growth between 2009-2013, the growth for the next five years will be led by increase in ARPUs (Average Revenue Per User per month). Pay-TV subscribers are expected to reach 165 million by 2018 and 180 million by 2023, implying a long-term penetration of 80 per cent, adjusted for multiple subscriptions.
Industry projections further indicate that total digital cable subscription will reach around 50 million by 2018, and around 55 million by 2023. Growth in cable ARPU will be a function of analog and digital subscriber mix, the package mix, and the contribution of HD services. While monthly digital cable ARPU will grow from $3.5 in 2013 to around $6.0 by 2023, overall cable ARPU growth will lag from $2.9 in 2013 to $4.4 in 2023 due to the prevalence of analog subscribers.
India’s cable television industry has grown rapidly since its inception almost 20 years ago, spurred by entrepreneurship and innovation from distribution platforms and content providers. It is now established as a mass medium for entertainment and information, available to over 134 million subscribers across India – representing 79.9 per cent of television-owning homes in the country. This involves uplinking a broadcaster’s channel to a satellite, which then provides a downlink signal to a particular region, where it is received by the MSOs (Multi Systems Operators) network operating center through dish antennas and other equipment. This signal is then distributed to end-user/subscribers, generally by LCOs (Local Cable Operators) who provide the “Last Mile” cable link to subscribers homes. Each LCO typically manages around 1,000 to 2,000 subscribers.
The dominant business model in the Indian cable industry involves MSOs providing signal to the LCOs following an agreement with the latter being “franchisees.” As per the MPA Report 2012, the top five MSOs generated $700 million in revenues with more than half derived from C&P income. The MPA report 2013 states that within the media and entertainment segment, companies having last mile connections remain among the most profitable and scalable. As per same, cable companies in countries like USA, Japan, Korea, Taiwan and Europe generate significant levels of cash flow and EBITDA margins trending between 40 per cent to 60 per cent on average.
As per industry estimates, the total capital requirement for upgrading to digital cable network could be to the tune of Rs 20,000 crores and Rs 25,000 crores. To support the process of mandatory digitalisation, the Government raised the limit of foreign investment in broadcast services from 49 per cent to 74 per cent – a move that is likely to help MSOs in attracting new funding to supplement funding requirements for digitalisation apart from enabling partnerships with foreign strategic players that will help bring in better technological knowhow.
As per MPA Report 2013, broadband cable television operators remain a key driver of value creation for investors and consumers alike in the global context; and such value is anchored to last mile ownership, digitalisation of network infrastructure and ability to offer multiple media and communication services including television (SD and HD channels), high speed Broadband, and Telephony over a single network and in a bundle.
Ortel Communications Limited is one such company that is now entering the share market as one of the first private sector companies in India to be granted an ISP (Internet Service Provider) license by the Indian Government, while presently being a regional cable television and high speed broadband services provider – with last mile control – focused on Odisha, Chhatisgarh, West Bengal and Andhra Pradesh. Ortel made its presence in the share market with issue of 12 million equity shares of Rs 10 each even as its Non-Executive Director cum Chairman Baijayant Panda stated that the company had benchmarked itself to global standards including the last mile operation, every inch of cable being laid with proper clearances, and not over tree tops and rooftops. Panda noted that Broadband is still in its infancy in India and represented more opportunities to tap.
VOIP and Telecom provided Voice and this could be a potential business going forward, besides cable modems today coming in hi-fi versions. Bibhu Prasad Rath, President and CEO, Ortel Communications Ltd., said the focus on the company’s growth was through increased penetration (both through voluntary digitalisation and through TRAI mandated Phase III & IV digital conversion), inorganic acquisition and increased broadband penetration. At present, B2B models are predominant in India where MSOs such as ORTEL are the “backbone” of the system but hand over the last mile to cable operators, franchisees and LCOs.
“MSOs and broadcasters do not get a fair share of revenues due to under-reporting by LCOs. Overdependence on placements fees is one of the biggest risks in the B2B model. We are in the process of digitisation of analog TV, broadband, video on demand, HD TV,” he said, adding that ORTEL has entered into agreements with 490 MSOs/LCOs between April 2009 and December 2014 – resulting in acquisition of 221,155 cable television subscribers. ORTEL has entered the share market for the purpose of raising capital to ensure that the last mile component is much larger and – in going forward – to ensure maintenance of this last mile stretch, he said while pointing out that many companies in India had not yet aligned to the global model of covering the last mile – in which ORTEL will play a leading role as not just TV broadcaster but also as broadband platform.
While digital entertainment is pleasing to the eyes, action-packed entertainment too calls the shots in India’s massive tourism industry where domestic tourism has shown a growth of 9.6 per cent in 2013 over 2012. In 2013, the top five states for domestic tourists were Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Karnataka, and Maharashtra. Total number of foreign tourists arrivals in India in 2013 were 6.9 million, a 5.9 per cent increase from 2012. In 2013, the top five states visited by foreign tourist arrivals in India were Maharashtra, Tamil Nadu, Delhi, Uttar Pradesh, and Rajasthan.
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