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Pay TV providers post record subscriber loss in USA. Will the similar trend continue in emerging economies?

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Nov, 2016

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With Pay TV losing up to 6,65,000 subscribers in second quarter of the year in 2016 in USA, it’s an alarm button for Pay TV providers. USA being a very developed nation and having access to fast internet services can get such a response from Internet users. But can the emerging economies like India too can look forward to such circumstances?

Emerging economies will not see this coming in next few years because of several limitations such as limited access to high speed broadband services, lack of digitization etc. Also in emerging economies there are more homes with multiple family members who depend on TV for entertainment with different content and programs, for which they need to spend more amount. Thus, its demand is high in these economies.

In India OTT (Over the Top) content technology is not yet popular as most of the people are still using Cable connections to watch Channels even in this most advanced era. But for the tech savvy people many apps have been launched in India which deliver Indian TV channels through Internet and they can watch all the episodes and programs whenever they needed, even though they miss their favorite program because of their tight scheduled work. All you need to do is register yourself and subscribe to a pass to get access to the channels. They provide Live content and Catch up TV of past 7 days where in you can watch episodes of past 7 days. The best part is that you can watch the channels on multiple devices simultaneously. The Apps are supported by 3G, 4G and Broadband connections.

Pay TV Scenario in India

India’s pay-television industry is expected to grow at a compound annual growth rate (CAGR) of 9.2% and will touch $14.5 billion in revenue by 2021 compared to $ 9.4 billion in 2016.pay-tv-2

A research by Media Partners Asia says that by 2025, the pay-TV industry will reach $18 billion in revenue. Pay-TV channels like Colors, Sony and Star Plus are subscription-based channels for which the consumers have to pay monthly in most cases.

The report projected that total number of subscribers which includes subscribers of analog cable TV, digital cable TV and Direct-to-home services will rise to one hunderd and eighty three million by 2025 from one hundred and fifty two million in 2016.

With Indian government implementing digital addressable system (DAS), by 2025, 70% of India’s pay-TV base is estimated to be digitized, growing from 93 million subscribers in 2016 to 129 million in 2025.

There will be a great growth in television and DTH indistry in India. Due to digitization program announced by Indian Governament, this industry is getting matured from being monopoly, cable owned service to satellite service providers, that users can use advanced technologies to provide high quality and high definition content.

The Information & Broadcasting ministry has been quite active recently and has been implementing digitization quite promptly, nearly 41 million set-top boxes have been seeded in Phase 3 areas and Phase 4 digitization is due in December 2016. Except few states which have demanded extension in the deadline the government has been able to complete its phase 3 of digitizing India in terms of television reaching people even in interiors of the country.

Pay-TV monthly average revenue per user (ARPU) is going to increase from $3.3 in 2016 to $4.5 in 2025. It is expected that with the overall market size increasing, broadcasters will start getting a fair-share in the revenue which they have not been getting.

Though Cable has been the major attraction for subscribers soon, DTH is expected to attract more subscribers. Thus pay TV subscribers is expected to decline to 60% in 2025 from 68% in 2016.

The biggest opportunities of digitization are in the phase 3 and phase 4 as the cable penetration is very low in these areas. Digitization in these areas would require massive capital expenditure which is the big challenge for the Indian Govt. DTH players in India are best placed in such markets to complete the digitization process. Advertising revenues from pay-TV channels will see a rise too in couple of years.

TV Industry in India and recommendations by TRAI to still remain in game for Pay TV and avoid future glitches.

The TV distribution platforms are terrestrial which is owned by Doordarshan, cable, DTH and IPTV.

The revenues are driven by two types – advertising and subscription. Even broadcasting has two types of business models:

  1. Free to Air (FTA) channels which rely on advertising revenue as their primary source of revenue.
  2. Pay TV channels which have a dual source of income from both subscription and advertisement.

Key recommendations of TRAI (Television Regulatory Authority of India):

The media is popularly known as the “Fourth Estate” as it plays a important role in a democratci country like India. It is the watchdog of public interest and its role as witness and commentator on the activities of the Government, various social and political institutions, and society at large, is vital.

The media – print media, radio, television and now a days the internet – has certainly played a significant role.

To monitor the media activities TRAI has some key recomendations.

  • Restructuring of Cable Industry with a larger role for MSOs and Digitalization plan.
  • DTH policy on tariff and Quality of  Services
  • New recommendations on FDI policy  in cable- upto74 % by TRAI
  • Internet Telephony allowed for ISP’s.
  • Cable Broadband focus with easier Right of Way ( RoW) and Wireless possibilities
  • Non CAS tariff regulations for TV subscribers
  • Cable Companies can provide IPTV. Recommendations cleared by Government. MSOs can consider this opportunity, marketwise
  • Ala carte choice of Channels by MSOs from  Broadcasters in non CAS
  • New Television Rating points (TRP), Television Audience Measurement (TAM) policy by TRAI.
  • Greater emphasis laid on network digitization, increased addressability and to encourage voluntary CAS
  • Incentives prescribed to Multi System Operators (MSOs) to introduce total digitized networks
  • Separate licensing frameworks for Cable TV operators (LCOs) and Multi System Operators (MSOs)
  • Eligibility criterion made specific to identify the entities who can act as LCOs and MSOs
  • Option and flexibility to choose Service area given both to LCOs and MSOs
  • CAS extension to the remaining cities and subsequently followed by digitalization

But Can the Younger Generation of India change the game for Pay TV?

India’s earning population above the age of 25 years has less time and more to catch in life,it’s also expected that it will grow from 40% to almost 60 % of total population by the year 2020. With data available to them on the go, it is expected that there would be an emergence of freemium subscription model in the media industry around recent and real time content.

We may see bifurcation of mass and niche products being created. There is an increase in individual content consumption and plans to get into rural market are going to give rise to mass products as well as niche products.

The content providers will also be looking forward to create communities as the monetization capacities increase in that case as in for sports, for music, for kids etc. all these communities will create a lot of interest in media companies as well and they will have a great role to play in here.

They will have to create concepts where in audience will be engaged in the content online and give them revenue as well, events, concerts etc. will play major role in attracting audiences. Most importantly they will have to offer a deeper engagement with the content experience that the audience will choose directly pay for content streaming services or ownership.

The companies will have to adapt to their supply chain management, customer experience and analytics platforms to address these trends.

Thus though digitization and content streaming is an attractive space for youngsters but the population which can get this facility of high speed internet or even internet connection is comparatively very less. Maximum population of India is in rural India and hence Pay TV still is a preferable mode of entertainment considering the majority of population’s requirement.

The subscription of Pay TV in India has still not reached that stage that people are worrying about as India having the culture of joint family, still has people of age that are not that technology friendly hence they still prefer switching on and off and watching their favorite content than searching for specific content online and watching it at their convenient time. They are many companies providing content online.

The cord cutting with the Pay TV may not happen completely in growing economies like India soon but if the Pay TV companies did not take any cue from the condition in USA then technology will not take much time in making them invisible.

The most useful things that a television industry support are,

  • Live broadcasting
  • Education
  • History
  • Sports
  • Business

Conclusion:

The Pay TV is emerging as a very attractive space owing to the TRAI recommendations. Globally, India is the third largest player in the TV space. Industry experts expect Pay TV industry to consolidate and Corporatize in the near future, this will lead to economies of scale, higher efficiency and also easier access to capital. And they can still hold market in growing economies as reach of broad band in each nock and corner of these countries is still miles away.

But surprises may be just round the corner so sitting back and relaxing may not be an advice for these Pay TV companies. Get up and work upon your strategies to take over the market that you wish to else you may be planning your funeral soon.

By : Ramakrishna Mashetty

Ramakrishna Mashetty is The Chief Marketing officer of SURE! (a Magnaquest product).SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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