As the TV.NXT conference on Indian television kicked off in Mumbai today, Media Partners Asia issued a new report on the market, pointing to tremendous revenue potential but highlighting the pressures on profit margins as a result of intense competition, fragmentation and regulation.
The populous nation's 20-year-old commercial TV sector is set to outperform most key global emerging markets in revenue growth over the next five years, MPA reports. However, operating margins for the sector has fallen from 25 percent to 13 percent in the past four years as a result of growing competition in TV broadcasting and aggressive subscriber acquisition in pay TV. In other fast-growing markets, like Brazil, China, Indonesia and Russia, operating margins are about 30 percent. MPA's forecast for India sets EBITDA margins at under 20 percent by 2014, as compared with 35 percent to 40 percent in Brazil and China.
MPA says the issue in India is under capitalization and fragmentation, particularly in pay TV. There are also challenges in the ad market—while revenues are growing, spurred by a competitive landscape and TV usage growth in regional markets and smaller towns, advertising intensity remains low, at just 0.4 percent of nominal GDP. In addition, annual TV sector revenues per capita reached only $5 in 2009, as compared with $10 in China, $30 in Russia and more than $200 in Brazil.
The report also takes issue with the country's regulators who, MPA says, "appear to be unaware of the enormous capital costs required to build the foundations of the country’s future TV industry ecosystem." A key policy recommendation from MPA is the digitization of the analogue cable infrastructure, which equates to 80 million homes in India, at a cost of $3 billion. "Full digital TV conversion would realistically require a decade to complete, combined with credible incentive structures, improved revenue sharing mechanisms, and coherent planning as opposed to the unrealistic time frames and shaky structures currently set out by policy makers."
MPA also suggests the removal of price controls on the distribution of TV content and limiting the multi-layered micro-regulation of retail and wholesale fees, the increase of the foreign direct investment (FDI) caps and the implementation of more beneficial tax structures for TV content and distribution. "Such deregulation will provide an engine for national economic output, generate TV industry synergies, and help build larger pools of profit, enabling domestic TV brands to expand aggressively at home and abroad."
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