Television at India – the new frontiers:

Television first came to India when the state owned ‘Doordarshan’ (DD) started broadcasting on Sept 15, 1959 as the National Television Network of India. The first telecast started on Sept 15, 1959 in New Delhi. After a gap of about 13 years, second television station was established in Mumbai (Maharashtra) in 1972 and by 1975 there were five more television stations at Srinagar (Kashmir), Amritsar (Punjab), Calcutta (West Bengal), Madras (Tamil Nadu) and Lucknow (Uttar Pradesh). For many years the transmission was mainly in black & white. Television industry got the necessary boost in the eighties when Doordarshan introduced colour TV transmission during the 1982 Asian Games.

For the first 17 years, it spread haltingly and transmission was mainly in black & white. The thinkers and policy makers of the country, which had just been liberated from centuries of colonial rule, frowned upon television, looking on at it as a luxury Indians could do without. In 1955 a Cabinet decision was taken disallowing any foreign investments in print media which has since been followed religiously for nearly 45 years. Sales of TV sets, as reflected by licences issued to buyers were just 676,615 until 1977. In this period no private enterprise was allowed to set up TV stations or to transmit TV signals. The second spark came in the early nineties with the broadcast of satellite TV by foreign programmers like CNN followed by Star TV and a little later by domestic channels such as Zee TV and Sun TV into Indian homes. Prior to this, Indian viewers had to make do with DD's chosen fare which was dull, non-commercial in nature, directed towardsonly education and socio-economic development. Entertainment programmes were few and far between. And when the solitary few soaps like Hum Log (1984), and mythological dramas: Ramayan (1987-88) and Mahabharat (1988-89) were televised, millions of viewers stayed glued to their sets

TV manufacturing in the early years meanwhile was essentially a small scale industry sector with licenses reserved for given to only SSI units. One of the first manufacturers was in fact the Hyderabad based PSU - Electronics Corporation of India Ltd (ECIL) which made the first ever solid state TV in India – the Apsara. Today however they have no interest in this business preferring to make set top boxes instead. With the onset of liberalization this was a industry that soon faced a dismantling of government controls. In India, where 70 percent of citizens earn less than $5,000 a year, buying a television is not an option for many consumers. Surprisingly, however, Indians have shown remarkable interest in buying televisions, even the more-expensive flat-panel sets, mostly because of increased awareness, rising availability and declining prices, according to iSuppli Corp. “India is emerging as a major force in the global television market in terms of domestic consumption as well as in production of sets,” said Riddhi Patel, principal analyst for television systems at iSuppli. “While there remain disparities in terms of the economic status of television buyers, set sales in India are experiencing strong growth.” India’s television market is set to grow to 18.7 million units by 2011, expanding at a Compound Annual Growth Rate (CAGR) of 9 percent from 12.1 million units in 2006. On the revenue side, overall television sales will reach $4 billion by 2011, rising at a CAGR of 9.6 percent, up from $2.5 billion in 2006, according to iSuppli.

CLICK TO ENLARGE

With the growth of TV channels and the availability of satellite TV – this market is expected to boom. Needless to add the old faithful like the government owned TV channel – Dordarshan is soon falling by the wayside.

According to Hong Kong-based media research firm Media Partners Asia (MPA), India is set to emerge as Asia's leading revenue generating pay-TV market by 2015 with multichannel video industry (cable, DTH and IPTV) turnover growing from $3.6 billion in 2005 to $7.2 billion by 2010 and $10.5 billion by 2015. However, projections on DTH vary and depend a lot on progress (or the lack of it) made on the regulatory front. For example, MPA feels the Indian DTH market is likely to grow to Rs 45 billion ($ 1 billion) by 2015 on a base of slightly over 11 million subscribers and 7.8 million customers by end 2010.Contrast this against what others say. According to Sanjeev Prasad, head of equity research at Kotak Securities, the DTH market could grow to only 4 million "pay" homes or $300 million by FYE March 2010, while KPMG projects 8.6 million subscribers by 2010. But what most agree on is that digital television, driven more by DTH in India, has the potential of changing the electronic media landscape. In such a scenario, Dish TV, the country's first private sector DTH platform, stands to have a beginner's advantage. That's what most people feel.

A brief summary of the market according to Mr. Arun Uday an advisor with HSBC Private Equity Advisors at Mumbai, India, primarily affiliated to the technology ventures team follows:

• Current size of Indian television media industry: INR 191 billion (USD 4.7 billion)
• Expected CAGR over next 5 years: 22%
• Total no of households in India: 187 million
• Total no of TV households: 112 million (60% penetration)
• Total no of pay TV households: 70 million
• Total no of cable households: 68 million
• Total no of DTH households: 2 million
• Projected CAGR in cable households over next 5 years: 5%
• Projected CAGR in DTH households over next 5 years: 43%
• No of TV channels: 300
• Expected no of TV channels in 2 years: 500
• India is Asia’s second largest pay TV market after Japan
• By 2015, it is expected to be the largest pay TV market surpassing Japan

The Asia-Pacific zone is racing ahead as the global entertainment industry's fastest-growing region (nearly 12% annually), and India has been invited as a "country of honor" to stage an "India day" on October 8, the first day of an annual four-day entertainment conference at the Palais des Festivals in Cannes, France, sponsored by Mipcom (Marche International des Programmes de Communication). India has the third-largest pay-TV market in the world at $4.2 billion, with TV revenues estimated to reach $11 billion by 2011 and $16 billion by 2015. India is also good news for foreign TV channels and investors when compared with China, where foreign TV channels such as the British Broadcasting Corp, Cinemax and HBO are generally only legally available in tourist hotels and expatriate residential areas. With about 120 million television homes in India last year, pay-TV penetration is expect to grow to nearly 90% in another eight years, with 185 million television-owning homes in 2015. India will join Japan as Asia's top pay-TV market by 2015, with the direct-to-home satellite market expected to grow to 38 million by 2015, up from 2.6 million subscribers in 2006.

Industry reports say 150 new channels are awaiting government approval, taking the number of TV channels in India close to 400. But TV company executives point out that there is room for more growth given the number of Indian languages (23 official languages, including Hindi and English, besides hundreds of other regional languages and dialects) and specialized channels such as movies, news, music, sports and general entertainment. It is however proving very hard to boost subscription revenue quickly in India. The problem is that India's pay-TV industry operates in a kind of gray market, in which the "last mile" connection is owned by a third party, so channel operators don't get paid for all of their content. The industry has tried to limit this problem by creating a "conditional-access system" to help keep track of subscriptions and allow consumers to buy exactly the channels they want, but the system's rollout has been repeatedly delayed. Moreover, the system won't necessarily help broadcasters' subscription revenue. There are caps on the pricing of channels, and "consumers will have the freedom of selecting individual channels," says Pratik Nowlakha, an analyst with Batlivala & Karani Securities India. With more choice, "they may not take up pay channels at all."

There are over 7,000 headends and 30,000 cable operators serving 53 million subscribers but the cable operators declare only 15 to 20 percent of their paid connectivity to MSOs and broadcasters. The cable industry has witnessed an entry of the organised sector MSOs such as Siti Cable, InCable, and Hathway. The C&S penetration in India is still much lower than some of the other developed nations. Dr. A. K. Rastogi, president of All India Aavishkar Dish Antenna Sangh, is of the view that DTH can succeed only in areas where cable is non-existent or the service is poor. "There are 60 million cable homes in India and about 50 million cable dark homes. DTH can hope to penetrate, at best, 25 percent of cable dark homes in the next 5 years, i.e. a potential of 15 million homes. Out of which, five million are divided between DD and Dish TV. For penetration in the cable TV arena, both DTH and broadband require fresh cabling, which is prohibitive. Further, cable TV subscription rates will always remain lower than DTH or Broadband. Hence DTH, at least for the next five years, is not a threat to Cable TV," he said. A key challenge for cable operators is that the cost to upgrade cable plants to provide these digital transmissions is substantial. This high cost, in turn, has slowed the overall pace of digital upgrades and has limited digital cable TV service to a few of the wealthier countries in the world.

Commenting on the challenges faced by the Indian cable TV industry, Dr. Rastogi, added: "The cable TV industry in Asia lacks financial muscle. Cable operators have reached the limit of their investment capacity. With digitalisation and broadband proliferation, telcos with stronger financial muscle will enter the arena, but that may sound the death knell for LCOs as they operate today." Cable TV networks' channel handling capacity depends upon the amplifier bandwidth and spacing between amplifiers. Most of the last mile segments, i.e. LCO to subscriber, have 47-550MHz amplifiers whose channel capacity is confined to 62 channels in un-encrypted analog mode. MSOs networks upto the distributor have 47-862MHz amplifiers, which can distribute 90 channels. Headends are with the MSOs or independent distributors. To increase channel capacity, digital compression is a solution wherein 12 programs are compressed into the spectrum width of one analog channel. Thus, it is theoretically possible to deliver 620 channels in the present LCO segment and 1,080 channels in MSO/distributor segment. But with such capacity enhancement, the viewer will require a set-top box to convert digitally compressed channels to analog for viewing. Digitally compressed channels can be seen without CAS as well.

Leaving aside the initial investments made by consumers for DTH installation, and considering an ARPU of Rs 250 a month, the industry segment is already accounting for over Rs 900 crore a year, and expanding exponentially. Moreover, companies like Dish TV are making additional investments in their infrastructure to provide a host of value-added services, which in turn will add to the ARPU. Both Dish TV and Tata Sky have started offering interactivity during the viewing experience of news, sporting events and other gaming services to their users. With the latest plans in place - digital set-top box can be yours at one-third the price you pay now. Indian manufacturers like Bharat Electronics (BEL), and TVS are likely to manufacture set-top boxes for less than Rs 1,000.A digital set-top box is a technology interface required for encrypted television signals for conditional access system and direct-to-home services. Currently, the bulk of set-top boxes being supplied in India for CAS or DTH services are being imported and cost Rs 2,800-3,300. However, the government is planning various incentives to encourage Indian companies to manufacture them. The government is expected to re-impose Customs duty on imported set-top boxes and slash the 13 per cent countervailing duty currently being charged on all components required in a set-top box could be slashed by less than half." If the 13 per cent countervailing duty and the 16 per cent duty on plastic products for the front panel is brought down or removed, it will help the support industry provide cheaper components. This will drastically reduce the retail cost of set-top boxes," said Vineet Wadhwa, chief technical officer at Logic Eastern, a set-top box manufacturing company in an article in Business Standard.

"If Customs duty is levied on set top boxes, the cable industry will look inward, which will encourage local manufacturers to produce digital set top boxes," said Suresh Khanna, secretary general of Consumer Electronics and TV Manufacturers' Association. Imported set top boxes invite an aggregate of 35-37 per cent duties, which makes the retail price of these boxes over Rs 3,000. Companies like Flextronics, Alcotech, and Kortek had all got the surface mount technology required for manufacturing set top boxes and if the government provided a conducive environment, Indian set top boxes would be produced at a lower cost, Wadhwa said. The Consumer Electronics and TV Manufacturers' Association has also recommended imposition of Customs duty on imported set top boxes. "South Korean companies are setting up manufacturing bases in China for making set top boxes, which are then exported to India. To consumers, they cost around Rs 3,000. With CAS expansion planned, Indian manufacturers should get into the manufacturing of digital set top boxes in a big way and then they will cost less than one-third," said Ashok Mansukhani, president, Multi System Operators Alliance, and executive vice-president of Hinduja TMT.

Cable operators, set top box manufacturers and multi system operators are meeting officials from the information and broadcasting ministry and the Telecom Regulatory Authority of India on February 1, ‘07 to chalk out the next phase of rollout of CAS, which is also linked to the government's goal of converting the analogue mode of television transmission in the country to digital by 2010. This meeting would probably outline steps to boost local manufacturing of set top boxes, an industry source said. According to the estimates of the Consumer Electronics and TV Manufacturers' Association, by 2010 there will be 120 million TV sets in India, of which 40 per cent will be black and white. "A set top box will be a must for watching digital quality pictures and without local manufacturing, the prices of set top boxes can never come down," said Khanna. Besides cable TV and DTH there is however a new technology on the horizon called IPTV which has started operations in India. On the 15^th August 2007 the government owned telecom service provider MTNL and BSNL have launched their IP TV services across selected geographies in the country. Broadband IP penetration pales in comparison to Cable and Satellite in India. According to Siddharth Jain, Vice President of Distribution and Business Operations for India and South Asia for Turner International India Pvt Ltd (TIIPL), "IPTV is specifically to a TV (via a STB, not Internet TV to a PC). In my opinion, both BSNL/MTNL and private operators (such as Reliance Communications and Bharti Group, which will compete in the same territories) will have a sizeable consumer base, but a lot depends on the rapid increase of broadband connections."

"It's a bit premature to comment on the penetration levels," said Mr. Jain. "It is estimated that broadband will overtake dial-up in 2008-2009 and by 2009-2010 broadband connections will be 75% of the market so it's evident that IPTV will be a platform to reckon with for cable and DTH."IPTV has the power to elevate the usage of Internet by TV-only homes by converting their TV into virtual PC. But Arpita Pal Agrawal, associate director, PricewaterhouseCoopers feels this could be challenging as TV, not the PC, is the household media centre in lower- and middle-class Indian households. "If it doubles as a PC then it would be critical to provide a solution that will not require any kind of technical knowledge by the user, entail minimal additional device upgrade costs and will be easy to operate and maintain," she said. Rajesh Jain, National Industry Director for Information, Communications and Entertainment at KPMG (India), also feels IPTV needs to gain mindshare to rise above competitors. "Consumers are already being bombarded with advertising campaigns, especially by DTH players. IPTV providers can't afford to wait and they need to be pro-active," said Mr. Jain, who added that four metro markets - Chennai, New Delhi, Mumbai and Kolkata -- presently account for 12%-14% or 9.5-10 million households of the total cable and satellite household's pie in India.

One of the key growth opportunities for this business both from the media and equipment manufacturer’s perspective is the homogeneity of cultures in the SE Asian markets. Paksitan, Bangladesh, Srilanka, Nepal have a shared heritage and language with India and represent an obvious effort for coming together. Indian and Pakistani cable operators have joined hands to push for a regional body that would take up industry issues in the SAARC (South Asian Association for Regional Cooperation) region. The campaign for such a body has been jointly launched by India’s Aavishkar Dish Antenna Sangh and Pakistan Electronics Media Regulatory Association (PEMRA). According to Aavishkar Dish Antenna Sangh founder-president AK Rastogi, "The time has come when an organisation is launched that will work for the interest of cable operators and the cable and broadcast industry in the SAARC region, including interfacing with various governments." SAARC region includes countries like India, Pakistan, Bangladesh, Sri Lanka, Nepal and Bhutan. "A meeting of the new organisation, attended by Pakistani and Indian representatives, has been held. Consent from those in other countries had been taken earlier," Rastogi added. Such a body, according to Rastogi, would go a long way in creating awareness about the industry and its intricacies amongst the general populace of various South Asian countries.

Concurring with Rastogi, PEMRA’s founder chairperson Muhammad Ibrahim Rana told Indiantelevision.com on the sidelines of the ongoing 14th Convergence India 2006, that even the Pakistani government has realised the futility of banning Indian TV channels. "There is a growing feeling in Pakistan that Indian TV channels like Zee TV, Star Plus, NGC and Sony can be given landing rights with certain riders like inclusion of a certain percentage of Pakistani content on the channels’ Pakistan feed," Rana said. However, these content-related riders are worrying some Indian and foreign broadcasters who have sought permission from the Pakistani authorities to beam there. For example, a senior executive of Zee Telefilms, India’s largest vertically integrated media company, said, "These conditions being flaunted by Pakistani authorities for giving a green signal to us will only increase cost and red tapism. Does the Indian government put such conditions on Pakistani channels, including PTV?" Pakistan may not see eye to eye with India over various issues, but when it comes to watching Indian cable television, most Pakistanis will tune in faster to Indian general entertainment channels than a runaway rickshaw. It is this factor, according to some critics, that has stopped the Pakistani cable industry and subscriber homes from growing as fast as their Indian counterparts.

While India boasts of over 61 million C&S households, PEMRA’s Rana said that the total number of cable TV homes in Pakistan would be approximately 2 million. Though Dubai-based ARY Digital has obtained a DTH license, it is yet to start the service. "But if Indian TV channels agree to about 20 per cent of Pakistani programming on their Pakistan feeds, we don’t see any reason why the likes of Zee and Star cannot be seen in our country," Rana said, admitting that before a ban was put in place Zee News, notably, had seized a fair market share. The SAARC Electronic Media Association can work towards removal of such governmental, political and social barrier