With consolidation already taking place in India’s cable TV industry, there is suddenly a whiff of it in the DTH sector with the country’s regional operator Sun Direct acquiring total control and an 80% share in Reliance Digital TV.
This will create India’s joint largest DTH operator with almost 13 million subscribers, combining Reliance Digital’s 4.6 million distributed around the country with Sun’s 8 million concentrated in the south eastern Tamil region. Prior to the merger, which has just been agreed for a sum yet to be disclosed but we think around $1 billion, Dish TV, a division of Zee Network Enterprise, was number one in the DTH sphere with 13.0 million subs, followed by Tata Sky on 9.5 million, Airtel Digital on 7.7 million, Videocon on 6.8 million and Sun Direct fifth at 4.6 million. Under the deal, Reliance will receive a one-time cash payment, while Sun gets full management control.
Cable TV remains India’s biggest pay TV sector with around 95 million subs compared with 48 million for DTH. The gap is set to narrow as DTH grows faster, in common with many other markets, although it is hard to count numbers exactly as some surveys include passive subscribers who still have dishes, but whose subscriptions have lapsed.
India is a land of contradictions for pay TV just as in other respects. It is one of the most dynamic and fast growing markets and yet cursed by low ARPU, in contrast with another fast developing region, Latin America. The business model has yet to succeed despite the large number of customers, reflected in the fact that despite subscription rates being low they still account for 70% of pay TV revenues, with advertising just 30%. This is the reverse of the ratio in many markets and in turn is related to content.
It is forcing pay TV channels to chase the lowest common denominator with the result that diversity of programming has fallen. There has also been an under reporting of subscribers in order to reduce carriage rates paid to broadcasters, which is one reason why surveys vary so much and cannot be trusted. We have taken data from a variety of sources since no single one, even official data from the regulator, can be relied on.
This is related to another problem, the lack of comprehensive regulation, combined with increased political control over channels at a local level. India still has no clear law covering all aspects of broadcasting of the kind that prevails in Europe and the US for example, including reasonable content guidelines and cross-media ownership laws.
There are some signs that things will get better. The Indian Broadcasting Federation (IBF) has recently announced proposals to strengthen the existing self-regulation mechanism with backing from the Ministry of Information and Broadcasting. Although yet to be properly tested, it has been followed by the formation of the Broadcasting Content Complaints Council, which in turn has announced a series of self-regulatory guidelines for non-news channels.
At the same time digitization is proceeding across the cable sector, promising to bring better measurement and tracking of individual viewers. This is happening slower than expected because of wrangling over who pays, but it looks like 60% of the base will have been converted by 2015 compared with 30% at present.