There is a word of caution for pay TV DTH operators and cable TV networks. Witnessing exponential growth, free TV viewership in India is set to reach 46 million households by 2020, according to a forecast report by EY. The number of free TV viewers was at 30 million in 2016. The increase in the number of FTA channels has also led to a significant rise in viewership for genres such as Hindi GEC, Hindi movies and, primarily, the Hindi news genre, in which FTA channels command 81 per cent of the total viewership.
Ashish Pherwani, Partner, Advisory, Media and Entertainment, EY said, “Free television is increasingly becoming a viable option for channels looking to capture the base-of-pyramid audiences in urban and non-urban areas. With a large subscriber base, it also opens up new avenues of advertising for marketers looking to get reach some of the fastest growing markets in the country. The change in customer behaviour will also have a significant impact on FTA and pay TV channel uptake, and corresponding spends on subscription income.”
Currently, rural TV viewers contribute to 52 per cent of the overall viewership. However, it is estimated to contribute 74 per cent of the total viewership on DD Free Dish. The timing of this move is unfavourable as subscribers in phases 3 and 4 markets opting for FreeDish, will be reluctant to shift to pay-TV as they have to incur switching costs. “DTH (direct-to-home) platforms have also been reactive and are offering leaner and smaller packs and FTA packages to combat Free Dish. While broadcasters have confirmed that it is a tactical move, we see such short-term approach as a matter of concern,” the report said.
Leading broadcasters launched their FTA movie channels in 2016 and a number of news and music channels have been converted from pay to FTA. “Broadcasters’ belief that they will be able to pull back on FTA content at will is imprudent. We fear a scenario of subscribers unwilling to graduate to pay-TV platforms as quality content to satisfy the limited entertainment needs in rural India is available for free,” it said. “We peg the long-term loss for broadcasters higher from pay-TV in the long run as compared to FTA ad pie. We showcase an annual revenue opportunity loss of Rs18 billion for broadcasters from pay-TV, assuming 30 million subscribers could have generated monthly content average revenue per user of Rs50,” it added.
Free Dish, the free DTH platform offered by the government, has witnessed a huge surge in subscribers in the past two years. The subscriber base of DD Free Dish is projected to reach around 40 million users in the next two to three years from over 20 million subscribers at present, according to a recent EY report. Currently, rural TV viewers contribute to 52% of the overall viewership. However, it is estimated to contribute 74% of the total viewership on DD Free Dish, EY noted.
Four key factors
- Digitisation of cable TV distribution – DAS IV – The mandatory move towards digitisation will require consumers, particularly those in DAS III and IV markets, to opt for more expensive cable TV options, DTH or free TV options such as terrestrial TV or Free Dish. EY expects the price-conscious customers may opt for free television services in the immediate term.
- The proposed new tariff order – The new tariff order will make customers choose between the options to either pay more to receive pay channels of their choice or decide that free television would be a better option, given the quantum of quality content on it. This will help further drive subscriptions from price conscious consumers for Free TV.
- The fast growth of DD Free Dish – DD Free Dish bouquet is set to increase to over 250 channels, featuring quality content, also including sports being available on its spectrum. This makes the Free Dish bouquet a formidable competition to pay bouquets.
- DTT on mobile infrastructure – Another important development relating to mobile television is the emergence of digital terrestrial distribution. Since this is a broadcast technology, the key implication will be that consumers whose mobile handsets have the required antenna would not be required to pay any bandwidth charges. Consequently, once the mobile handset ecosystem matures, DTT could also provide a strong addition to free television services.
Implications of growth
The report also notes the implications of growth in free television for broadcasters and distribution companies in the near future, which include:
Broadcasters – Pricing of channels, particularly those that are not leaders in their genres, and determination of whether channels should move to FTA
Number of channels to include in base and base+ packs of distributors
Carriage fee considerations
Creation of free television products and differentiation of free and paid television products
Competition from Free Dish offerings to broadcasters’ pay channels
Increasing audience reach from a DTT perspective
Distributors – Creating packages for various customer segments, while at the same time convincing customers to pay more for fewer channels
Ensuring channels from all broadcasters are present in each popular package
Placement of channels in and within appropriate packages
Prevention of subscriber migration to free television