The next leg of profitable growth for the existing TV networks in the country will largely depend on their subscription revenue, as per an MPA (Media Partners Asia) and TV.NXT analysis.
The reason for this is that the advertising market will remain fragmented and competitive. Between 2010 and 2016, the Indian television advertising market will move from $2.5 billion to $5.4 billion. However, the TV distribution and other non-advertising revenues such as licensing and syndication, in the Indian market, are expected to reach the $10 billion mark by 2016.
The reason for this expected growth in distribution money are many. The growth for HDTV, monetisation of digital direct-to-home (DTH) and digitisation of 80-90 million analog last-mile cable homes will contribute massively to this growth. Broadcasters and content providers are also expected to gain from this. The MPA report suggests that TV networks will garner about 20 per cent of the total TV industry distribution fees by 2016.
Both STAR and Zee are expected to increase their EBIDTA in the next three years. In fiscal 2011, STAR EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization ) was $157million, and is expected to grow to $253 million by 2014, the report said. Similarly Zee's EBIDTA is expected to grow from $169 million to $270 million in the next three years, while that of Sun TV will be $438 million from the current figure of $348 million.
For STAR, the study suggests, the future value drivers for the network will be its growth in regional markets, and international subscription. A strong parentage (News Corp), leadership across genres, and presence in distribution will continue to be the strengths for the network, however the real challenge for the network will be its limited FDI in news which means heavy dependence on the domestic partner.
Zee will increase its profitability through sports, but it will also have to increase its content cost to regain its leadership in the Hindi GEC space. Zee's growth rate will be moderate -- around 11 per cent over the next five years but margins should climb from 25-30 per cent. However, it will have to leverage other group businesses and new revenue streams, as well as, weather intensifying competitive dynamics.
In the report, MPA ranked the top television networks on seven critical parameters such as flagship channels, bouquet strengths, scale, content sourcing, IPR and syndication, distribution leverage, financial strength and future readiness.
Each of these parameters was assigned weight to the degree of its relevance over the next five years. Each network was assigned a score between one and nine (nine been the highest score) for each parameter. STAR India led the list followed by Sun, Zee and Sony.
In the next few years, the importance of Indian networks in the global scale is also expected to increase. This year, STAR India will contribute around 5 per cent to the global revenues for News Corp, while Sony's Entertainment's contribution in its global business will also be the same. At the APAC (Asia-Pacific level), STAR India will contribute 65 per cent of the revenue, while Sony will contribute 75 per cent to the parent company's income.
However, Indian media businesses' position as a profit engine, driver of talent and capital flows will depend on a number of factors, such as the pace of consolidation, rationalization and M&A activity; the development and growth of new markets and demographics; the build-out and monetization of digital and broadband infrastructure for the delivery of content and progressive change to an outdated
Overall, the TV industry is expected to grow from $8.6 billion in 2011, to $15 billion by 2016 -- at a CAGR of 12 per cent over the next five years. This means India's TV business will be half the size of China by 2016 and will be the third largest TV advertising market in Asia after Japan and China.