New Delhi: Driven by the forecast of aggressive advertising spends on television, India will overtake Australia and Korea to become the third-largest TV advertising market in Asia behind Japan and China in next 45-months generating $5.2 billion (R16,000 crore) in ad revenue, more than double of what was generated in 2010.
Currently ranked fifth in Asia, the Indian TV advertising market is projected to grow at a CAGR of 15% between 2011-2016, over three times the growth rate of China. Overall, Indian TV industry will cross $15 billion (R75,000 crore) mark after 2014 led by growth in DTH, digitisation of 80-90 million analogue cable homes and growth of regional television says the latest report by Media Partners Asia (MPA) which comes out on Thursday.
According to the report, leading broadcasters like Star, Sun and Zee groups will continue to dominate based on earning margins and the ranking projected by MPA.
Spelling out the reasons which will drive advertising on television in the coming years, the MPA report said, "Competitive intensity in large ad categories such as FMCG, finance and auto is expected to boost advertising demand in the medium term along with growth in spends from SMEs, larger TV audiences and rate hikes across leading TV networks."
But the path to growth is not easy. MPA report says that costs are expected to escalate on talent and content in the coming years. However, due to the proposed digitalisation, carriage and placement fees is expected to moderate over the medium term. The report spells out consolidation in the television sector in India in the coming years. "As access to capital becomes difficult and valuations get closer to all-time lows, consolidation will be the name of the game, steering the course of the industry," it said.
According to Vivek Couto, executive director, MPA, how successful India is in emerging as a profit engine in the future will depend on the pace of consolidation, mergers and acquisitions; monetisation of digital and broadband infrastructure and progressive change to an outdated regulatory regime.
The report said that subscription and other revenues will continue to command the larger chunk of the overall revenues generated by the television industry over the next few years. According to the projection, the TV distribution and other non-advertising revenues (ie licensing and syndication) are expected to grow at a CAGR of 11% over the next five years to reach $10 billion by 2016.
Commenting on the existing broadcasters dominating the Indian television industry, the report said the growth strategy for incumbents will revolve around ramping up subscription revenues as newer players seek capital to strengthen their content.
"Star leads the pack, followed by Sun, Zee and a resurgent Sony. After significant erosion between 2007 and 2009, Star is benefiting from improved operating leverage, anchored to growth in regional markets. Sun TV has been exposed to negative news flow and adverse market developments in Tamil Nadu yet with free cash of $150 million and annual operating profits of $250 million, Sun's financial strength can catapult it to number one and it remains best placed to acquire some newer networks to complement its business," it said.
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