India's TV business is set to grow at 12 per cent in spite of all its problems, says a new report.

Star and Sun are the strongest networks in India, Network 18 is a great acquisition target and the global significance of the Rs 32,000-crore Indian TV business will keep rising. These, among others, are some of the conclusions of a new report on India's voluminous but not-so-profitable television business. The report, titled The India TV Industry — Act Two, will be released on Wednesday at afaqs! TV.NXT by Media Partners Asia. TV.NXT is a two-day event on the business of television in India.

The report takes a hard look at India's TV networks, beyond their channel and genre dominance to come up with a weighted scorecard index (see graph), based on seven parameters. These include, flagship channels, bouquet strength, scalability and financial strength and parentage. The picture that emerges is of a fundamentally good television market, hounded by issues that are clearly hampering growth — primarily that of pay revenues, falling profitability and a regulatory muddle. The report predicts that profitability will improve as consolidation begins. There are some signs of that happening in entertainment television already. Star and Zee have formed a joint venture for distribution, Walt Disney just bought our UTV and Sony might buy ETV. (Click here for graphs & table)

The report also puts a number to something most in the business knew vaguely — that the Indian market's contribution to both global and Asia-Pacific revenues of global TV majors is significant. Sony for instance, gets more than 70 per cent of its Asia-Pacific revenues from India and News Corp gets 65 per cent. That figure will keep rising reckons the MPA-TV.NXT report. The Indian TV industry should shut this year with $8.6 billion or Rs 38,700 crore, says the report.

While that figure is half the China one, the report ranks India better than China simply because 'operating leverage' is better. Read that as, 'it is easier to do business in the media sector in India.' More important, as the report points out the internet is not playing the disruptive role it is in China. Thanks to that and the huge numbers, India's television industry will 'grow revenues at an average annual rate of 12 per cent over the next five years to reach $15 billion by 2016' says the report.

It is, however, the ranking of India's strongest networks and how they are arrived at, that form the most interesting parts of the research. Sample this; 'Network18 is the fastest-expanding network with strong TV entertainment and news assets but is in a weak financial position, with $300 million in debt. A sale of certain assets will help generate some cash, but the company could also be an attractive acquisition target for a strategic player with strong financial muscle." More consolidation in the offing?