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In Focus: International Distribution Of Indian TV Channels

The Indian television industry is rapidly increasing its foothold across international markets. Ernst & Young’s newsletter Newsreel focusses on the trends, challenges and the future of the broadcasting space

Industry Overview

The TV broadcasting industry in India has seen a considerable increase in the number of players in the segment in the last few years. After establishing a foothold in domestic markets, broadcasters are increasingly looking to expand their operations in international ones, to gain incremental revenue and increase their audience base. Several established broadcasters such as Zee Entertainment Enterprises Limited (ZEEL), Star India Pvt. Ltd. (SIPL), Sun Network (Sun) and Multi Screen Media (MSM) have been distributing their channels in international markets for the past decade or so. Now, new players such as Viacom18, Reliance Broadcast and Times Television are also actively evaluating expansion of their global presence. Moreover, regional channels are being pushed internationally and are now available on various international networks.

Several international broadcasters such as CNN, BBC and Al Jazeera have tied up with local distribution partners to transmit and broadcast their channels in India and other countries.

Domestic channels are being uplinked from India and distributed in international markets through local distribution partners (Cable, IPTV and DTH). Indians and other Asians are the core target audience for broadcasters. However, subscription revenue forms the major part of revenues (with low advertisement sales) due to a limited audience base. Major markets for Indian broadcasters include the US, the UK, the Middle East, Africa, Australia, New Zealand and Singapore.

Domestic channels are being uplinked from India and distributed in international markets through local distribution partners (Cable, IPTV and DTH). Indians and other Asians are the core target audience for broadcasters. However, subscription revenue forms the major part of revenues (with low advertisement sales) due to a limited audience base. Major markets for Indian broadcasters include the US, the UK, the Middle East, Africa, Australia, New Zealand and Singapore.

Key Trends

Broadcasters continuing to expand their footprint and target new international markets

All broadcasters are aggressively expanding their presence in international markets. Zee TV has extended its presence to around 167 countries, while Star Plus is available in more than 70 countries. Viacom18 Media, the JV between Viacom and Network18, has also expanded the reach of its Colors channel to more than 50 countries. The 24-hour news channel from the NDTV group, NDTV 24x7, now reaches out to more than 75 countries. Broadcasters are also increasingly targeting new geographies such as Eastern Europe, China, South America and East Asia, to expand their presence in these. In March 2012, ZEEL obtained the rights to air its channel in China and is soon expected to launch it in the country. Recently, B4U has launched its channels B4U Movies and B4U Music in East Africa to cater to the Asian community in Kenya, Uganda, Ethiopia, Zambia, and Sudan.

In addition, markets such as SAARC and the Middle East, where illegal/pirated signals are readily available, are being targeted by broadcasters to maximise their revenue from these markets. In October 2011, the Times Television Network launched its three channels — Times Now, ET Now and Zoom — in the UAE. UTV launched UTV Stars in West Asia in August 2011 and had earlier launched its other channels, UTV Bindass and UTV Movies, in the region in April 2011. FOODFOOD, a Hindi 24x7 food lifestyle channel, was launched in the UAE in September 2011.

Local channels with customised content

Like international broadcasters such as Discovery and the National Geographic Channel, Indian broadcasters are also increasingly customising their offerings to suit local needs and are launching local channels with differentiated content, in some key markets. Zee has already launched a wellness channel, Veria Living, in the US market and runs an Arabic channel as well. After launching its channels in the UAE, UTV plans to enhance its presence across the entire Middle East and North Africa (MENA) region by customising its offerings to cater to the viewing preferences of the region. In addition, broadcasters are subtitling their channels in English and other local languages to cater to mainstream audiences and bolster their subscription and ad-sales revenues.

Enhanced revenue-reporting procedures

To increase revenues and prevent under-declaration, large broadcasters have begun initiating revenue assurance procedures through subscriber declaration audits of their distribution partners.

Key Challenges

Piracy

Piracy continues to be a considerable and ever-increasing threat to the revenues of broadcasters and platforms. In addition, internet streaming and the proliferation of many illegitimate over-the-top (OTT) services pose a significant threat to pay-TV revenues. This threat is more prominent in countries such as Nepal, Bangladesh, Pakistan, Afghanistan and Sri Lanka.

Complicated tax laws

Recovery of dues from operators in international markets is a challenge in certain countries. Complicated tax laws and regulations in countries such as Bangladesh and Pakistan pose difficulties in timely collection of subscription revenues. Therefore, the risk of bad debts in these markets is high.

Limited bandwidth

In most developing countries, TV signals are distributed via the analogue mode, which limits the channel-carrying capacity of distributors. Bandwidth constraint in these markets has created an entry barrier for broadcasters. Furthermore, platforms are not willing to carry too many Indian channels in countries where Indians do not have a significant presence.

Broadcasting laws and regulations

Broadcasting laws and regulations differ from one country to another. Telecast feed has to comply with these regulations to avoid legal and regulatory non-compliance. The feed also needs to be customised for each market to comply with local advertising and content-related restrictions.

Intense competition

With the advent of new broadcasters, local distribution platforms are adding more services to existing packages or bouquets at the same retail price to retain their customers. This increase in competition has resulted in the same pie being further divided among broadcasters, which results in a reduced share for all.

The Way Forward

Emergence of new media

The emergence of various new media platforms (IPTV, Mobile TV and OTT) is expected to increase adoption and monetisation of content. Consumption of entertainment through new media platforms is expected to rise and broadcasters are increasingly looking for opportunities to launch their channels on new media platforms.

Emergence of DTH in emerging markets

Broadcasters will now be able to address bandwidth-related constraints with the launch of DTH platforms in relatively small countries, particularly in Eastern Europe, Latin America and Africa, This is expected to enhance the presence of Indian broadcasters, especially that of more recent players, in international markets.

Monopolies likely to be broken

Erstwhile monopolies created by first movers may break as one or two Indian packages are created to carry all popular channels. After that, content is expected to drive demand and viewership for each channel.

Alternative revenue streams

Broadcasters are beginning to generate revenues from live events and interactive programming (e.g., viewer play-along during TV game shows and merchandising opportunities) to augment their subscription revenues in key markets. Ad sales opportunities are also developing, in terms of Indian advertisers and foreign ones targeting affluent Indians abroad.

Ashish Pherwani is a Partner with Ernst & Young’s Risk Advisory practice.

 


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