Key issues answered through this analysis:

Who are the key constituents of the television value chain?

What are the key characteristics of the space with respect to content, broadcasting and
distribution?

Introduction

India, with over 155 million TV households as of 2013, is now one of the largest television markets in
the world along with China and USA. There are 793 registered channels (as at March 2014), including
187 pay channels.

The total Indian television industry revenues stood at over Rs 420 billion in 2013, compared
to Rs 383 billion in the previous year, due to a continued rise witnessed in the advertising revenues
and a steady growth in subscription revenues too. This rise in revenues was due to Cable and
Satellite (C&S) penetration which was close to 85 per cent in 2013 with a good growth shown by
both digital cable and DTH. Television has the widest reach amongst the primary media delivery
channels.

Key players in the industry

Content providers - Balaji Telefilms Ltd,

Broadcasters - Network 18 Ltd, New Delhi Television Ltd, Sahara One Media and Entertainment Ltd,
Sun TV Network Ltd, TV Today Network Ltd, Zee Entertainment Enterprises Ltd and Zee Media
Corporation Ltd

MSOs - Den Networks, Hathway Cable & Datacom, Siticable Ltd

DTH operators - Dish TV India Ltd

Few Key definitions:

 Television content providers:

Television content providers supply content either on a commissioned or on a sponsored basis

(explanation below under 'types of television content'). As their importance is associated with the
exclusivity of the content as well as the reputation of the content house, some of these providers
produce some/all of the content themselves.

 Television broadcasters:

Television broadcasters uplink the content supplied by the content providers to a satellite for
broadcasting into TV homes. There is intense competition amongst the broadcasters due to the low
entry barriers in this space and the large number of options available to the viewer. Their current
share in the television subscription revenues is around 15 per cent which is expected to increase,
once the full benefits of digitisation kick in.

 Television distributors:
  The television distributor is a link between the broadcasters and the end consumer. There
are around 5,000 MSOs and 60,000 LCOs in the Indian market. This is a highly fragmented
and unorganised chain. Further, lack of addressable systems result in under reporting of the
subscribers at the LCO level, particularly in the smaller towns. MSOs control a number of
LCOs and act as a link between the LCOs and broadcasters. DTH operators would also be
classified as TV distributors and they have witnessed a steady rise in their subscriber base
over the years (64.8 million as at March 2014).

 Subscribers:

There are around over 130 million Cable and satellite subscribers in the country who pay Rs 100-400
per month towards the subscription charges depending upon the location. These subscribers often
do not have a choice in terms of subscription mainly due to the monopoly enjoyed by the local cable
operators in their respective areas of operations. However, this situation is gradually changing with
the increasing acceptance of digital viewing platforms (digital cable and DTH). On the cable side too,
a shift to digital cable is in vogue in the large cities, with the digitisation deadline mandated by the
I&B Ministry.

Television content
Low entry barriers in general entertainment

The television content business, especially general entertainment programming, is characterised by

the presence of large number of content houses and low entry barriers. Competition and entry
barriers are relatively higher in case of niche content, where exclusivity and intellectual property
rights (IPRs) are involved (e.g. sports).

Types of television content

Commissioned programmes:

The broadcaster commissions a television content producer to produce a program in return for a
telecast fee. In most cases, the broadcaster retains the IPRs for the programme. The broadcaster
earns revenue by selling airtime to the advertiser. The content producer typically works on a cost
plus margin basis. Thus, the broadcaster bears the financial risk, while the television content
producers bear the execution risk.

Sponsored programmes:

The content producer buys a slot from the broadcaster for telecasting a programme by paying a
telecast fee. Along with the slot, the producer also gets some free commercial airtime while the
content producer usually retains the IPR for the programme. The excess/ deficit of revenue earned
from selling commercial airtime to advertisers over the telecast fee, production cost of the
programme and any other related cost, represents the profit/loss to the producer. The content
producer thus bears the financial as well as the execution risk in this model.
Television broadcasting
The Indian broadcasting industry can be segmented into two categories:

Terrestrial broadcasting:

Terrestrial broadcasting refers to broadcast done through transmitters and received through
antennas. The government-owned Prasar Bharti Corporation is the only terrestrial television
broadcaster in India which operates channels in Hindi, English and several other regional languages
under the umbrella brand 'Doordarshan', which is available free of cost.

Satellite broadcasting:

Cable and satellite (C&S) broadcasting refers to broadcast through a satellite transponder.
Equipment required for reception of television signals include dish antennae, amplifiers, modulators
and decoders. C&S channels can be further categorised into the following segments -general
entertainment (GEC), regional, movie, news, sports, educational and spiritual. C&S channels are
either free-to-air (FTA) or pay channels.

Revenue streams for broadcasters

Television broadcasters draw their revenues from two main sources, viz. advertising revenue
(revenues earned through the sale of time slots during programmes) and subscription revenue
(proceeds collected from subscriber households that distributors pass on to the broadcasters).
Television broadcasters also earn income from content syndication and international distribution of
channels. However, these revenue streams constitute a relatively small proportion of overall
revenues. Pay channels earn almost their entire revenues from advertising and subscription charges.
FTA channels, on the other hand, do not earn any income from subscription charges, and hence rely
on only advertising for their revenues.

Television value chain

Television delivery mechanism