TRAI tariff order – A game changer: Girish Menon, KPMG
Guest Column: Partner and Head, Media and Entertainment, KPMG in India on the factors that played out in the robust growth of the Indian Media and Entertainment sector in 2018
Published - 24-December-2018
The Indian Media and Entertainment sector continued its robust growth in 2018 driven by strong economic fundamentals, and the fading impact of GST/RERA. While the growth was fuelled by rapid consumption of digital content and continued growth in the high-speed internet base and smartphone penetration, India remained one of the unique markets in the world where traditional media continues to grow.
TMT Convergence playing out
The overarching trend this year has been the growth of digital media and how that is leading to a convergence of Telecom, Media and Technology (TMT) companies. In this converged world, organizations are realizing the importance of engaging with the consumer directly, with traditional forms of content distribution beginning to see disruption. With ~450 mn broadband users (largely wireless) in India of which ~250 million being online video users (expected to reach 550 million FY23), telecom and technology companies are rapidly building competencies in offering content directly to these users, while traditional media companies have started to build directly to consumer platforms to compete against the technology players. A recent example of building a robust digital content ecosystem is the acquisition of traditional cable companies by a telecom/tech player. Further, traditional tech players are rapidly building out content ecosystems, emerging as major players in the M&E domain.
The Rise of ecosystems
This emerging war of ecosystems has seen a proliferation of OTT platforms and a huge resultant surge in online video consumption. The App downloads of Video Players and Entertainment apps saw a 5x increase from September 2016 to June 2018, with the accompanying increase in data usage on these apps at 20-25x. Standalone players have started to focus heavily on original content, while effective bundling of content by telecom players has ensured that the distribution has ceased to be a challenge. However, in spite of the inflection point on digital consumption already being reached, the monetization has lagged behind, with AVOD models still dominant and SVOD models seeing low acceptance.
Growing emphasis on rural and regional markets
On the demand front, the rural and regional markets along with tier II/III cities have been the key focus areas for organizations, given that the rural internet penetration stands at less than 20% (as of June 2018) and viewership of regional language (non-Hindi and English) content on Television is close to 40-45% of overall consumption. Some of the key focus areas around rural and regional markets this year have been - Continued digitization of television across Phase 3 and 4 markets combined with strong FTA offerings; Phase III expansion of FM into tier II and tier III cities; growing print readership with hyper-localization of content; increased focus of broadcaster on regional languages through launch of language sports channels and adaptation of popular reality shows into regional languages; and inclusion of rural areas under measurement metrics. On the digital front, the expansion of internet user base beyond urban markets and OTT platforms starting to develop local language digital content are initiatives which are likely to keep the rural/regional momentum going.
Data Analytics – Fast becoming a hygiene factor
Increasing focus on digital consumption has also led to the industry recognizing the importance of consumer data, with organizations investing heavily in building analytical capabilities and relying on data-driven decisions around customer acquisition, content creation, pricing, distribution, and content packaging. Other technical innovations such as digital delivery and consumption, artificial intelligence, augmented/virtual reality, blockchain, have also started impacting businesses and consumers in the M&E sector.
Implementation of the TRAI tariff order – A game changer
The Hon’ble Supreme Court cleared the decks for the implementation of TRAI’s tariff in Oct 2018. Broadcasters have started to publish Reference Interconnect Offers (RIO) and MRPs of their individual channels in compliance, with the implementation of the order effective 29 December 2018. While some leading broadcasters have priced their flagship channels closer to the cap of INR 19, some of the niche channel broadcasters are seeing a reduction in MRPs and bouquet prices. However, the pricing strategies are at an early stage right now and are likely to evolve based on how consumer take to the new regime. The basic bouquet of INR 130 for 100 SD channels is likely to boost ARPU realizations in the near term, especially in Phase 3 and 4 areas. Overall, the tariff order is likely to bring in the much-needed transparency across the industry value chain, ensuring equitable distribution of end customer revenues across stakeholders. The performance of TV sub-segment, especially subscription revenues, is likely to be heavily linked to the successful implementation of this new regime.
However, with barely a few days to go for the implementation deadline, consumer education is expected to be a major challenge for distributors. Having robust subscriber management systems in place and tackling the large amount of data expected once customers start choosing individual channels, are likely to be significant challenges going ahead.
Going forward, the sector is expected have a double digital CAGR growth over the next 4-5 years on the back of growing digital access and consumption, strong domestic (particularly rural) demand supported by GDP growth and growing penetration into non-urban & regional user base across sectors.
(The author is Partner and Head, Media and Entertainment, KPMG in India)
Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.comFor more updates, be socially connected with us on
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