India will remain the key pay-TV market in Asia as the penetration rate of digital TV grows to encompass half the population by 2016 and 61% by 2020, says a new report from Media Partners Asia (MPA).
Just 20% of India's homes had digital television in 2011, but the mandatory drive to digitise the cable TV network, as well as the six commercial direct to home (DTH) pay TV platforms, in addition to DD Direct, the DTH platform operated by the state broadcaster Doordarshan, will attract more and more subscribers in the coming four years.
"India's digitalisation timetable implies a three-year transition to full digital TV (DTV) conversion. This is ambitious, though we believe DTV transition will occur but over a longer time frame," said Vivek Couto, executive director, MPA.
"The industry will remain capital-intensive until 2017 at the earliest, due to the capex requirements associated with digitalisation. This will lead to more mergers and acquisitions (M&A) and fund-raising activity in both primary and secondary markets. The sector's improved transparency, scale and operating leverage will attract large domestic and international strategic players, who will play a key role in M&A activity," he added.
MPA predicts pay TV subscription fees will grow at an 11% compound annual growth rate from 2011-2016, driven by increased DTH and digital cable volume. The total number of pay TV subscribers in India is expected to reach 172 million by 2016, and 199 million by 2020.
MPA's biggest concerns for the industry include, Couto says, "cable execution and capitalisation, as MSOs transition from a B2B to B2C model; DTH satellite capacity; and the extent of regulation in the broadcast ecosystem. While digitalisation is the result of policy progress, this has not been the case for investment and taxation policies."
In terms of DTH penetration, the active subscriber base of paying customers may grow from 29 million in 2011 to 69 million by 2016, says the report, reaching 93 million in 2020. This would represent a 46% share of the overall market by 2020, compared with 23% in 2011, and a 65% share of the digital pay TV market according to MPA.
The analysts also predict the majority of DTH pay-TV platforms will be generating cash within the next four years in the report, titled 'Asia Pacific Pay TV & Broadband Markets 2012'. However, consolidation of last-mile local cable operators will become inevitable, leading to a shift in industry profits and value to centralised distribution platforms and broadcasters.
Approximately 33 million homes will subscribe to digital cable TV by 2016 and 48 million by 2020, with the multiple service offerings in the form of channel packs, high definition, value-added services and broadband, driving both subscribers and average revenue per user (ARPU) growth.
MPA predicts the monthly digital cable ARPUs will rise from US$4 in 2011 to $5 by 2016, and $6 by 2020. Subscription revenues in the cable industry will grow from $4.2 billion in 2011 to $6.4 billion by 2020, with broadband providing 15% of these sales and pay-TV accounting for 85%.