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Indian TV industry's margins fall by half

October 13, 2010 10:18 IST

It had to happen. Operating margins (Ebitda) for the Indian television sector have fallen from 25 per cent to 13 per cent over the past four years, says a report released by Media Partners Asia.

Growing competition and capital intensity, combined with poor regulation, are eroding value in the business, says the report.

India's performance compares unfavourably against the average of 30 per cent in Brazil, China, Indonesia and Russia. Worse, the Singapore-based consulting and research firm expects profit margins in India to continue to lag. The prediction is 20 per cent by 2014 versus 35-40 per cent in Brazil and China.

'Indian TV – a growth story with significant potential' was released at TV.NXT, a television industry conference in Mumbai last month. It compares India to the other BRIC markets, Indonesia and the US. Not surprisingly, India scores high on growth and volumes. It is the second largest TV market in the world in volumes and one of the fastest growing ones.

What most of this means is that eventually all the stuff discussed ad nauseaum, in consultation papers, columns and industry fora, are finally showing up in the numbers.

For years, we have discussed the Indian TV industry's huge dependence on advertising (80 per cent) and the lack of any growth or hope on pay revenues. Till advertising and penetration were both growing, it did not matter.

Now, as growth slows, penetration falters, and as costs go through the roof, the complete impact of all these years of neglect is showing.

In fact, most broadcasters did not even bother to fix problems when ad yields started dropping a decade earlier. The regulator did try. The Telecom Regulatory Authority of India's papers make some of the more sensible recommendations on how to deal with the issues surrounding the $6-billion (Rs 26,600 crore) Indian TV industry.

Most of the good ones, however, have been completely ignored by the ministry of information and broadcasting. Its entire focus seems to be on micromanaging pricing, technology and rating points, instead of worrying about incentivising investment or getting a good piece of broadcast legislation through.

Vanita Kohli-Khandekar
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