Linear TV’s growth story inches towards a dead end

Some recently emerged figures indicate how India’s history of linear television, particularly pay-TV, is evolving. The signals are unmistakable: The growth of the mammoth TV industry is hitting a wall. Linear television is now a commonly used term for traditional television in which audiences tune in to view scheduled programs delivered via cable or direct-to-home (DTH) technology. This is in contrast to over-the-top (OTT) video streaming, which is delivered over the internet and can be viewed at will.

Paying users of linear television are declining. The decline in paying subscribers has been accelerated during the Covid pandemic as consumers turned online at scale for both shopping and entertainment. A March 2022 EY Ficci report on the media and entertainment sector stated that the number of online video viewers rose to 497 million in 2021. Paid video subscriptions rose to 80 million in nearly 40 million Indian households. During the same period, television subscription revenue fell 6.2%, with six million pay-TV households lost. Although EY-Ficci said TV households will continue to grow by 1% through 2025, this will be on the back of connected TVs and free TV, which could surpass 50 million, further stressing the core pay-TV market.

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More recent figures, offered by the country’s leading broadcasters, point to a deepening crisis. In earnings for the June quarter, released last month, Zee Entertainment Enterprises Ltd (ZEEL) reported a 48.9% year-on-year decline in consolidated net income. Importantly, subscription revenue is down 5.1% year over year and 10% quarter over quarter. The company argued that the price embargo (TRAI’s tariff regulation had capped channel prices) continues to hamper linear revenue growth. However, a media industry expert said that at constant prices, a loss in the subscriber base will eat away at subscription revenue.

The other number of concern was raised by K. Madhavan, Disney Star’s country manager and president. In an interview with the Economic Times, he said India’s pay-TV households have declined from 120 million to 108 million over the past four years.

In May, this column argued that low-income households may have given up cable due to the financial strain during the pandemic and switched to Doordarshan’s free-to-air direct-to-home platform, FreeDish. Meanwhile, affluent viewers turned to streaming options.

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Media adviser Anuj Gandhi said cable cutting is a reality in India, although streaming-only viewership is unconfirmed at between 12 and 18 million.

The Broadcast Audience Research Council (BARC) has also not updated its estimates for the television universe for 2020 of 210 million television households. “If out of 210 million households, 108 million are paid subscribers and another, say, 40-50 million are using FreeDish, it’s not clear where the rest of the TV households are. Are you seeing analog or pirated signals?” Gandhi said.

“We need to overhaul our TV home universe. I’m not sure the BARC numbers still stand,” said another cable industry expert.

However, the linear TV universe is still vast. A recent global report by PwC states that India’s pandemic-hit TV advertising market saw a 10.8% decline in 2020 from 2019. But it rebounded, growing 16.9% to a level in 2021 32,374 crores. PwC forecasts TV adspend growth of 6.3% CAGR through 2026.

As adspend growth rates slow and pay-TV subscriptions decline, “linear television is no longer a growth story,” Gandhi said.

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The TV industry is cutting personnel costs worldwide. According to a recent Bloomberg report, Warner Bros. Discovery fired TV ad sales staff. Netflix has also announced layoffs, it said. “Any business that goes down needs a correction. While the TV story is familiar, even streaming subscriptions have hit a wall in some markets, as reflected in Netflix’s admission of losing subscribers earlier this year,” Gandhi said. However, streaming services will grow in India, likely via the aggregator route as consumers find managing multiple apps cumbersome.

But who will be the winners in this churn?

FreeDish and YouTube, media experts said. At the end of 2021, YouTube in India had 500 million monthly active users. “It is by far the number one channel, the largest aggregator of content ranging from music to movies to children’s content,” Gandhi said. And Doordarshans FreeDish already has nearly 50 million subscribers.

Shuchi Bansal is the editor of media, marketing and advertising at Mint. Ordinary Post will address pressing issues related to all three. Or just fun stuff.

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