India’s Pay TV User Pie Has Shrunk By A Third

Mapping only paid subscribers, new rules that make users pay for only what they view, and a cheap data boom have shrunk India’s television pie—by nearly a third.

The nation has 116.3 million active pay TV subscribers of cable and direct-to-home services as of April 1, according to data shared by the Telecom Regulatory Authority of India on its website. The regulator has changed norms to only count paid users with set-top boxes, instead of the earlier practice of including anyone who recharged once in 120 days.

The new method of mapping lopped off 31 percent pay TV users from last year’s overall base of 170.5 million.

Effectively, there are 54 million fewer paid television users than what the industry thought.

That’s partly because set-top boxes now help the regulator track subscribers better. Also, the new tariff order put an end to duplication. Indians also have been cutting the cord as Asia’s richest man Mukesh Ambani’s data tariff war lets them stream videos, movies, original shows and live sports action from services such as Netflix, Amazon Prime and Hotstar at low prices. A March report by Ficci-EY estimated that 12-15 million Indians are now paid online video subscribers.

But will a smaller user base impact advertising income of India’s Rs 74,000-crore television industry because one of the factors that decides pricing is viewership and reach? Broadcasters and advertising executives BloombergQuint spoke with are yet to gauge the full impact since the data has largely gone unnoticed.

A former senior executive at a large media planning firm, however, told BloombergQuint that a smaller subscriber base will have no direct impact on advertising revenue of broadcasters. And as revenues are likely to remain stable, effective television advertising rates will increase as the baseline shrinks, he said on the condition of anonymity. That would lower the premium digital advertising pricing commands over television rates, nudging companies to eventually spend more on marketing through digital platforms, he said.

Biggest Cut In Cable TV Subscribers

India’s cable TV industry was opaque, allowing service providers to underreport the number of users. That forced the regulator to make set-top boxes mandatory. Both TRAI and the Ministry of Information and Broadcasting said digitisation was completed by March 2017.

The nation had 1,469 multi-system operators feeding more than 60,000 cable services providers as of April 1 this year, according to TRAI. Top 15 large operators account for 52.3 million active subscribers, it said.

That accounts for 80 percent of the active subscribers, according to a regulatory official—the person spoke on the condition of anonymity as granular data is still not public. The percentage implies that the total active cable TV user base stands at about 65 million.

While TRAI didn’t share active user data in the past, its disclosure for the year ended March 2018 showed India had 98.5 million cable television users.

So, more than 33 million cable television users have vanished. But not all of that has happened because the regulator now only counts paid subscribers with set-top boxes.

According to industry executives BloombergQuint spoke with, there has been a drop since the new tariff order fixed a minimum payment of Rs 130 a month. Many people held two connections but paid for only one. Local cable operators offered such incentives to win and retain customers, particularly in smaller cities and towns. Such users would have given up the second free connection, the people said on the condition of anonymity out of business concerns.

Moreover, TRAI’s new tariff order allowed subscribers to create their own bouquets and pay for whatever they want instead of the practice of creating packs by dumping unrelated satellite stations users may not want. It also asked broadcasters to price channels individually, capping the rate at Rs 19 each.

Since April last year, the five largest multi-system operators—that provide signal to local cable services providers—lost four million users, according to data companies shared with rating agencies, the regulator and investors.

The top five operators have yet to respond to BloombergQuint's emailed queries.

Overall, at least 10 million television customers have deactivated their set-top boxes after the tariff order, said a senior executive with a sports and entertainment broadcaster on the condition of anonymity. Cable operators in smaller cities and towns were charging as low as Rs 50 before the new rules came into force, he said, adding that the minimum monthly payment of Rs 130 prompted many to switch to over-the-top platforms because cheaper data tariffs allow consumption on mobile.

TRAI hasn’t released fresh detailed data on cable subscribers for April period this year. New format of reporting for multi-system operators will be out in one or two months, the regulatory official quoted earlier said.

30 Percent Fewer Active DTH Users

The new tariff order brought parity in pricing by cable TV services providers and direct-to-home operators. While companies didn’t respond to BloombergQuint’s queries citing silent period ahead of earnings, DTH operators said after the January-March results that the new tariff also caused a shift from cable TV users to DTH.

The total DTH subscriber base rose from 67.53 million in March 2018 to 72.44 million at the end of March 2019, according to TRAI data.

But there’s a catch. The TRAI data show only 70 percent of DTH users are active. Which means only 51 million are regular paid users—lopping off more than 21 million who don’t recharge regularly.

Threat From Digital Disruptor

The challenge for the pay TV industry, particularly cable operators, has only begun.

Because the cable service user base shrunk even before a full-blown onslaught by Ambani’s Reliance Jio Infocomm Ltd. The billionaire has started offering television services through JioFiber, a high-speed broadband service, as he looks to disrupt the cable industry after upending the nation’s telecom market with low tariffs—that has already triggered the exodus to streaming services.

The oil-to-retail conglomerate has acquired three of the top five multi-system operators to gain last-mile connectivity. The three—Hathway, GTPL Hathway and Den Networks—together gave 19 million users to Reliance Jio that targets to take broadband to 50 million homes.