TV digitisation will be a challenge in tier 2, 3 cities: Jehil Thakkar, KPMG

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Digitisation of cable television will play a key role in helping the Indian media and entertainment industry grow 15% a year to double its size by 2016 but its implementation will be a challenge in small towns and cities, Jehil Thakkar, head of media and entertainment at KPMG, says. The FICCI-KPMG Media and Entertainment Report 2013 released on Tuesday forecast the industry to reach Rs 1,45,700 crore by 2016 from Rs 72,800 crore in 2011. Talking to ET on the opening day of FICCI Frames 2013, the annual conclave of M&E industry, Thakkar says digitisation will boost broadcasters’ subscription revenues. Excerpts:

How has the first phase of digitisation effected the broadcast industry?

Phase 1 is only starting to have an effect. So far, the average rate per user (ARPU) has remained stagnant. It will only go up once MSOs (multi-system operators, or cable TV operators) move to pricing packages and collection of the same happens. There has been some rationalisation in carriage fees of 15%-20% in recently concluded contract negotiations, which is a direct impact of digitisation.

What are the possible hurdles in the future and how could they effect the sector?

Implementation across phases remains a risk, especially because phases 2, 3 and 4 have a lower concentration of large MSOs. This is because these phases move into tier 2 and 3 cities, which are still very unorganised in their cable industries. Also digitisation does not only mean seeding (installing in houses) set-top boxes. It also means altering longstanding consumer habits. Phases 3 and 4 may see limited interest from cable operators due to limited infrastructure as well. Funding and logistics are also likely inhibitors.

How will digitisation affect sectors other than television?

DTH will likely see gains as cable ARPUs rise and DTH becomes more of an equal player. We expect a channels to be more dependent on subscription than advertising. Prices for films rights are also likely to increase due to this. New media will grow as cable companies begin selling broadband.