The Anchor: Renu Aggarwal on 5 reasons M&E is under-leveraged in India

05 Oct,2012

By Renu Aggarwal

 

Media spend as a percent of GDP is very low in India (at 0.41%) and is half of the world average. The five major impediments for the same are cited below:

 

#1 Low penetration levels: The Indian M&E industry is still in its nascent stages and a lot of developments have taken place only in recent years. Though India has a large and young population base, it is not fully tapped. The penetration levels are still quite low with TV penetration of 60 percent of households, cable penetration at 50 percent and DTH penetration at just 30 percent.

 

#2 Low customer revenues: The average revenue per user (ARPU) in India is amongst the lowest in the world. When compared globally, ARPU (per month) in the US is USD 120, in the UK is USD 70, in China it is USd 5 while in India it is merely USD 3. This increases the payback time for the various channel providers and makes it less attractive.

 

#3 High levels of piracy: Indian M&E industry is crippled by piracy, due to which it has not been able to monetize its content fully. Despite various technological advancements to curb piracy, the fact remains that industry is still losing significant revenues on account of piracy.

 

#4 Digitization is still far-off: Digital infrastructure is still very weak in India and modern technologies are yet to be deployed. India has just ~30 percent penetration of digital TV compared to more than 95 percent in most of the developed countries. With lack of digitization, ARPUs continue to remain low and the last mile operator can carry a maximum of 70 channels only (in analogue network), whereas more than 600 channels are available in the country.

 

#5 High regulatory framework: Industry faces strong regulatory restrictions in terms of FDI limits and taxation structures. Currently, the digital cable and DTH sector have to pay taxes at multiple levels – Central, State as well as local/city level. Also, the sector requires capital expenditure for the digitization and content creation, and thus, calls for rationalization of FDI limits.

 

Renu Aggarwal is the  Principal Consultant at Wazir Advisors

 

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