Pay-TV industry to witness marginal revenue drop in FY2026: ICRA

The Indian pay-TV industry will witness a moderate, 1% to 3% contraction in revenues in FY2026 compared to the FY2025 levels, primarily due to a sustained shrinkage in their subscriber base, according to the latest report released by the rating agency, ICRA.

Besides revenue shrinkage, the companies in this segment are likely to experience a 175-225 basis points (bps) dip in their aggregate operating margins (AOM) in FY2026, according to ICRA. Their AOMs are likely to drop to 23% to 25%, with the AOMs for direct-to-home (DTH) players likely to be in the 33% to 35% range and for multi-system operators (MSOs) to be in the 6% to 8% range in FY2026.

Besides revenue contraction, the pay-TV operators will also likely experience higher pressure on their margins due to rising content acquisition costs, such as sports rights, premium international content, and the capital and operating expenditures involved in network expansion and maintenance, according to ICRA.

The pay-TV segment has been experiencing an erosion of its subscriber-base for the past few years with many viewers moving either to over-the-top (OTT) platforms or to free dish services provided by the state DTH operator, Prasar Bharti. The subscribers at the higher end of the average revenue per user (ARPU) pyramid have been moving away from pay-TV to smart/connected TV or other digital alternatives, and those at the lower end have been shifting towards the free dish.

Commenting on the changing trends in the TV industry, Ritu Goswami, sector head—corporate ratings, ICRA, said, “The factors such as on-demand personalised content, ad-free viewing, regional content, and flexible subscription models (mobile only to multi-screen, basic to premium quality) have made OTT a preferred TV watching mode for consumers. The increasing smart phone penetration, affordable data plans, percolation of smart/connected TVs, and regulatory changes relating to pricing caps for channels and rules for their packaging have aided the shift to non-traditional modes of TV viewing in India over the last decade.”

There were about 19 crore households with television in India in 2024, a shade lower than China, making India the second largest in the world. Given the gigantic population of the country and rising number of people with higher disposable income, this figure is expected to grow in the near future.

Despite its large subscriber base, the Indian TV distribution industry lags behind the developed markets like the USA and Europe due to their higher ARPU. The consumers in the US and Europe can pay for premium content like sports, HD, and exclusive programming, while India and China maintain much lower ARPU due to their vast, price-sensitive subscriber bases, according to Goswami.

“Given this price sensitivity, the pace of ‘cord-cutting’ in India will be relatively moderate, with significant variation in urban versus rural markets. A strong tradition of TV viewing, availability of affordable hybrid offerings and challenges related to internet infrastructure will also prevent any sharp fall in pay-TV subscriptions,” Goswami explained.

ICRA notes a variation in India’s urban and rural pay-TV subscriber dynamics where the shift away from pay-TV has been sharper in urban areas driven by higher disposable income, access to wired broadband infrastructure, among other factors, while the adoption of free dish services in rural or low-income households.

ICRA observes that the drop in subscriber numbers for pay-TV, is however, likely to be offset partially by about 1% to 3% higher average revenue per user (ARPU) in FY2026. ARPU growth will be led primarily by bundled or premium offerings and a consolidation in the industry. Bundling will include traditional TV content with OTTs and/or broadband services, and premium content offerings can be HD or 4K formats and live events.