Campaign India Team
Mar 21, 2017

The rapid rise of Free to Air channels: FICCI-KPMG report

Advertising revenues of the FTA genre set to double in a year’s time, but the genre could cannibalise subscription revenues

The rapid rise of Free to Air channels: FICCI-KPMG report
“The emergence of Free to Air channels as a major source of reach and viewership has the potential to translate into a large advertising market,” according to the FICCI - KPMG Media and Entertainment Industry Report 2017 that was launched at FICCI Frames 2017 in Mumbai today.
However, the rise of free to air channels (FTA) would be accompanied with risks around cannibalisation of subscription revenues, the report warns. 
The rise of FTA genre has seen a commensurate increase in interest from advertisers in the last year as well. “Brands who have a substantial rural consumption base were now able to measure their spend performance, which resulted in sustained inflow of the advertising monies.
The FTA channels garnered an estimated INR 400-500 crore of the overall TV advertising pie in 2016; which is expected to rise to INR 800-1000 crore in 2017, as the channels gain prominence in the upcoming annual budget planning exercise for advertisers.
The same could result in an adverse impact on subscription revenues in the long run with a material number of subscribers in Phase 3 and 4 and new additions to the C&S fold likely to find FreeDish as an attractive option as compared to Pay DTH and MSOs. “The increase in advertising revenue pie could compensate a part of negative impact on subscription revenues,” the report says.
With a projected 30 million subscribers on the FreeDish platform by 2021, KPMG forecasts a net negative impact of INR 9,000-11,000 crore on the total industry revenues over 2016-2021. The FreeDish projections take into account upgradation of FreeDish subscribers to Pay TV each year, and a churn out factor from FreeDish is assumed to account for that. The report cites that it has “also taken into account the inflow of incremental FTA advertising revenues, to arrive at the potential impact of FreeDish”. 
“The FTA market has seen a rapid growth in terms of advertising revenues in 2016 resulting in opening up of the rural markets for advertisers. Robust ratings of FTA GECs have seen advertisement rates rising to 1/5th of the Pay GECs, from 1/10th at the start of 2016. However, the threat to subscription revenues is real, and the onus lies with broadcasters collectively to ensure Pay channels remain relevant,” Ashish Sehgal, chief revenue officer, Zee Entertainment Enterprises (ZEEL) was quoted as saying in the report.
“The content overlap with FreeDish is a serious concern. Concept of windowing and differentiated content needs to be thought through. We are cannibalising long term Pay TV market for easy short term money at the moment. With an estimated 150 million HHs for Pay TV market, each customer lost to FreeDish is a long term revenue loss for DTH and MSOs,” added Rohit Jain, deputy chief executive officer, Videocon D2H.
Some of the measures devised by Pay TV platforms to counter the potential impact include aiming for a better share of the market in South India –  as the success of FreeDish as a platform has been largely observed in the Hindi Speaking Markets.
Almost all DTH players have launched INR 99 + (Add On) entry level packs to counter the FreeDish value proposition, with the FTA channels a part of this package.
The FreeDish platform could also emerge as an intermediate medium for a subscriber coming into the C&S fold for the first time. Pay TV operators could use this opportunity to upgrade such potential users to a premium content viewing experience.
Campaign India