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13 million households, constituting 5% of projected TV universe, to be cord-cutters by 2026 in India: KPMG

TV penetration in India is estimated to be 76% by 2026, forming 248 million households consuming linear television

TV penetration in India is estimated to reach 76% in 2026 compared to 70% in 2020, with both FTA and Pay TV registering strong growth, according to KPMG analysis.

According to KPMG, it is estimated that 248 million households would be consuming linear television in 2026.

A bulk of the growth in TV HHs is likely to come from the rural markets, which are under-penetrated at 61% of the total rural HHs. KPMG expects the growth to be divided between Pay TV and Free to Air (FTA), with DD FreeDish expected to touch 52-55 million HHs, while high fresh content volumes and affordability of TV means that an increasing number of HHs are likely to jump onto the Pay TV bandwagon. This resultant increase in Pay TV penetration is likely to be attractive to advertisers with them being able to reach a larger number of individuals.

 

TV enjoys dominance over other media platforms

TV enjoys an overall reach of 900 million compared to the 450-500 million monthly active users of digital in 2022 – thus exceeding the reach of digital platforms by a significant margin. The dominance of TV is in part due to that TV lends itself well to family and co-viewing with certain genres like sports made for TV. The family remains an important part of the social fabric in India, and the ~97% of TV HHs in India being single TV, lends credence to the importance of family viewing.

The adoption of connected TV in India is nascent at ~10 million owing to low fixed broadband penetration and relatively higher entry costs. This coupled with structural impediments around cord-cutting, implies that TV will continue to dominate as a media platform.

Cord cutting remains a nascent phenomenon in India

Cord cutting in India remains a relatively nascent phenomenon, unlike the US or UK. There are an estimated 0.5 million cord-cutters in India at present, which is ~0.2% of the overall TV universe. According to KPMG estimates, ~13 million HHs will be cutting the cord by 2026, which is at ~5% of the projected TV universe. It would mean a large majority of the Indian population looking at TV as their primary source of entertainment in the medium to long term. 

Television (TV) remains the largest media platform in India, both in terms of reach, as well as consumer engagement in terms of time spent.

TV reached 210 million households in 2020, as per the Broadcast Audience Research Council (BARC) TV Universe Estimates, translating into ~900 million individuals who watch TV. This user base far exceeds any other media platform in the country, outlining the large reach that TV enjoys.

In 2022, TV penetration at all India level stands at approximately around 70%. Its penetration stands at 87% in urban and 61% in rural households.

The rural penetration has historically been low owing to socio-economic concerns, grid electricity issues and the relatively higher cost of TV infrastructure in remote areas of the country. However, with the infrastructure improvements and rising per capita disposable income, rural TV penetration in India has significant headroom for growth, and along with the continued Pay TV growth in urban markets, the TV penetration in India is likely to steadily grow.

Robust TV ownership across Hindi-speaking markets

Television ownership across Hindi-speaking markets (HSM) grew at 8% from 2018-20, outpacing the overall TV market growth of 6.6% during the same period. The growth across the HSM markets can possibly be attributed to the continued growth of DD FreeDish, which due to its content provides an affordable option to enter the TV universe.

DD FreeDish is estimated to have crossed 43 million households at the end of FY22, making it the largest Direct to Home (DTH) player in India. This is also corroborated by the share of DD FreeDish in the Mode of Signal reception (MOSR) increasing from 13% in 2018 to 19% in 2020.

The TV ownership in Southern markets grew by 5% during 2018-2020, owing to an already high TV penetration of over 95%

TV owners moving up the socio-economic ladder – An exciting opportunity for advertisers

The analysis of TV ownership across various socio-economic classes indicates that the TV-owning population has been steadily moving up the affluence pyramid. The proportion of NCCS A and B among TV households has increased to 58% in 2020 as compared to 48% in 2016, while that of NCCS DE has reduced to 9% from 19% in 2016.

​​The increase in TV ownership, along with a higher proportion of NCCS A and B households (HHs) represents an increasingly attractive audience for advertisers, which can be effectively monetised with the right mix of content across genres.

The growth of television in India – A significant runway ahead

As outlined by the statistics around ownership and viewership, TV remains highly relevant in India despite the steep growth witnessed by digital platforms in the last four years. Even during the hyper-growth phase of digital consumption (especially aided by COVID-19 tailwinds), the TV HHs have witnessed a gradual increase, and more importantly.

While there was a spike in TV viewing during COVID-19-induced lockdowns, the average daily time spent on TV stands at 3 hours 34 minutes in 2022; and is close to the pre-pandemic level, despite significant investments by Over the Top (OTT) video platforms on digital content.

Factors likely to drive TV growth in India

Improving access to affordable TV sets 

The government's focus on household electrification and increasing electricity uptime along with pro-manufacturing policy support like Make in India, PLI scheme are driving the penetration of TV sets among rural households. 

TV continues to be very affordable

The entry price for Pay TV - Cable and DTH – is Rs 153 (including taxes) which gives access to 200 FTA channels. The Pay TV ARPUs in India at ~$3-4 are amongst the lowest in the world, as compared to traditional TV and home video ARPU of $5 in the Philippines and $24 in Malaysia.

There is little price arbitrage between TV and digital

The combined cost of subscriptions to leading OTT platforms and a fixed broadband connection is 3.5-4 times of watching similar content on Pay TV. This lack of price arbitrage is a structural factor, which is likely to ensure TV retains its pole position for the foreseeable future.

Volume of content on TV, including regional language content, is the highest among entertainment media
           
The scale at which original content for TV is produced, in Hindi and other regional languages, is far higher than that acquired or created by OTT platforms (~1,00,000 hours per annum for TV compared to 2,500 hours for OTT).                 

Covid-19 is a short-term challenge and may not fundamentally change the structure of the TV segment

The number of direct paid OTT subscribers in India grew 5X from 14 million in 2018 to ~70 million in 2021. However, TV penetration in NCCS AB households grew by 17% from 2019 to 2022. Further, adults in India spent 3 hours 36 minutes, daily on TV in 2022, highlighting that TV has been able to maintain its share despite the growth in digital consumption and subscriptions.

Further, an important thing to note is that the lack of fixed broadband penetration and the higher cost of OTT vs pay TV (as highlighted earlier) are structural inhibitors to cord-cutting in India. With 30.4 million fixed broadband connections in India at the end of August 2022, fixed broadband penetration is at 9% in India as compared to 95% in developed nations. The experience of viewing content on a large screen (especially with family viewing) is difficult to replicate on smartphones.

The absence of price arbitrage between pay TV cost and the cost of consuming content on OTT platforms, which is close to 3.5-4x in favour of TV, means that cord-cutting at a large scale is unlikely to be witnessed in India in the near to medium term.

Having said that, there are instances of cord shaving being witnessed for genres such as English entertainment and English movies, and kids’ content and niche movies could also see an impact due to cord shaving in the years to come. However, genres which are experience-based (like sports and movies) and depend on continued fresh content (GECs – Hindi and regional) are likely to continue seeing growth on TV due to the strong value proposition that they provide.

The TV segment saw a decline of 18-20% in advertising revenues in FY21 owing to COVID-19-induced lockdowns, which negatively impacted the capacity of broadcasters to produce new content. However, this has been a short-term challenge, with TV advertisement revenues in FY22 (at Rs 26,500 crore), having exceeded the FY20 number of Rs 26,200 crore. This recovery bodes well for the broadcasting segment and would lead to greater investments in content creation.

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