Revising 5% customs duty on set-top boxes could boost media.
The Indian media and entertainment sector remains dominated by television and print (which garner 70% of an estimated Rs82,000 in annual media spend). Television has a more clear roadmap for future, thanks to the digitisation resolve demonstrated recently by the government, while print continues to be under constant pressure from newer media for transmission of information (which is changing the nature of news and information to ‘push’).
Such being the scenario, we expect the media sector to evolve as per its inherent sectoral dynamics rather than provisions of Budget 2013-14.
As regards television, the content segment has limits to scalability due to the creative nature of segment. However, the infrastructure segment has witnessed lots of action in the recent past.
In the media infrastructure segment, the broadcast sub-segment is now being looked upon more positively due to structural changes in the other sub-segment (that is, digitisation). Thanks to digitisation, the cable distribution space stands to be the only “structural” play in the Indian media sector currently.
Analog signals were switched off in Delhi and Mumbai last year without any hiccups. This shows the seriousness of all stakeholders, including the government.
Digitisation will likely improve declarations (albeit with a lag) of vital statistics like number of subscribers, so on, by content distributors. This means, the ‘annuity-driven’ model of distribution may come to the fore. This in turn could result in superior financial performance for cable distribution companies such as Den and Hathway.
However, in spite of having a head start in digitisation, the direct-to-home (DTH) segment is facing issues in scaling up while cable continues to outpace DTH.
Following the successful digitisation in metro cities, the government has started preparations for digitisation in 38 cities across 15 states.
To aid digitisation further, the finance ministry may consider revising the 5% customs duty on set-top boxes (STBs) and service tax on subscription revenues.
As information becomes push, the print medium is becoming relegated as a choice for advertisers, although it gets a larger share of advertising revenue spend (about 45% of the estimated Rs33,000 crore market).
This will lead to correction in yields and eventual profitability. Further, there are no specific expectations from this year’s Budget with respect to the print sector.
Overall, as in the past, the Indian media and entertainment sector will continue to evolve on its own inherent dynamics, rather than on Budget provisions.
Factors such as evolving consumer preferences towards niche content, and that too over digital delivery platforms including personal devices, will shape the industry in the longer term.
Meanwhile, business models will continue to adapt, like they had done always, to changing environment, competition levels and regulations.
The writer is MD and head of research at IDFC Securities Ltd.
Views are personal
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