Media: Key vitals of television viewership remain healthy

Update | 24 May 2017

Media

Key vitals of television viewership remain healthy

Increasing TV ownership and nuclear families portend well; high co-viewing

ensures Big-4’s moat remains wide

We met Mr Partho Dasgupta, CEO of BARC (Broadcast Audience Research Council) India,

who gave us a bird's-eye view on the emerging landscape for the television broadcasting

industry. Our key takeaways:



India has a long-way to go to mature in terms of television viewership. Key vitals for

the industry are only getting better.



Underpenetrated rural India and increasing share of nuclear families in India's TV

households would continue to drive TV viewership growth.



"Bottom of the pyramid" is shrinking. Consequently, television sets are rising up the

ranks of goods purchased within the consumer durables basket.



High co-viewing would ensure that the Big-4's (Zee, Star, Sony and Viacom 18) moat

remains wide for a long time. Increasing rural skew bodes well for rural-centric brands

such as Dish TV and Videocon d2h.

Mr Partho Dasgupta, CEO of

BARC (Broadcast Audience

Research Council)

All India TV penetration stands at 64%; enough headroom to grow

All India TV penetration has increased from 54% to 64% since the IRS 2013 survey.

Most states have seen an increase in TV penetration over the last three years. In

CY16, TV-owning individuals grew 16%. While the North Zone appears saturated,

with ~8% growth in CY16, ~73% of the incremental TV-owning individuals came from

the West Zone (Madhya Pradesh, Chattisgarh, Maharashtra, and Goa) and East Zone

(Bihar, Jharkhand, the North East, Sikkim, Odisha, and West Bengal). The TV-heavy

South Zone (31% of India’s TV ownership) added 19% to incremental TV ownership

in CY16.

Bharat (Rural India): Growth engine all revved-up; now ~54% of TV

ownership

Mega cities and tier-II cities are largely saturated, with TV penetration as high as

93% and 91%, respectively. TV owning households in rural markets has grown at a

CAGR of ~11% over CY13-16 to 99m households. Rural markets now account for 54%

of TV ownership v/s ~50% in CY13 and accounted for two-thirds of the incremental

TV households in India over CY13-16. Despite this healthy growth, rural India

remains just 52% TV-penetrated, implying significant headroom for TV ownership

growth.

Families going nuclear; bottom-of-the-pyramid subscribers shrinking

The Indian Family is increasingly going nuclear and the share of nuclear families in

TV households is growing. Over CY13-16, while the share of nuclear families in TV

households has grown from 53% to 58%, the share of joint families has declined

from 26% to 22%. Importantly, the more lucrative target audience – categorized as

“NCCS AB” from an advertising standpoint – has increased from 26% to 32% of all

households. At the same time, there has been a 19% drop in “NCCS D/E” (bottom of

Jay Gandhi

(Jay.Gandhi@MotilalOswal.com); +91 22 6129 1546

Aliasgar Shakir

(Aliasgar.Shakir@motilaloswal.com); +91 022 3982 5423

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

8 August 2016

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Consumer

the pyramid) from 55% to 44%. Delhi NCR, Haryana + Himachal Pradesh + Jammu &

Kashmir, Gujarat, and all southern states have seen a ~40% drop in “NCCS D/E”.

Television’s increasing prominence in purchases within the consumer durables

basket and increasing nuclear families should translate into more eyeballs, and

consequently, better monetization on both counts – ad and subscription. Given that

India remains a largely single-TV household market and co-viewing is high, big

national broadcasters (Zee/Star/Viacom18/Sony) are expected to attract a

disproportionate share of the incremental viewership.

North and South house 57% of TV owners; West and East fast catching up

While the South owns nearly a third of the TV eyeballs in India, the skew is gradually

tilting towards the West and the East. The contribution of the West and the East in

TV ownership has increased from 39% in CY15 to 43% in CY16. Industry checks

suggest that Zee’s viewership in these markets ranges from average to above

average in relation to the industry. Any collective industry move towards monetizing

the number of viewing impressions v/s the current system of monetizing the share

of viewership could lead to a meaningful uptick in ad revenues for the Big-4 national

and strong regional broadcasters.

India largely remains a single-TV household market; co-viewing high

35 years since the introduction of color TVs in India, the country still remains a

largely single-TV household market. Multi-TV households account for just 3.4% of

the total TV households. Even in Urban India multi-TV households constitute a mere

5.1% of Urban TV households. Hence, co-viewing remains high. The North zone

leads in multi-TV ownership, with 7.3% of the TV households being multi-TV

households. The South houses the lowest multi-TV households (1.7%). Multi-TV

penetration is 6.8% in the metros and 5.8% in tier-II towns. Even across the various

consumer classes, the skew of multi-TV owners is largely towards the most coveted

“NCCS A” (owners of 8 or more predefined consumer durables). This too indicates

significant headroom for television consumption in India.

Big-4 national and strong regional broadcasters to retain dominance

High co-viewing ensures that driver channels of the leading national/regional

broadcasters remain staples. Niche channels, which piggy-backed on the popularity

of staple/driver channels and whose viewership is perceived to be at risk following

the

new tariff order,

could perhaps find an audience on the broadcasters’

respective OTT platforms. BARC’s EKAM suite of products could be one tool to

mitigate the risk of declining ad spends on niche channels. One product, EKAM

Integra will tie up television data with digital video data and should help monetize

ad volumes on niche channels as well.

Could OTT throw a spanner in the works?

Television remains the organic mode of delivery and consumption for most long-

form content (such as movies, sports events, etc) and catch-up viewing. BARC

estimates that ~86% of TV sets in India are cathode-ray tube (CRT) TVs – a natural

bottleneck for online video consumption via a television set. OTT players are yet to

24 May 2017

Consumer

firm up their pricing strategies and business models. The combined cost of data and

OTT content is still significantly higher than the average pay TV ARPU of INR250-300

per month. The largest library of sticky content such as movies remains with

broadcasters, who are expected to tread the television-OTT equation cautiously

until a viable online presence can be established. The most crucial block of the

puzzle is advertisers, whose growth ambitions are pinned on rural markets and

television remains the fastest and cheapest way to reach them. Therefore, OTT is

likely to remain an add-on to television viewership for a long time.

Impact of demonetization on ad revenue fading

The ‘note ban’ drive’s severe impact on ad volumes can clearly be seen in the 44%

drop in ad insertions from peak-to-trough. FMCG ad insertions (within top-10

advertisers) declined 66% from peak-to-trough. The contribution of FMCG (the

biggest ad spender) declined from 55.4% to 52.9% during the drive. While social

advertisements (up 50% YoY), smartphone ads (up 35% YoY) and ads for online

payment gateways (up 124% YoY) increased significantly, this could not fill the

FMCG void. Deferment of new launches impacted auto segment ads, especially two-

wheeler ads, which dropped 74% YoY. Shampoos, chocolates, online shopping,

perfumes were the most affected categories during demonetization. While

demonetization did have its effect, the worse seems behind the television ad

industry. Overall (as well as FMCG) ad insertions have nearly reached pre-

demonetization levels again in March 2017.

24 May 2017

Consumer

Story in charts

Exhibit 1: TV penetration in towns categorized by

population

IRS 2013

89 93

BI 2016

16 20

All India

75 lakh+

17 19

10-75

lachs

19 22

19 24

Rural

144

Exhibit 2: Rural TV households now 17% higher than Urban

India

183

IRS 2013

BI 2016

All India

75 lakh+

10-75

lachs

1-10 lakhs <1 lakh

Rural

1-10 lakhs <1 lakh

Source: Company, MOSL

Exhibit 3: TV penetration in towns categorized by

population

Exhibit 4: Rural TV households contribute nearly 3/4 to the

incremental TV owners

Urban, 46%

Rural, 54%

672

CY15 TV owners

Source: Company, MOSL

Urban

Rural

CY16 TV owners

780

Source: Company, MOSL

Exhibit 5: Analysis of incremental TV additions in North

India

195

202

Exhibit 6: Analysis of incremental TV additions in West India

208

154

Source: Company, MOSL

24 May 2017

Consumer

Exhibit 7: Analysis of incremental TV additions in East India

105

129

Exhibit 8: Analysis of incremental TV additions in South

India

221

241

Source: Company, MOSL

Exhibit 9: Increase in nuclear families to drive growth in TV

ownership

IRS 2013

BI 2016

Exhibit 10: Bottom of the pyramid shrinking

IRS 2013

BI 2016

NCCS A

Source: Company, MOSL

NCCS B

NCCS C

NCCS DE

Source: Company, MOSL

Exhibit 11: Overall ad insertions nearing pre-demonetization levels...Big Daddy FMCG too inching to normalcy

1750000

1400000

1050000

700000

350000

Total Ad Insertions

FMCG ad insertions (Within Top 10 advertisers)

Source: Company, MOSL

24 May 2017

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Consumer

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