HD channel penetration is on an upswing, continuously changing the balance between subscription and advertising revenues, especially since a lot of channels are yet strengthening their foothold within the industry
The Indian consumer who still hasn’t forgotten the joy of leaping from black and white to colour television is now all set for the next leap, thanks to an increase in the number of high definition channels. According to the Ficci-KPMG 2015 report, there are 4 million HD subscribers, accounting for 10% of all direct-to-home (DTH) subscribers. The report further shows that compared to 6.5 million units of panel television sets (LCD, LED and plasma TVs) sold in 2013 in India, close to 8 million units have been sold in 2014, of which 55% were HD panel TV sales. Moreover, the share of HD and 4K TV sales is expected to further increase over the next five years, reaching 80% by 2019.
“The completion of phase 1 and 2 of digitisation and change in hardware has led to the creation of an ecosystem that has opened the door for HD viewing,” says M K Anand, MD and CEO, Times Network. “The technology is allowing broadcasters to provide a better viewing experience, which they are definitely putting to good use.”
Interestingly, the game is no longer restricted to broadcasters launching a high definition feed of the same content aired on standard definition; presently, it is all about the introduction of ‘pure-play’ HD channels. Star World Premiere HD, HBO Hits and Defined, FX HD, Cafe HD, Star Movies Select HD, MN+, etc., are some of the HD channels that are enthralling viewers with differentiated content on TV. “Movie is one genre that gives the maximum scope to provide differentiated content on HD channel. Each movie channel can be positioned in a different way with unique content,” explains, Ruchir Tiwari, deputy business head, Hindi movie channels, ZEEL. This is followed by English general entertainment channels, presently.
For example, FX HD is all set to release the new season of popular show, Empire. Similarly, Zee Cafe HD will be airing the new season of Vampires Diaries, while Colors Infinity is all geared to air season four of DC Comics’ show, Arrow, in October this year.
And in their effort to win eyeballs, broadcasters are leaving no stone unturned when it comes to the acquisition of English content, ranging from soaps to movies. This has resulted in a rising cost of acquisition. Earlier, the cost of acquiring library content was $2000-3000 per hour. Currently, while the cost of library content for popular shows such as The Big Bang Theory, Grey’s Anatomy, The Originals, Teen Wolf, Desperate Housewives, etc., is $8000-10,000 per hour, simulcast or first output deals cost $13,000-14,000 per hour.
So does this mean Hindi and regional entertainment channels will lose out on the HD chase? “Not at all,” says Raj Nayak, CEO, Colors —the Hindi general entertainment channel from the house of Viacom18, adding, “HD feeds are about providing high quality visual content to viewers thereby heightening the overall television viewing experience.”
For example, he explains, in the case of Colors, the channel has been showcasing content across genres and categories over the past seven years. With the launch of Colors HD in late 2011, there has been a visible change in content consumption. “A a better quality product is more appealing to viewers with evolved tastes,” he says.
A similar story is brewing in the case of news and sports channels. Here, it is the viewing experience that would make viewers flock to HD from SD. According to Anand, the content will not change in case of both the genres. One cannot expect to watch different or rarified news on HD channels. Similarly, the experience of watching a live cricket match on a HD channel is more pleasurable compared to a SD channel.
Show me the money!
To be sure, most of these channels are free of advertising or show fewer ads lasting four to five minutes per broadcast hour. With the business depending mainly on subscription revenue, broadcasters claim that despite HD channels sold in the form of a bundle at R150-200 by DTH operators, these channels generate better average revenue per user (ARPU), compared to SD channels.
“HD channels allow a broadcaster to target a premium segment of viewers with premium content. This in return also ensures ARPU,”says Tiwari of ZEEL. “Also we can bundle different genres of HD channels and sell a universe to consumers. For instance, Zee has two-three HD movie channels which can be bundled and sold together as a package.”
Agrees, R C Venkateish, CEO, Dish TV India who says with HD providing a better viewing experience, consumers are making the shift from SD to HD. “Also, more and more consumers opting for HD breaks the myth that Indian consumers are not ready to pay for quality content,” he adds.
As per the Ficci-KPMG report, 15-20% of incremental subscribers in 2014 were HD subscribers. HD adoption continues to drive ARPU growth for DTH players as the average ARPU of a HD subscriber stands at 1.5-2 times the ARPU of a non-HD subscriber.
As for the modest advertising that HD channels telecast, these channels still have a better chance to perform in the future, according to industry experts. Targeted at a premium section of viewers, these channels allow broadcasters to get premium advertisers such as Audi, BMW, or perhaps even a fashion brand like Dior. “It is a win-win for both premium brands who generally find it difficult to reach its set of target consumers via television, as well as broadcasters who get to earn more advertising money,” says a media planner who does not want to be named.
Nayak of Colors points out that the revenue model is completely subscription-based, as the audience segment being catered to is rather specific. “Advertising revenue, in such a case, comes in from marketers of premium products and services who cater to the segment of viewers that the broadcaster very clearly taps, leaving little scope for ambiguity,” he says. In terms of earnings, the HD channel penetration is on an upswing, continuously changing the balance between subscription and advertising revenues, especially since a lot of channels are yet strengthening their foothold within the industry.
Compared to SD channels, HD channels allow broadcasters to command a higher ad rate in case of English content.
For example, a 10-second ad spot on an English GEC (SD) costs Rs 1500-2000, compared to Rs 35000-40,000 on a HD channel with exclusive content. “Our target consumers typically belong to SEC A and B, and are men and women with annual income of R4-5 lakh. These are independent professionals in their mid 20s to late 40s. They are knowledgeable and are well-travelled. As their affinity towards English content including entertainment and movies is very high, it is important to have a presence on English channels,” said Dhruv Chopra, chief marketing officer of automotive website CarWale.com, earlier in an interview to BrandWagon.
Marketing of these channels too has helped broadcasters to get more subscribers on board. Utilising their own network to promote the new HD channels and relying on print advertising as well as digital marketing, has surely helped in garnering enough eyeballs to sustain the business. And with the proliferation of LED TVs, it is just a matter of time when the Indian television industry will take the final step towards being completely high definition – until such time, viewers can expect to be treated with new and intriguing content by broadcasters.
If so far we have seen action in the English genre space, there is nothing that stops broadcasters from experimenting in the Hindi and regional entertainment/ movie space.
“One shouldn’t be surprised if broadcasters toy with the idea of introducing exclusive content in the Hindi entertainment HD space in the future,” concludes Tiwari.