Technology, Venture Capital, Private Equity

With great change comes great opportunity. And the Indian TV content distribution industry today, with its heady mix of gargantuan size, steep growth and a rapidly changing dynamic presents just that. Before we dive into the giant soap opera that is the television industry in India, lets just look at a few facts that establish the size and growth prospects of the industry:

OK, so having established the size and growth prospects of the industry, lets now discuss the massive changes that the industry  is now witnessing. While the content production and broadcasting side of the business is undergoing some change (growing no of channels, segmented content production etc), it is the distribution arm which is where the real action is unfolding. Until recently, the two major distibution channels for TV content were the government owned terrestrial network, Doordarshan and Cable television. Doordarshan is basically now reduced to serving the small town and rural audiences and is almost “frozen in time”. So, not much worth commenting there. Cable television, which has been the dominant distribution channel for the majority of the populace has been more or less a cottage industry consisting of small local cable operators, who pull wires over buildings, through trees, on poles and whatever other creative means one could possible think of to reach the end consumer. It has been infested with goons and other folks of such dubious ilk (such as political henchmen), who are not exactly reputable when it comes to service quality or responsiveness. The viewer had no option but to pay the cable guy some 200 odd bucks every month and make do with a bunch of standard 80-100 channels that were offered to him irrespective of his own tastes or preferences. Not only the viewer, but the broadcasters too have been held at ransom dishing out obscene carrier fees to the cable operators for them to carry their channels. But, now with the emergence of two alternative means of accessing television content viz, DTH and IPTV, all that is set to change. With vastly superior picture quality, custom bouquets of channels catering to different audience tastes and bundled value added services such as broadband access, games etc. – all at a comparable or slightly higher price point, the hitherto bastions of the cable mini-emperors suddenly seem vulnerable to attack. The fragmented nature of the cable industry means that the small individual cable operators don’t have the wherewithal to invest in superior technology necessary to compete with these new competitors. The larger MSOs are attempting to cease this opportunity and buy out the small LCOs, thus resulting in some much needed industry consolidation. PE firms also seem keen to join the party as they have they have pumped funding into two MSOs – Hathway and Digicable in the last couple of months. The cable industry in the US is a classic example of one that was built on “rolling up” of small networks by industry giants such as Comcast and Warner. PE investors seem to be making bets on a similar history repeating here as well. On the other hand, DTH also seems to be gaining traction with Tata Sky just signing up its one millionth subscriber in less than one year of launch. Meanwhile the only listed IPTV stock, IOL Broadband has seen a mind boggling 6000% appreciation in the last two years. Telcos too seem all geared up to jump onto the IPTV bandwagon and are preparing to launch IPTV services on their networks soon. So, what we have is three different stakeholders – private investors, public markets and industry itself displaying high degrees of bullishness on each of the three alternatives which are set to unfold in the near future – Digital Cable, IPTV and DTH respectively. Now, its clear that all three cannot simultaneously grow at a steep pace and while there will be some expansion of the pie, in the long run, one of these will emerge the dominant channel. The billion dollar question now is which one should we be backing? And I haven’t even talked about the other great imponderable – regulators, who seem to be adding an additional degree of complexity to the equation as they are still not clear as to whether IPTV needs to be included in the Cable TV act which governs, well the Cable TV industry or the Telegraphy act, which governs the telecom operators. 
Well, yes, with great change comes great opportunity, but, only if you get the call right. And that sure aint easy in this case.