Growing competition from OTT players and Prasar Bharati’s DD Free Dish will lead to contraction of revenues of pay TV media distribution companies by 1-3 per cent in FY26, a report of rating agency ICRA stated. Aggregate operating margins and coverage indicators for DTH and MSO companies are expected to moderate further by 175-225 bps year-on-year to 23-25 per cent in FY26 from FY25 estimated levels, though strong parentage of major players will ensure adequate liquidity and access to capital for investments, the report added.
It also noted that the decline in subscriber base will to a certain extent be offset by a higher average revenue per user expected to be up 1-3 per cent year-on-year in FY26. It expects DTH and MSO players to be able to charge higher for bundled or premium offerings and industry consolidation.
“Bundling of traditional TV content (with OTTs and/or broadband services) and more premium content offerings (such as HD, 4K, and live events), will support growth in ARPU. Nevertheless, increased content acquisition costs (for instance, in sports rights, premium international content) and consistent capex/opex towards network expansion and maintenance will continue to compress margins for pay TV operators,“ the rating agency added.
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OTT a preferred mode
Ritu Goswami, Sector Head, Corporate Ratings, ICRA, said: “Several factors make OTT a preferred mode of watching TV for consumers, for instance, on-demand and personalised content, ad-free viewing options, access to regional content and flexible subscription models (mobile only to multi-screen, basic to premium quality). In addition, the telecom and digital revolution (with increasing smart phone penetration, affordable data plans, percolation of smart/connected TVs) and regulatory changes (relating to pricing caps for channels and rules for their packaging) have aided the shift to non-traditional modes of TV viewing in India over the last decade.”
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The Indian television market is next only to China, with nearly 190 million TV households in 2024 (estimated), a number which is expected to keep growing in the near term, with its increasing population and higher disposable incomes leading to transition from TV-dark households. However, structural evolution is being witnessed in the industry with subscribers at the higher end of the ARPU pyramid moving away from pay TV to smart and connected TV or other digital alternatives and those at the lower end shifting towards the free dish. The shift away from pay TV to streaming platforms has been sharper in urban areas while traction for free dish services has been observed in rural or low-income households.
“Despite having a large subscriber base, the Indian TV distribution industry lags developed markets like the US and Europe in size due to their higher ARPU. Given this price sensitivity, the pace of ‘cord-cutting’ in India will be relatively moderate, with significant variation in urban vs rural markets. A strong tradition of TV viewing, availability of affordable hybrid offerings and challenges related to internet infrastructure will also prevent any sharp fall in pay-TV subscriptions,” Goswami added.
