India’s pay-TV market has passed a key milestone. More than half of pay-TV homes – around 70 million households, mainly in the country’s biggest and richest cities – now subscribe to a digital cable or satellite service, opening up new shelf space for viewers and media companies.

Celebrations are on hold however, as incumbents gear up for another period of rapid transition, this time around OTT video.

Pictured (from left): Harit Nagpal, Adil Zainulbhai, Sudhanshu Vats

India’s largest private company, Reliance Industries, is a major driver of change, investing US$22 billion in mobile, broadband and digital services, across 4G and fiber networks.

Incumbent telcos have also ramped up investments in their own pipes in tandem, accelerating the arrival of a new media ecosystem for a country with low levels of broadband access.

“By the time this wave of investment goes in, by us and other telcos, we hope India will become number six or seven in the world in terms of broadband penetration,” remarked Adil Zainulbhai, an independent director on Reliance’s board, at this year’s APOS conference.

“When you do something that quickly and of that scale, it creates lots of changes in the market, in terms of what will be on it, how the different players will react and where the power lies,” Zainulbhai added, speaking on a session called India’s Digital Transformation.

For fixed line, Reliance is targeting a large proportion of high net worth homes passed within 18-24 months, but fiber rollouts will take time. Reliance’s high-speed mobile networks, however, are almost ready to go.

Tests among friends and families of Reliance employees, 500,000 people in total, show average monthly consumption at 20GB, a steep climb from the 0.18GB national average for Indians currently using wireless broadband.

“This is really a big disruption,” Zainulbhai said.

“We don’t really know how everything will roll out when you give people the opportunity to consume as much as they want for a reasonable price. It’s only when we actually see it that we start understanding what they want.”

Wider Effects

Reliance’s entry into the market should also provide a boost to digital pay-TV providers, predicted Harit Nagpal, MD & CEO of DTH operator, Tata Sky, speaking on the same panel.

Traditionally, pay-TV's pricing power has been heavily influenced by local analog cable operators, able to keep rates low by under-declaring subscriber numbers.

“When Reliance gets into that business, they are going to be paying their taxes and paying the broadcasters and cannot sell at US$3 Arpu,” Nagpal said.

“If they raise their prices and cable raises their prices, I also have the ability to take the prices to an affordable level. All of us have bled through the last 10 years because we have had to benchmark our prices against the analog guy.”

In time, fiber will also provide another conduit for video delivery, that DTH operators such as Tata Sky can leverage.

“I will fill their pipes up,” Nagpal said. “I will get the content revenue out of that, and their pipes will get filled up and they will get the pipe revenue out of that. Both of us can make money.”

India sits at the cusp of a digital metamorphosis. The government is making a serious push behind its Digital India initiative, while cheaper smartphones and falling data costs are putting mobile internet into the hands of more people.

Voot, an ad-supported streaming service from broadcast major Viacom18, has around 300,000 daily users after making its debut in March.

“Look at the hunger in the country,” commented Viacom18 Media’s Group CEO Sudhanshu Vats.

“Since the launch in March, there have been 1.5 million uniques,” Vats noted. “We haven’t advertised the service at all.”

Voot's visitor numbers have continued to build. This month, the OTT platform launched its first marketing campaign.

Standalone digital platforms, primarily YouTube today, dominate India’s online video ad market, claiming more than 80% of spend.

Vats is confident that Viacom18 and other TV companies will fare better in the future, due to the hold domestic broadcast majors have on premium local rights.

“You will see a very strong play in the middle of India, the mass, by these players, who understand India,” Vats said.

“As large as India is, there is room for the global players to come in, they will perhaps have the top end of the pie,” he suggested.

“There could also be room for a few digital-only players, if they do very disruptive content.”