Mumbai: With broadcasters keen on offering more free-to-air (FTA) channels to tap rural demand, it could adversely affect the pay-TV opportunity in urban areas and villages, according to a report.

FTA channels have been registering a strong growth in TV viewership, since rating agency Broadcast Audience Research Council (Barc) started reporting rural data in late 2015, leading to increased interest from advertisers.

The FTA ad market was pegged at Rs400-Rs500 crore in 2016 and is expected to grow to Rs800-Rs1,000 crore by 2017, the report by ICICI Securities said.

In the latest round of bidding for slots on Free Dish, broadcasters paid Rs85 crore for 11 slots.

“This move by broadcasters to offer more FTA channels could threaten the pay-TV opportunity in phases 3 and 4 markets and could be negative in the longer term," the report said.

The timing of this move is unfavourable as subscribers in phases 3 and 4 markets opting for FreeDish, will be reluctant to shift to pay-TV as they have to incur switching costs.

“DTH (direct-to-home) platforms have also been reactive and are offering leaner and smaller packs and FTA packages to combat Free Dish. While broadcasters have confirmed that it is a tactical move, we see such short-term approach as a matter of concern," the report said.

Leading broadcasters launched their FTA movie channels in 2016 and a number of news and music channels have been converted from pay to FTA.

“Broadcasters’ belief that they will be able to pull back on FTA content at will is imprudent. We fear a scenario of subscribers unwilling to graduate to pay-TV platforms as quality content to satisfy the limited entertainment needs in rural India is available for free," it said.

“We peg the long-term loss for broadcasters higher from pay-TV in the long run as compared to FTA ad pie. We showcase an annual revenue opportunity loss of Rs18 billion for broadcasters from pay-TV, assuming 30 million subscribers could have generated monthly content average revenue per user of Rs50," it added.

Free Dish, the free DTH platform offered by the government, has witnessed a huge surge in subscribers in the past two years.

The subscriber base of DD Free Dish is projected to reach around 40 million users in the next two to three years from over 20 million subscribers at present, according to a recent EY report.

Currently, rural TV viewers contribute to 52% of the overall viewership. However, it is estimated to contribute 74% of the total viewership on DD Free Dish, EY noted.

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