Balaji Telefilms says TV to remain its cash cow despite digital boom

India’s top daily soap opera producer believes the traditional television screen will remain its cash cow even as its own foray into streaming content has drawn backing from Asia’s richest person, Mukesh Ambani.

“I don’t see the TV screen fading in India like what happened in the US, at least for the next five years, as we have low subscription fees here,” Sunil Lulla, chief executive officer of Balaji Telefilms Ltd., said in an interview in Mumbai last week. Television programming still accounts for about 65 percent of revenue for the company, which has a market capitalization of 9.2 billion rupees ($128 million).

Despite faster growth in digital consumption of media, mainly through smartphones, TV remains dominant in India due to its affordability and more stable connectivity as the world’s second-most populous nation struggles to ramp up broadband services.

Balaji’s online streaming platform launched in April 2017 and within four months drew a Rs 4.1 billion investment from Ambani’s Reliance Industries Ltd. ALTBalaji has produced 29 web shows so far and offers a subscription priced at 300 rupees a year.

ALTBalaji aims to break even at the earnings before interest, taxes, depreciation and amortization level by the financial year ending March 2022, Lulla said. The business is seen contributing as much as 30 percent of Balaji’s total sales within the next three years, up from about 10 percent currently. Balaji also produces movies for theaters, a business that it expects to turn profitable this fiscal year.

TV Dominant

Growth in online streaming, also referred to as over-the-top or OTT, services is highly unlikely to lead to a decline in subscriptions for India’s conventional broadcasters, Macquarie Capital Securities (India) Pvt. said in an investor note in July. “We believe TV and OTT will coexist in India, with TV remaining the dominant medium,” analyst Alankar Garude wrote.

TV broadcasters in the nation are expected to see total revenue of 862 billion rupees in 2020, an increase of 31 percent over the level in 2017, according to an Ernst & Young LLP report published in March. Combined digital media sales are seen jumping 88 percent over the same period to 224 billion.

Rapid expansion aside, it may take more than high technology and compelling content for new media to dislodge the television’s place in the Indian home, Lulla said.

“India mostly has single TV homes and collective viewing; to compare it with the western world is to expect a large sociological change and it’s not going to happen soon,” he said.