Cable fee should be Rs 1000 a month

Updated: Dec 3 2013, 09:11am hrs
With the Indian broadcast industry successfully moving past the goalposts of the first two phases of cable digitisation, broadcast companies, multi-system operators (MSOs) and local cable operators (LCOs) have been forced to change the way they

operate and engage with customers. Content aggregators too have seen their role transforming in this changing landscape. In a conversation with FE Brandwagons Anindita Sarkar, Rajesh Kaul, president of TheOneAlliance, one of the leading content aggregators, talks about the concerns of the industry. Edited excerpts:

What are your major concerns with the cable digitisation process

There have been a lot of learnings during the first and second phases of digitisation and now, we need to use those learnings and move forward. In the beginning, the MSOs did not believe that this kind of a sunset date could be possible; that complete digitisation can happen; and that the government will enforce the law on them. As a result, the MSOs were not prepared for this transition. Since the priority then was to convert analog to digital, the MSOs started

to aggressively distribute the set-top-boxes. And in that rush, the MSOs did not get any data from the subscribers. They issued the boxes to the local cable operators (LCOs) but did not keep proper records; meanwhile, they also did not sell the packages the way they were supposed to.

Digitisation also meant that the consumers should have had the option of choosing a particular channel and paying only for that. So, the first motto of digitisation was addressability. But this did not happen because the MSOs were not ready with their infrastructure.

Now with about 10 more months to go for complete digitisation, this is an opportunity for the MSOs to start putting their infrastructure in place and start seeding the boxes and set up call centres.

Experts argue that with digitisation there is no question of any capacity constraint. So why do we still have carriage fees

Yes, we thought that with digitisation there would be no capacity constraint. This meant that there would be no carriage fee anymore. But then when phase one happened, the ministry of information and broadcasting and Telecom Regulatory Authority of India (Trai) asked all the major television networks not to expect the fruits of digitisation immediately. So all the broadcasters decided that they would continue to pay the carriage fee for the entire year. But this does not mean that there was no reduction in carriage fee. So, if earlier a channel was paying R100 as carriage fee, it has probably become R75-80 now. However, we are hopeful that there will be further drop in carriage fees once the MSOs are ready with their infrastructure and require no more hand-holding.

What about subscription revenues Has it increased

All of us understood that with digitisation, subscription revenues would eventually go up since under-declaration by the MSOs, sometimes as much as 80-90%, would fade away. The R5000 crore subscription revenue could even jump to about R10,000 crore. But here too, we managed to get only about 20-25% increase.

Why did the addition of LC1 markets create fear amongst broadcasters Did it not bring hope for additional subscription revenues

It is not about fear but rather the pressure that it brings along. The LC1 markets always existed from the subscription point of view. It was only when TAM Media Research notified these markets for the calculation of the GRPs (gross rating points), that there was added pressure on the broadcaster to ensure that the channels were available in the market. So, from the carriage and placement point of view, those markets became important. For example, if a channel in one of the LC1 markets was placed on a hyper-band and not the prime band, the broadcaster was not much worried. But when TAM notified that market, it put pressure on the broadcaster to move up to the prime band or the S-band. So the broadcaster ended up spending more money on carriage, which it was not paying earlier.

Recently, a Trai consultation paper mentioned that content aggregators command substantial negotiating powers, compelling MSOs to enter into deals that are not accepted by them. Is this true

No. Even today with digitisation happening, the monies that we are collecting out of subscription is not even 15% of the overall earnings for the broadcasters. If aggregators had so much power, then our revenues should have been three times more.

TRAI has asked the MSOs to send a compliance report on the status of subscriber billing in Mumbai, Delhi and Kolkata that were covered under phase one of digitisation. What is your view on that

Even now, quite a few MSOs do not know the details of their subscribers. So Trai is pressurising them because they need to have the back-end infrastructure ready as well as the details of the subscribers. They also need to understand their customers and what they want to watch. Ideally, they should have done this groundwork last year. But they have still not done it and so the pressure from Trai.

Is the cap on channel prices harming the revenue generation potential of television networks

We have seen the price freeze for the pay channels for the past 4-5 years now. Now is the time for the regulator to lift the price cap. Let the consumer decide. If he does not like it, he will not take it. Yes, they were supposed to deregulate the price cap after digitisation. But it has not happened yet.

This year we have seen the launch of several new channels. Do you think there is enough space for new players

Capacity is not an issue as technically MSOs can carry 600 channels. But only the best channels will be seen by people. Also, if the distribution revenue of the channel does not improve, then the channel will die. Also, the cable fee that consumers are paying has to go up. Ideally, consumers should be paying about R1000 a month given the kind of service they are getting, but they are still paying R250-300. You cannot have 600 channels surviving with no significant ad sales, no distribution monies at all and high carriage fees. However, the industry continues to launch channels because digitisation is a positive step and there is hope that things will change in the long run.

Do you think that channels with no network strength can survive in such a competitive market

They can survive if the content is really good but if it is about distribution alone, then it is always better to be part of a bouquet. The aggregators meanwhile already have the infrastructure ready. For a single channel it could cost R30-40 crore. Now if it is part of a bouquet, the costs are reduced by almost 15-20%.

What is One Alliances plan to stay ahead of the curve

We are very content with where we are right now. We always believed that size does not matter. Our bouquet of 28 channels have the best of channels in all genres. After digitisation, a lot of people have been talking to us. But we do not want to rush into collecting channels. If we feel that some channel is going to add value to the existing bouquet, then we are open to that. I think that there is enough space for all the content aggegators currently.