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Conditional Access System: Way out of cable conundrum? Part II

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Conditional Access System: Way out of cable conundrum? Part II

Amit Agnihotri

Having looked at the key provisions of the CAS bill in our lead story yesterday, we look at the implications. What, and by when, will be the coverage of CAS? Will pay channels need to rework their strategies? How will satellite viewership pattern change?

First, the impact of CAS is expected to be limited, at least in next 12 months, and drawn out. As it stands today, the system will be implemented in a phased manner, starting with the top 4 metros and then rolled out nationally. By such time, one can expect other access technologies like DTH and television-on-fiber optics to become commercial.

Agrees Amit Khanna, Chairman - Reliance Entertainment. “Conditional access through set-top-boxes is one of the technologies that will bring about addresibility. Needless to say, addresibility is a given in today’s scenario. After all, we have no illegal telephones or gas connections!” sneers Khanna.

Even if it takes time and may actually come in different shapes, addresibility has the potential to reshape the current paradigm.

  • Pay broadcasters can lose advertising revenue, in short run, but stand to gain from the increase in disclosure of subscribers
  • Advertisers will rework their media strategy based on sharper profiles of channel audiences
  • Fringe channels in a Pay Bouquets will get adversely affected.

Lets first address how the large pay channels, which control most advertising and subscription revenues, are likely to get affected. In the short run, key pay channels can expect a drop in viewership emanating from a small percentage of households dropping a set of channels from their wish list However, the quantification of fall, is difficult at this stage. This drop can adversely affect advertising revenue. But in the medium term, the market will get adjusted to the lower revised viewership estimates.

On the flip side, key pay broadcasters with compelling content, over medium term, can expect their subscription revenues to shore up significantly. The current disclosures are close to 20% only. If the disclosure, in just top 4 cities move up to 50%, broadcasters can expect to gain as much as Rs. 2.5 billion. “No. The revenues are not expected to go down in Indian context. We have an abysmal disclosure percentile. So even a drop in subscriber homes can be well adjusted by an increase in declarations,” opines Khanna.

The evolution of two tier households, Basic tier that access only the free to air channels and Premier tier that access pay channels also, will segment the CAS audience viewership. “We welcome CAS. We’ll be closely looking at viewership universe of pay channels and may even adjust our sample sizes to meet this new need. Surely, viewership will get fragmented into two domains. And will allow sharper segmentation of audience that can help advertisers.”

Clichéd but relevant, Content will really be king as consumer has more direct control over their choices. This then can upset the bouquetization where not so popular special interest channels are also bundled. Much like selling lemons with apples! So the nth Music channel, part of a large bouquet, might face the music. “Typically weak channels are bundled with driver channels. CAS will expose these weak bouquet channels,” opines Rajiv Vyas, President- InCablenet. But, niche but strong unique content channels, such as CNBC and NGC can actually gain from higher subscription revenue by charging a premium.

Amidst all this mêlée, lets not lose the sight of consumers. After all, this amendment is actually meant to benefit him. Opinions are divided. Some commentators opine that most cable households will end up paying more than the current bill. They state that if the basic tier will cost around Rs 125 (close to their current bill), they might end up more than Rs. 100 to access a mix of a few general entertainment channels and some niche channels. Also, the cost of set top boxes is substantial for an individual household. Those favoring the move sight the Indian entrepreneurial spirit that will create resources to seize the potential and suggest that market would play its role and readjust the pricing of channels.

Fair enough. Addressibility is indeed inevitable and CAS is a step forward. The market needs to realign its strategies and get ready for this new paradigm. In the final analysis, the effectiveness of CAS lies in its speedy implementation. Are the policy makers and the industry ready for that?


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