DTH: Creating new frontiers
For DTH players in India, digitization will open new frontiers for opportunities along with fresh challenges. When there was widespread concern among viewers of metros in 2007 over the choice of paid channels, it offered a chance to DTH operators to attract fence-sitters. DTH operators have comfortably managed to attract 40 million consumers, close to 25% of the total market share. Unlike MSOs, DTH operators have invested huge monies to ensure a robust distribution system. However, so far, DTH operators were not competing with cable operators directly as there was a clear distinction between digital and analog TV sets. Along with quality viewing experience, LCOs will have an added advantage of penetration due to their widespread presence. Faster response to consumers’ complaints and post-sales service, DTH consumers may also consider switching to the set-top box option. However, DTH operators differ. They see an opportunity as the markets open up for a digital revolution. RC Venkeitesh, CEO, DISH TV says, “Digitization of distribution is a good opportunity for DTH operators in India. The market size is huge. DTH has already covered 40 million homes. I don’t think it will be MSOs versus DTH players. The Indian market is huge which will provide wide opportunities, not challenges.”
Achieving the target within the given deadline will require massive investments; hence DTH players are expecting the government to give them tax relief for faster implementation. Harit Nagpal, CEO, Tata Sky, says, “We would like to see digitization within the said time-frame and feel that the acceptance of TRAI’s recommendations on short-term taxation relief for DTH operators would immensely boost this process. Digitization of Indian TV services will aid the organization of the industry and result in clearer subscription figures for broadcasters.”
Broadcasters - Not much to gain?
Broadcasters have welcomed the decision of the government with a smile. While most believe that there will not be a major alteration in viewership pattern, the industry will certainly benefit from a transparent and organised system. Subhash Chandra, Chairman of the Zee Network, says, “With the Union Cabinet clearing the ordinance on digitization, the cable industry will get a much required boost which would help create a more sustainable business model. If implemented well, over the next 4-5 years, the industry can completely transform itself from a fragmented unorganised set-up to a more transparent, organised and service-oriented industry.”
Like broadcasters, most industry experts have also turned down the hypothesis of alteration in viewership pattern. LV Krishnan, CEO, TAM Media Research, said, “Viewing patterns are not dramatically different in the digital landscape today, because people are not consuming technology, they are consuming content. If you don’t change the content dramatically, there is not going to be much of a difference.”
Overall, the prospect of more bandwidth coupled with transparency has come as relief for many broadcasters. Reaching viewers will also become a game on an even field. Most importantly, under-reporting of collection by cable operators will pay off heavily to the industry which spent Rs 41 billion in 2010 as subscription revenue. “As a broadcast network, it is an opportunity to be able to provide more offerings to the consumer. With digitization, carriage fees should see a drop. Importantly, pay channels can participate more equitably with MSOs and DTH platforms,” feels Sunil Lulla, MD and CEO, TV Business, Times Global Broadcasting Co Ltd.
However, chances are that free-to-air platforms will always have higher access. For instance, DD-DTH service is prevalent in small towns. If there’s a dramatic shift of viewers to DD DTH from cable operators, the market dynamics may change substantially. The suspense will unfold only when the government and regulators clarify tariff charges to broadcasters.
Game changer for advertisers?
Digitization has brought good news for advertisers. In India, cable channel viewing has gone down from 9% to about 2-3% in the last 10 years. This share is not negligible as it amounts to 150 minutes of TV viewing. This amount of time will shift to regular channels after digitization, which is good news for advertisers. But fingers will remain crossed over the possibility of intervention from the regulator in tariff plans which can decide the fate of the Rs 5,000 crore ad spends on television. In 2007, media planners had reported a reduction of 3.5% in ad spends on television. Experts believe that next year will be crucial for the industry as results from the four metros start showing up. “I think we need more clarity from the government on whether there will be regulation in tariffs. I believe that the carriage fee is already too high. Broadcasters should be given a free hand to decide the tariff; else we may see a major spin in the industry next year,” reiterates Yogesh Radhakrishnan, MD and CEO of Prime Connect, a distribution company from the Times Group.
Immediate focus – Phase I
Seven million set-top boxes, an investment of over Rs 900 crore, four critical markets and all to be achieved within five months. The much-awaited implementation of the ordinance for Phase I of digitization is crucial to all players. It may sound like a tall order, but the industry is confident of achieving it. But the later phases may pose big hurdles as the infrastructure in B and C-towns is not streamlined, nor are the people educated about the big change. To achieve the 2014 target, all cable and satellite homes will require 80 million set-top boxes. “Deadlines for the first two phases can be achieved easily, but the next two phases can be challenging. Consumers and cable operators in rural India must be educated about the importance of digitization,” says Krishnan.
But as metros require an investment of over Rs 900 crore to make digitization a reality, the rest of India will need geometrically higher infusion. MSOs will be under stress to reach the nooks and corners of India, hence there is a growing demand to ease FDI norms for faster progress. “The TRAI digitization blueprint of August 5, provided for the complete package of monetary and non monetary incentives, see huge costs of digitization, estimated at over Rs 25,000 crore nationally. These included harmonized FDI at 74%, grant of infrastructure industry status to cable and a host of fiscal and tax incentives. At present, all these enabling measures are yet to see the light of day,” says Ashok Mansukhani, president, MSO Alliance.
Consumer education on advantages of set-top box
Experts believe that India has an advantage of set-top boxes, but will the government subsidise it is a matter of concern. Also, 25% of viewers in metros may not be able to afford it as they are from the lower socio-economic strata of society. “In the USA, the government subsidized set-top boxes and 40-dollar subsidy was given to every household which did not delay the process much. Cable networks are well established in every nook and corner of India. The need of the hour is good investment. If the government has a plan in place then procuring STBs from China and Korea will be very easy,” says Col. (Retd.) K K Sharma, a consultant to several cable companies in India. MSOs and LCOs do not see STBs as the major challenge. According to them, there is a need to reach out to viewers and convince them about the benefits of digitization.
Co-opting Local Cable Operators
Incorporating LCOs into the exercise is crucial. LCOs will have to either group themselves or register themselves under existing MSOs for organized functioning. The next step immediately after digitization would be to create an organized chain in distribution. Systems have to be put in place on the lines of the telecom operations in India. MSOs and LCOs will have to be careful about providing services as TRAI will monitor services as well as quality of service. Therefore, interruption in services will attract action from the regulator.
A balanced revenue-sharing formula is yet to be devised by the government and regulator. While LCOs and MSOs are anticipating a good chunk of the pie, broadcasters expect a significant fall in the carriage fee due to reduction in under-stated collection from cable operators. “ARPUs from subscriptions will increase for most of the stakeholders. The revenue sharing will change,” says Rohinton Dadyburjor, VP- Operations, Hathway. “Many issues will be clarified once the whole process takes off. It remains to be seen whether there will be a basic tier package on the lines of DTH operations,” says Krishnan.
Putting a monitoring system in place is also a challenge. As digitization will be guided by the process of an ordinance, the monitoring exercise has to be accurately carried out. The CAS system was monitored by the Post Master General, but after complete digitization, an authority will have to be entrusted with powers to take stringent action against defaulters.
As opposed to CAS, DAS will provide easy addressability which will ensure that every small piece of information is available for auditing. After all cable homes of the country go digital, it will be a challenge for authorities to maintain and monitor a record of names, addresses and viewership patters in different regions of the country. Auditing will involve a record of which home is buying which channel and the cost allocated to each channel.
(With inputs from Dipali Banka)
(Read the complete report in the IMPACT issue dated October 29, 2011)
Digitising Television – Part 1: Going digital with the box