Guest Column: Broadcasters need to function like FMCG companies to drive consumption of channels

Guest Column: Broadcasters need to function like FMCG companies to drive consumption of channels

Author | Atul Pande | Monday, Oct 20,2014 8:51 AM

Guest Column: Broadcasters need to function like FMCG companies to drive consumption of channels

The recent judgment on the imbroglio between a large MSO and the largest network in India has stirred up a hornet’s nest that few expected, and interestingly has triggered off a series of actions that may help in accelerating the restructuring of the industry.

Of course, this judgment is one in a series of actions which could have happened earlier, and which would make the industry disclosure and management process more transparent, and more end user revenue focused. It cannot, and should not, be seen as a one – off between a broadcaster and a platform, but will trigger off a series of equitable actions that level the playing field eventually.

An A La Carte structure, is the first step towards discovering the true value of content, and after the initial skirmishes are over, content providers will get a true fix of penetration levels of their content, and the true reach their linear channel deserves, or is delivering at that platform. I understand that initial responses suggest that flagship GEC channels will get penetrations upwards of 50 - 60 per cent, which incidentally, also approximates their reach numbers as reported today. At these penetrations, the revenue coming out of these channels, if correctly reported, should exceed current revenues, in spite of the artificially depressed pricing in the industry.

Sports Channels, should get penetrations in the 15 – 20 per cent mark, especially the ones with the cricket overhang, and given their higher pricing, will be able to recoup their investments in the long term, more so as the Pricing Forbearance and the HD penetration kicks in some time.

The niche and the specific pay channel content is the random variable in the mix, in terms of reach and delivered revenue. Cable operators do not need them to survive, conventional wisdom says that these products are DTH heavy, given the consumer profile, and implementing them will take much doing at the cable operator – MSO combine level, which is still light years away in terms of industry time frames to get something going seamlessly. Not a single MSO I know of has a prepaid system in place, and a Middleware and SMS system that will be able to execute on – the – fly purchases of content products, the way it happens in all DTH platforms.

And this will test the holy grail of the industry like nothing else before – the MSO – LCO relationship. The LCO, till now, has largely been insulated of the shenanigans between the content owners and platforms, and suddenly it falls on his mantle to execute a pay channel structure, which he spiritually is not ready for. Since digitisation, he has focused much time on generating a reasonable revenue structure for himself, instead of the basics of the pay platform, and this will come home to roost for him, at least for some time. MSOs will accelerate the drive, but will need to get enhanced cooperation from the field level to make it happen at the velocity, which the environment demands.

Interestingly, when the verdict was announced, I was with one of the leading MSO CEOs of the country, and his first reaction was quite interesting. He felt that this would accelerate the pay pricing structure in the industry faster than anything done over the last two years, but he also expected conflicts at the operating level as the MSO and LCO objectives clash. Piracy is another animal, he felt, which will rear its head as LCOs will strive to provide the full signal and channel bouquet to their consumers as they resolve their technical and commercial structures with their principals. Content owners should get ready for some time of active policing as this model evolves, our regulators will need to watch the space with a sanguine eye.

It is evident to me, and as I have said earlier, that this will eventually lead to a more liberal pricing regime of channels. If one looks at the channel payout structure released after this pronouncement by the specific operator in question, it appears to me that some channels are priced too low, and the regulator will have to necessarily take a liberal view of this as the pay structure kicks in, and consumers get used to paying a la carte for the channels. The industry needs a review of this for some time, and this will happen quicker than possibly we expect today.

If implemented well, almost all parts of the chain will see immediate benefits of this in terms of enhanced revenue, and the accelerated change may get self perpetuated; a bit like digitisation in even non-prescribed areas, where the box now pays for itself as the benefits of digitisation are understood by consumers and LCOs, and the investment and rollout is voluntary, to a large extent.

If I were a broadcaster, I would be setting up a promotions and sampling unit, much like the FMCG companies, to drive penetration and consumption of my channels. Look at starting to work with my distributors (read MSOs) and retail outlets (read LCOs), to ensure I am on the shelf for the consumer to sample and buy. Digital sampling acquires another dimension on this, and there is a story to be told there too. A significant shift in the industry will happen here, as the marketing action will move much closer to the consumer.

So, there is much to look forward to in the interim, and specific actions from various operators will also give an idea how they are thinking of addressing the space, as it vacates from the current fee structures. The actions as they unfold, should be riveting, and are the ones I will continue to watch with much interest. And so should you, if you are invested in the industry and its future, or just like to watch good TV!

The author is, Executive Director - SPORTZLIVE.

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