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MSOs register steep rise in pay channel costs in ’03-04

31-May-2004
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MSOs register steep rise in pay channel costs in ’03-04

Leading multi-system operators (MSOs) INCablenet and Hathway Cable & Datacom saw a steep rise in pay channel costs in 2003-04. Though there has been no increase in payouts this year with the Telecom Regulatory Authority of India (Trai) freezing the rates, MSOs feel that the temporary relief will pinch growth if continued for long.

Sources said Hathway Cable & Datacom’s payout to broadcasters rose 33.44 per cent to Rs 107.34 crore in 2003-04, up from Rs 80.44 crore a year ago. Hinduja-owned INCablenet’s cost towards pay channels increased by 28 per cent to Rs 68 crore in 2003-04.

The rise in payout costs to broadcasters was led by rate increases and hike in subscriber declarations. The migration of some of the southern language channels from a free-to-air to a pay mode also, to a small extent, contributed to the inflation of subscription fee to broadcasters.

MSOs, however, have declined to pay more to the broadcasters since January this year following the Trai freeze on price increase. Though Trai has not stopped broadcasters from asking for higher subscriber declarations, MSOs have not agreed to such demands. They have told broadcasters that they are not in a position to increase their outgo towards pay channels as there is no scope to recover more money from their franchisee operators or consumers.

MSOs, thus, are saved from the annual rate hikes so far. Broadcasters had earlier hinted at an annual increase in rates from January, but Trai’s regulation has prevented them from implementing it. “It is an ideal situation for us in the short term, particularly when we have no implementation of conditional access system (CAS). In any case, our margins were squeezed,” said Hathway Cable & Datacom chief executive officer K Jayaraman.

IndusInd Media & Communications chief executive officer major general CL Anand said, “We haven’t seen an increase in our payout to broadcasters this year, despite them asking for an increase in connectivity.” However, MSOs are concerned that the status quo can mean no growth in business.

“It is not an ideal situation to be in for the medium and long term. Though content costs are not up, we have our overhead costs. This way there can be no growth in the industry,” said Mr Jayaraman.

Hathway charges Rs 150 as franchisee fee per subscriber. INCablenet charges Rs 100-150, depending upon the area. “It is difficult to get enhanced collections from the ground. We are trying to generate newer revenue streams like broadband services,” said Mr Anand.

Since January, no new agreement with broadcasters has taken place. “There are some broadcasters with whom our contracts have expired. But we are continuing with the old rates,” said the head of a leading MSO.

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