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Rising subscription prices: Changing dynamics of television access business – Part I

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Rising subscription prices: Changing dynamics of television access business – Part I

As we write this analysis, one of the major player of Indian broadcasting industry, is busy in their meeting room thrashing out another hike in their subscription rates. Adding fuel to the vicious cycle of under-declaration and over pricing.

In this first part today, we analyze the current scenario-- how the cable TV distribution industry, which generates Rs.5,700 crore annually is rife with malpractices and how did it land up here.

Before reaching to any conclusion, lets peek into the history of the cable TV industry in India. It opened in year, 1991, when Star TV started beaming the channel, through Hong Kong. CNN and BBC followed the move, along with the domestic channel 'Zee'. Due to lack of any regulation, suddenly dish antennas sprung up at the rooftops, and the distribution of cable television took a giant leap. It changed the Indian TV viewership landscape forever. This sudden mushrooming of the cable TV operators acted as a major facilitator in the distribution, that formed the root of viewership numbers that the channels boast in their marketing pitches today.

In the mid 1990's, the Multi-System Operators (MSOs), looked at the disorganized cable distribution industry and got excited at the revenue potentials. At the same time majority of small cable operators were relaying only 10-15 channels, out of the 30 channels available, as for more number of channels greater investment was required. And there entered the players, Incablenet, Siticable, Asianet, Hathway and RPG Netcom, with capability of relaying 30 channels and more, thus, filling the gap. But again, the absence of regulation led to hotchpotch deals of MSOs with the small local cable operators (LOCs) and franchisers. By 1996, the Indian viewers were exposed to almost 60 channels including the movie channels provided by the local cable operators.

Almost at the same time, the broadcaster watching the haphazard growth of the cable distribution industry thought of taking a share of the revenues from the consumer. The first channel, which went pay, was Star Movies in October 1994, at that time the rate was between Rs.1.67 to Rs.3.33 per subscriber per month.

This was where the current problem of under declaration- overpricing, took birth. However, with the increasing distribution figures the channels started getting viewership, which led to greater advertising share. With the channels going pay, and consequent formation of bouquets, the rates being charged by the broadcaster started cutting into the shares of the MSOs and the LCOs, some portion of the rates was spilled over to the consumer. The number of channels kept increasing, with almost every stand-alone channel and bouquets increasing their subscription price in an average time of six months. The result is the present chicken and egg situation.

exchange4media estimates say, there are about 44 million C&S households in India, which are expected to rise to 50 million by 2003. Total under-declaration according to exchange4media estimates, is of the order of about 86% in 2002, which is huge. Also, we have seen hikes in the subscription prices of a lot of packages and channels like Star package, ESPN & Star Sports, FTV, Hallmark and Sony Discovery Package in year 2001. A lot of channels and packages increased their prices in 2002 as well, concurrently contemplating hikes in 2003 as well.

Uneasy Hikes
Channel Name
Current rate
per subscriber per month
Likely to be
Star Package
Rs. 40.50
ESPN & Star Sports
Zee TNT Package
Rs. 55-60
DD Sports
Rs. 8.95
Rs. 1.75
F-TV (Alacarte)
Rs. 9.00
Sony Discovery Package
Rs. 55-60
Rs. 45.5
Rs. 214.15
Rs. 245 (estimated)

The vicious cycle at present is working in the following manner:

MSOs stand: The MSOs are presently getting the total pack of channels, at an average Rs.215 (likely to increase upto Rs.250 in 2003), whereas the price charged from the consumer is in the range of Rs.200-Rs. 350, which includes entertainment tax as well as the share of local cable operator. The dilemma is with the MSO's earnings, they say if the declaration levels are increased, they will not be able to earn anything. We say, MSO and LCO's, who are still being benefited out of the unorganized delivery structure of the industry, are shedding crocodile tears in response to subscription price hikes.

Broadcasters stand: Broadcaster are just stretching the term under-declaration, constantly hiking the prices and fulfilling their long -term objectives. The price hikes are done because they want to increase the share of subscription revenues in their total revenues.

At the same time a few channels are trying to take a short-term advantage (due to delay of CAS bill), as the bouquets will cease to exist after the CAS bill is passed, and these channels will either become free-to-air or face tough times.

Effect on Consumer: The subscription price hikes that cannot be compensated through increase in under-declaration are spilled over to the consumer, who pays the increased rates without any explanation from any section of the cable TV industry. The consumer is already paying monthly fees as high as Rs.300, in which he also gets unheard, unwanted, irrelevant regional channels too.

Presently, the broadcasters are demanding 100 percent declaration by the local cable operators and MSOs, which doesn't seems feasible. Perhaps, the Indian markets would evolve the way international markets, US and UK, where there is 100 percent declaration of the basic tier package, then as the rates of the package or individual channels go up the declaration levels go down to as much as 40%. However, this conflict between the broadcaster and the cable operators is expected to end as soon as the CAS bill gets a green signal from the government.


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