Digitisation phase II is running behind schedule but speculations are rife over the prospects of post digitisation scenario for GECs. Will digitisation be a game-changer for all broadcasters?
The first phase of digitisation was targeted at four metros: Delhi, Mumbai, Bangalore and Kolkata. As per the market and TAM data, the results have been more than 98 per cent. The second phase is behind schedule primarily because of shortage of set top boxes and reluctance of people to convert from analogue to digital. But MSOs, broadcasters and Government are optimistic about the future. The question is: In spite of deployment of the right channel and slight surge in subscription revenues of the broadcasters, will there be a surge in viewership and hence overall revenue of the channels?
Market experts believe that post digitisation, GECs will need to fight harder for their market share as the phase will see surge in the viewership of niche channels. Pratap Bose, COO, DDB Mudra Group said, “There is no prediction one can make regarding this. As far as the practice of digitisation is concerned, it will surely set the right pace for right pricing and uniform judging. But one thing is for sure and that is, in the short-term, viewership of the niche channels such as travel, infotainment, science, etc. will enhance and this would also gulp the viewership of GECs. In the long-term, only the channel that provides better content will be the king, as viewers will have multiple options.”
His views are echoed by PM Balakrishna, COO, Allied Media, “As soon as digitisation happens, there will be a surge in viewership of niche channels and there will be a scenario of traction visible. Prediction at this point will be difficult; but even where digitisation has been achieved, it has been observed that viewership of niche channels has increased. So the trend is likely to continue in other cities as the practice shapes up,” he said.
As per market observation, digitisation will bring clarity on the distribution front. Although it is expected that the Average Rate Per User (ARPU) will increase, initially to gain over DTH players, MSOs will keep the consumer rates as before or will increase them slightly.
As per FICCI KPMG 2013 report, newly digitised subscribers are paying analogue level ARPUs providing a cost advantage over DTH, in order to compete with it (DTH). Therefore, it is expected that digitisation may bring in subscription revenues but there is big possibility of consumer volatility as niche channels, which were not able to make their presence felt before due to high carriage fees, will now be able to do so.
A press release in January, post DAS Phase I implementation, by Animal planet, one of the niche channels mentioned, “As per TAM data for the period Week 44-52, Animal Planet has witnessed an increase of 40 per cent in channel share. (Source: TAM, CS 4+, All India, All Day, Channel Share, Week 44-52 vs. Week 1-43). In prime time, Animal Planet registered a jump of 50 per cent in channel share (Source: TAM, CS 4+, All India, 1800-2359 hrs, Channel Share, Week 1-43 vs. 44-52).”
The release above only substantiates the fact that niche channels such as Animal Planet and others may gain viewership even in the prime time post digitisation.
Apart from this, post DAS, lower carriage fees has also become a reality and either channels are able to carry more channels at the same carriage fee or are have been able to reduce their carriage fees overall. Also, there is a surge in revenue through subscription fees and channels are expected to gain on that front. But now since there will be viewership attrition, it would be difficult for GECs to pitch at the same ad rates as they did before, as experts are predicting decline in viewership of these channels as inevitable. Consequently, there would be an increase in ad rates of the niche channels and therefore, they would also grab a bigger pie of the advertising budget as well.
So even if channels are able to gain over subscription revenue and are able to curtail their carriage fees, the top line of the channels is bound to be affected to a certain extent.
Ashok Shekhar, an independent media consultant stated, “What DAS will actually do is reduce the carriage fees because of its infrastructure. Also, because there will be a clarity of who is watching what, there will be an accountability over viewership. As far as revenue is concerned, it will now become a true competition because channels will now be investing in quality content and the revenue (subscription and advertising) would depend upon the actual viewership, unlike in the era of CAS (Cable Addressable System).”
The increase in subscription revenues of channels in 2012 is attributed to better negotiations (Media Pro, Alliance One, etc.) rather than due to DAS. Also, as per FICCI-KPMG 2013 report, the benefits of subscription revenues is expected to be seen post 2013 and 2014. Therefore, as of now, there can be no conclusion as to what will be the percentage increase or decrease in the top line of the channels but in the short-term, there would be definite consumer attrition from the GECs to niche channels.
In order to cater to high consumer expectation and to counter niche channel share rise post DAS, GEC channels will also rely heavily on HD feeds as the ad rates for HD feeds and normal feeds may be different with the former commanding more ad rates.
The FICCI-KPMG report mentions, “HD subscribers account for three-five per cent of existing DTH subscribers. However, the percentage of new DTH subscribers opting for HD feed has doubled from seven-eight per cent in 2011 to 15 per cent during 2012. This would boost DTH HD ARPUs.”
The long-term affect on the top line of channels is therefore yet to be seen and the channels – whether GECs or niche – will leave no stone unturned in capitalising the opportunities they have at their disposal.