Digital uncertainty

The mandated digital switchover for cable homes is to be universal—implemented in the whole country by 2014, in the four metros by 30 June this year

Talking Media | Sevanti Ninan

Over the next three months, the four metros are going to see an amazing scramble to achieve a technological shift with a deadline. The mandated digital switchover for cable homes is to be universal—implemented in the whole country by 2014, in the four metros by 30 June this year. The ministry of information and broadcasting (MIB) claims there will be no extensions. Come 1 July and, whoosh, the analog signal will be switched off. India is irrevocably set on the path to universal digitization.

By AFP

But is it? There is the physical improbability of what is sought to be achieved. To take Delhi, as a case study, MIB estimates 5,000 cable operators, five national-level multi-system operators (MSOs) and 3.3 million cable and satellite connections. Covering all those homes in 90 days means seeding 36,000 homes a day with set-top boxes (STBs). Even if all local cable operators (LCOs) were fired with missionary zeal to achieve this, which they are not, it would take a lot of doing.

Earlier this week, ministry officials attempted to sweet-talk an assembly of cable operators and MSOs into keeping the deadline. MIB is using everything from resident welfare associations to Facebook to chivvy the LCOs along, and get consumers to demand the boxes.

It has behind it the big service providers, some of whom have joint ventures with broadcasters. There was some significance to the fact that this meet which the Federation of Indian Chambers of Commerce and Industry (Ficci) organized in Delhi between ministry officials and the service delivery crowd was chaired by Sameer Manchanda, promoter of DEN Networks Ltd, the cable TV distribution company that has a 50:50 joint venture with News Corp.’s Star TV Group. Star DEN, in turn, has a joint venture with ZeeTurner. The Sun Network has long combined broadcasting and distribution interests, but over the past few years other big broadcasters have been getting into distribution to protect their own interests. That includes direct-to-home (DTH) operations such as Dish TV India Ltd and Tata Sky Ltd.

So far the dominant media discourse on digitization has been about broadcasters needing to get pay revenue due to them because cable operators under-declare, and needing to shed the carriage fees that LCOs levy to accommodate channels in their limited bandwidth. The industry is not achieving its potential because it is hobbled by the loss of revenue on these two counts. (Cable operators counter this argument by saying that pay channels are a third or less of all channels on offer, and free-to-air channels provide television rating points, or TRPs, to the broadcasters which get them advertisement revenue.)

Digitization is expected to bring in transparency, increase distribution capacity, and give the consumer choice, better TV signals, and price regulation, since the Telecom Regulatory Authority of India will set the upper limit for what they can be charged.

But does MIB need to hustle the process along so much? TAM figures on TV homes show that with the advent of DTH, people are opting for digitization in numbers have that brought DTH to a third of all C&S homes and 28% of all TV homes. There are now 42 million digitized homes. As people are able to afford it, they opt for digitization. So we would have got there, sooner or later.

And does digitization end carriage fee demands? No, DTH operators level carriage fees, too, as does Doordarshan’s free DTH service DD Direct. There are simply too many channels around, and too many new entrants, for bandwidth to be limitless enough to accommodate them all.

What media coverage taken up with the problems of broadcasters does not address is the issue of access for those at the bottom of the viewership pyramid.

Academic papers on the digitization experience in other countries point to the fact that it threatens two things: universal access and the public service broadcaster. So what is the score there? Doordarshan’s terrestrial service will remain analog for now, the switch-off date for it is 2017. People who cannot afford cable have the option of accessing its free-to-air signals through the antennae they now use.

Cable operators have lots of poor customers too. Can they afford set-top boxes? At the Ficci interaction, MIB additional secretary Rajiv Takru made two breezy assertions in this regard: give it to them at Rs. 30 a month rental, “anybody can afford that”. He also said, “Stop bothering about the consumer who does not want to pay for services.” Ask the cable community and they will tell you that there is enough gold at the bottom of the pyramid to make it difficult for them to shed their low-income clientele. And renting is easier said than done. What if a migrant labourer migrates with his set-top box, asked an LCO plaintively.

Are we then looking at the making of a new digital divide, this time in television access? Or should we take heart from the government’s poverty reduction figures and assume that we’ll soon be a country where the poor can afford digitization?

Sevanti Ninan is a media critic, author and editor of the media watch websitethehoot.org. She examines the larger issues related to the media in a fortnightly column.

(courtesy: Sevanti Ninan & livemint.com)

The great Indian media story: Digitisation dream gone sour

Tata Sky

The path to digitisation has plenty of roadblocks which is affecting the revenues and profits of companies in the broadcast media 

The television media is looking forward to digitisation, which is said to be beneficial for—both channels and broadcasters. It is expected to increased revenues for television channels and broadcasters, many of which are struggling financially. But, there is ample evidence to point out that the transition is not going to be easy.

About a week ago, the ministry of information and broadcasting said that it will start with the digitisation drive from April 2012, beginning with the four metros. The ambitious process is supposed to digitise all cable and analog households in the country by December 2014. The conversion is something many experts claim to be the cure-all, in this case, helping broadcasters and channels to earn revenues and save themselves, and provide a “high-end” experience to viewers, who are still stuck with an ordinary viewing.

According to the FICCI KPMG report, India has 146 million householdsthat have television sets; and cable and satellite makes up 80% of the segment. The biggest beneficiaries from the digitisation drive may be the Direct-to-Home (DTH) service providers and Multi System Operators (MSOs).

But we see that despite a considerable rise in the number of DTH subscribers, the channels, broadcasters and DTH service providers have not made money. This brings us to the question, why?

Airtel Digital TV Review [Updated]

The answer may lie in the convoluted tariff structure and huge inefficiencies of the system. The core problem is that channels are too dependent on advertising, customers are not paying enough for their entertainment, a substantial part of what they are paying is not reaching the TV channels and there is huge oversupply of channels, many funded by slush money and controlled by politicians. This oversupply is draining everybody’s resources—pushing costs higher and dragging down everybody’s profits (or increasing their losses).

The revenues of television business are hugely dependent on advertising. They hardly make much money from subscription. Currently, the average revenue per user (ARPU) is Rs160 per month, across all platforms, according to the FICCI report. This is much lower than what other countries pay. To reach Indian homes, they are dependent on cable operators and DTH providers who extract their pound of flesh. Hernan Lopez, president and chief executive of Fox International Channels, recently said in an interview: “Indian broadcasters generate $2.6 billion a year in advertising. But they only net out $700 million in subscription fees, after accounting for the $400 million they have to pay back in carriage fees.”

Carriage fee is the fee that the broadcasters pay the cable operators and DTH operators to ensure that their channels are carried into your homes. The system of carriage fee is mystifying, and suffers from lack of transparency. The analog cable operators have enormous clout in this area, and they can raise carriage fees, and every year, channels seal deals with these cable operators at increasingly high rates. And there is good deal of revenue leakage from the system. This means, that the channels often lose out on the revenues they earn, as the cable operators do not report their total earnings. Many cable operators are opposed to digitisation because they think it will lead to their loss. It is not that DTH operators are making money either with their carriage fee system. In a recent meet, Harit Nagpal, MD & CEO, Tata Sky, pointed out, “Of every Rs100, the DTH operator has to shell out 32%-35% as taxes and the broadcaster takes about 35%. So, what am I left with? DTH operators in India have shelled out Rs20,000 crore so far towards digitisation.”

Logo of FICCI

The FICCI KPMG report says, “Broadcasters as well as MSOs expect a decline in carriage fee after the implementation of the first phase of digitization. However, there is a lack of consensus on the movement of carriage fee in the medium term. While broadcasters expect a decline over the next two to three years, some MSOs expect carriage payments to claw back to current levels.”

The biggest problem faced by the sector—and what nobody wants to talk about—is of oversupply that is forcing fragmentation. More than 600 channels are on air and government has approved more channels, which are yet to be launched. While many television channels find it difficult to manage their finances and get money for continuing their operations, channels (especially in the regional segment) funded by slush money supplied by some powerful entities get ahead. The money flows in without interruption and unregulated; while other channels struggle to raise money through painful and legitimate means and the channels with dubious means of funding further fragment the sector, and eat away at the revenues. This seamy side of the TV business escapes the fund mangers and analysts. The industry professionals cannot talk about it.

Following the global financial turmoil and inflationary pressure, many corporates have cut down on advertising costs. While the number of channels going up, advertising rates have remained flat and even shown a decline. The 2011 FICCI report had estimated that advertising will grow at 15% CAGR. But the 2012 report says that the growth has been close to 12%. Since 2009, rates have remained flat.

To combat all this, broadcasters have tried to tap into the premium payable segment, i.e., viewers who pay for what they watch via DTH platforms. But it continues to be a very niche segment, because DTH services are costlier than regular cable. Cable operators provide more channels at the same cost while DTH and high definition channels (HD) will also cost more. Convincing the viewer is to pay more will require across-the-board changes.

The FICCI KPMG report estimates that the total cost of digitisation, over four stages, would cost Rs20,000-Rs25,000 crore— excluding investments for DTH additions during the phase. While large cable operators may be able to raise the required cash, small operators and MSOs may not be able to do so. Judging the present scenario, 2014 does not seem to be a realistic deadline for complete digitisation. Information and broadcasting minister, Ambika Soni has assured that the prices of set-top boxes (which are offered at the cheapest rates by China) will come down and that the Telecom Regulatory Authority of India (TRAI) will impose a tariff capping for subscribing to channels so that viewers do not get access to the whole bouquet of channels. But it will take more than that. Digitisation may improve subscription base, but without a thorough reform in the revenue structure of the industry (which seems impossible given the endless supply of channels), it seems unlikely that Mr Nagpal’s and his friends’ problems will go away.

(courtesy: Money Life)