Carriage market to stay buoyant

MUMBAI: Broadcasters will continue to be pinched by hefty carriage fees this fiscal as the industry forecasts a 10-15 per cent jump over the year-ago period.

The payout to cable TV operators could touch Rs 17-18 billion as space on analogue cable continues to be choked, digitisation is slow, and new channels are keen to launch in the Indian market.

An improved advertising market will also allow some broadcasters to up their carriage fees, particularly in genres where there is intense competition.
“Niche and new channels are continuing to pour in. This will contribute to some swelling in the carriage fees as there is severe bandwidth crunch. The carriage market is expected to go up by 10-15 per cent,” says Star Den chief executive officer Gurjeev Singh.

Regional channels, traditionally conservative spenders on carriage, are also spoiling the market as they strive for special attention from cable TV operators in specific markets.

“New entrants and regional channels with focus on some markets are the new spoilers. The carriage market could touch Rs 18 billion this fiscal,” says MSM Discovery president Rajesh Kaul.

Grabbing a small slice of the market are the direct-to-home (DTH) operators who are discovering this as a new revenue stream as they pile up subscribers. In FY’10, they took away close to Rs 600 million but the pace of growth is going to be slow.

“Dish TV had targeted Rs 500 million as carriage revenue but had to settle down with around Rs 200 million as the advertising market slumped. Though this year there is an economic improvement, the carriage growth will be slow. Only Tata Sky and Airtel digital TV are the other DTH operators who are in a position to charge carriage fee from new channel launches,” says a media analyst who is tracking the DTH sector. 
Though a small pay cheque at this stage, broadcasters are not amused. Says Kaul, “We thought digitisation would cure carriage payouts. But there is a transponder shortage and they are fighting against low ARPUs. Luckily at this stage, the DTH players are charging carriage fees only from new channels.”

DTH operators, however, do not see carriage revenue as their area of focus. “Carriage is not a critical piece of our revenue mix and is too insignificant. We would focus on subscription revenue. We are customer-driven and our strategy is to offer the right content,” says Airtel digital TV chief executive Ajai Puri.

Some broadcasters believe the carriage market will fall and is a short-run trend. Says Kaul, “This is not sustainable and a correction is bound to happen. We expect a downward trend after a year’s time.”

That could be wishful thinking. The size of the carriage revenue will depend on the overall market buoyancy. And at a macro level, as analogue frequencies are blocked, channels, facing stiff competition, will jostle for prime space on cable networks and pay a premium.

Agrees Indusind Media & Communications CEO and MD Ravi Mansukhani,”Where is the space? For all this empty talk about a carriage slowdown, there will be no correction unless we have cable digitisation.”

Cable companies, in fact, have turned around in the last couple of years purely due to carriage revenue growth. For the leading multi-system operators (MSOs), carriage is accounting for over 50 per cent of their revenues.

Says Mansukhani, “Without carriage income, every MSO would have been in the red. MSOs, however, have expanded to not just the carriage-led markets and acquisitions in these smaller cities have been fuelled by profitable subscription revenues. In the era of digitisation, the business model will change. Presence in high ARPU – and not necessarily carriage – markets will be crucial.”

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