The Last Mile Channel Carriage

(Posted on 21 April, 6:00 PM)

Satellite channels have driven growth in C&S households from only four channels in the early 1990s to around 100 today. And going by present indications, with a C&S growth rate of around 17 per cent per annum cable penetration is expected to reach 67 million households by 2005.

Improving socioeconomic conditions, rapidly falling TV prices, increasing relevance of TV in household entertainment, are some of the drivers to increase penetration.

In declared terms the industry has been growing at the rate of 10 to 12 per cent and the size of the industry today in revenue terms is Rs 38 billion. Of this subscription revenue makes up RS 36 billion, local advertising revenue RS 1.25 billion and Internet over cable RS 60 million.

There are some key issues which govern an industry still in its nascent stage of development. These are: mushrooming growth of mom-and-pop operations, lack of addressability in the traditional cable business, subscriber base for pay channels becoming a point of negotiation.

The battleground in broadcasting business today has shifted from the skies to the ground. Effective distribution and efficient addressability is paramount to the success of a channel.

And in this scenario - HE WHO DISTRIBUTES WELL IS KING.

And it is the cable operator who is the critical cog in this equation. For it is he who decides on:
a)channels to be shown to subscribers;
b)frequency at which the channel is transmitted;
c)in case of pay channels, he decides how he gets reimbursed from the subscriber and at times the broadcaster faces a huge under-reporting of actual subscribers with disclosure ratios as low as 10-20 per cent.

As for broadcasters, their primary targets are producing, acquiring quality content, maximising advertising revenue through higher reach and viewership.

And for this, the relationship with the cable operator is the single most important factor in deciding the success of any channel.

Because a channel's carriage ultimately depends on availability to both the cable operator and consumer as well as viewability at the subscriber end.

When discussing viewability, the type of television set also has to be considered. TVs receive signals on three major frequency bands. The Prime Band which is available to all TVs including B&W TVs; the tunable S-band viewable on all CTV's and the non-tunable S -band or Hyper band viewable on new colour TVs.

Statistics culled from surveys in 48 cities show that of an estimated 8.62 million subscribers, only 3.81 million can receive the hyper band signal which automatically excludes 4.81 subscribers from a broadcaster's list if he is transmitting on the Hyper band.

This means that efficiency of distribution is more important and critical than width of distribution. With the majority of TV sets lying within the 300MHz band (ie 36 channels) it is obvious that everyone is jostling for this space. Effective distribution therefore implies not only the ability to better place but also maintain the space for the channels.

This can easily be understood if we look at what sort of viewability was achieved by three channels covered in the survey. Of the 8.62 million subscribers in 48 cities, 1.53 million subscribers couldn't view Star Plus; 2.49 million couldn't see SAB TV and a whopping 6.15 million subscribers had no access to Aaj Tak.

Efficiency of Distribution:
In terms of channel carriage, the criticality of distribution cannot be underestimated. With the majority of the TV sets lying within the 300MHz band (i.e. 36 channels) it is obvious that everyone is jostling for this space.

Effective Distribution is not only about being able to get a better place for your channel but also maintaining the space for those channels.

This means that efficiency of distribution is more important and critical than width of distribution.

Cable v/s DTH:

DTH will penetrate 3 million homes in a span of three years. Revenues in this period would be approximately RS 18 billion.

However, investments required would include Rs100 million up-front as an entry fee and a 10 per cent share of subsequent revenues with the government. A bank guarantee of RS 400 million for a 10-year license.

Cost to the consumer - Capital expenditure of RS 10,000 to RS 15,000 towards set top box and dish antennae. Subscription fee of RS 500 to 600 per month.

Cable on the other hand, is well entrenched in India and poised for a leap into another plane. The sheer cost efficiency added to the fact that it is already present in 35 million homes across the country cannot be wished away. And upgradation of the current network can itself provide other value added services.

Cable is clearly a more economically accessible system and therefore, likely to remain predominant at least in the foreseeable future.

In conclusion: Efficient and effective channel carriage and monitoring capability with LAST MILE INFLUENCABILITY is the real key to higher TRP's and by extension higher advertising revenues.

 

* Rajan Kaaicker. The author is the CEO Distribution group, Modi Entertainment