Broadcasters will consider FTA offering apart from premium pay TV channel, says Motilal Oswal

MUMBAI: What will broadcasters do with CAS being implemented? Will the FTA channels go pay? Or will the pay channels go FTA?

Motilal Oswal Securities in partnership with Inquire has tried to answer questions such as these in its latest study on CAS. The Inquire report has claimed that broadcasters are unlikely to lose advertising revenues in a CAS environment because it will first spread through the four metros and the share that the major cities have of the overall C&S market is relatively small.

Ø The four metros account for only 15-17 percent of the total 40 million cable subscribers in India. Since the top three networks do not derive any significant advertising revenues from the Chennai market, the effective share of the three metros in total C&S homes is just 10-12 percent.

However, their implied share of advertising revenues on C&S television would be closer to 20-24 percent. If one assumes only 40 percent penetration of boxes in the four metros in the initial phase, about 12-14 percent of the advertising revenues might come under threat.

Ø Box offtake is likely to be higher than expected, Motilal Oswal points out. An analogy can be drawn with the Indian cellular market where the subscriber numbers are growing at about a million every two months. In fact, the market is expected to add about 10 million subscribers in the next year, the level reached over seven to eight years.

Ø Broadcasters (including Zee) are open to floating a mass general entertainment channel to maintain their presence in the basic tier. A new channel can be packaged, branded and floated (using library content or second run programming from the pay channel) in just about a month at a low cost of about Rs 100 million. This would help avert any loss of advertising revenues because of a drop in reach due to low box penetration.

This would also ensure that the broadcaster has its brand present in the basic tier homes to maintain and build recall and to give viewers a laddering option to graduate to their respective pay offerings when they upgrade to a pay channel. Broadcasters will in all probability run teasers on the FTA chanel to lure them to the pay TV service.

Off the record conversations with television professionals have revealed that most of the entertainment channels are actually looking at creating a FTA channel, which would have second run programming, that is, Zee TV could float a Zee Basic which will air shows that will do the run on Zee Premium first.

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