MUMBAI: You have to give it to Star India. It does not believe in half measures. The jewel in Rupert Murdoch's Asia operations effectively re-set the terms of the debate in the distribution arena today with the announcement that it was dropping subscription rates by 25 per cent from the current Rs 40 to Rs 30.

Star India CEO Peter Mukerjea had indicated to indiantelevision.com last week (on 3 December) that such a move was on the cards but it is the scale on which it has been conceived that is really going to shake up the works as it were. By dropping rates a whopping Rs 10, Star now costs less than affiliated ESPN Star Sports (ESS), which was the first to announce a new price regime when it hiked its rate 33 per cent to Rs 32 effective 1 December. Star's price reduction will be effective, 1 January, 2003.

Talking about the development, Mukerjea was quoted in an official release as saying: "Our focus is to provide even better value to our viewers & cable operators across the country. By reducing our price we believe that cable operators and ourselves can work closer together for the long-term benefit of the households that view our channels every day. It is our policy to continue to offer better value to all our customers. Whilst other broadcasters are increasing their price, we believe in a reduction in price, in keeping with our policy."

Indications of what Star expects from the cable fraternity in return can be garnered from the release which states that the rate reduction is being done to gain complete transparency and declaration on subscriber numbers.

Whatever may be the declared policy, there is no denying that this is a high stakes gamble on the part of the lead network. Looking at the monthly distribution revenue accruals, Star currently claims a declared connectivity of 6.5 million. At this level, it means that distribution revenue (calculating Rs 40 per subscriber) would be Rs 260 million a month. With Rs 30 as the new network rate, monthly income would fall to Rs 195 million. Therefore, just to maintain revenues at par, in the immediate term, declared connectivity would have to go up to 8.67 million, an increase of 33 per cent.

For this to be a winning proposition for Star in revenue terms, declarations would need to go up between 50 to 100 per cent from what it is today. That this presents quite a challenge for distribution head Tony D'Silva and his team is putting it mildly.

The move also has the potential to send for a toss all Sony Entertainment Televison's plans to become the leading distribution network in the country, largely on the back of the upcoming cricket World Cup. The SET-Discovery One Alliance has just revised its rates upwards to Rs 55 from Rs 40 following premium movie channel HBO's coming aboard.

And what of Zee Telefilms? Information available with indiantelevision.com had indicated that Subhash Chandra's network was looking at a subscription price of Rs 60 for the full bouquet (including all new additions like Realty TV, CNBC India and possibly Cinemax). Whether Star's announcement forces a change in plans remains to be seen.

See earlier headline for a detailed examination of the overall implications of Star's move to reduce rates:
Star looking to reducing bouquet price