Television

Domestic pay revenues to drive broadcaster profits - JP Morgan CAS report

MUMBAI: JP Morgan India's report on the Indian cable industry titled: "CAS: The Medicine for a chronic ailment" believes that the full implementation of the CAS (conditional access systems) would lead to an rapid growth in broadcaster revenues and ensure that domestic pay revenues will become the key driver of profits.

The Morgan report adds that pay revenues have continued to grow strongly in the recent past led by increasing declarations and continuous fee hikes in the industry. It specifies that the impact of CAS could be to redefine the broadcasters' revenues.

The Morgan report reasons that broadcasters have gained through increasing pay revenues in the last 3-4 years. As the revenues come without much attendant costs, the "pay revenues" have helped profitability of channels significantly. As per Table 1, the pace of pay revenues has been increasing since the past years.

A case referred to in the report was Zee. The report estimates that the company would have close to Rs1.6 billion from the domestic pay market in FY03. These revenues would be the key driver of profits in years that advertising revenues of the network are weak. The report also adds that for Star TV, pay revenues form about one third of total revenues.

Broadcasters: pay revenues increase likely to propel fall in channel rates 

The report envisages that the broadcasters have to bring down their channel rates with the advent of CAS; that is, if one goes by their promise of bringing down rates if declaration levels improve.

As is shown in Table 6, the net impact on channels should be marginally positive only. In the above calculations, the report has assumed a 60 per cent box adoption which might be slightly on the higher side. However, one must note that this assumption compares with a declaration rate of 30 per cent currently (which is higher than an all India rate of between 15-20 per cent).

The Morgan report has taken higher rates into account, as the analysts believe that the addressable market for broadcasters is lower than the total reported homes in the country. There are a huge number of cable homes in rural areas, which will be tapped only over a period of 5 years.

Given that the first phase of rollout is in metro areas, the Morgan reports believe that the concerns there are overblown. Since metros are controlled by MSOs and since declarations are the lowest from metros, the impact on pay revenues should actually be positive. The negative impact, if any, would likely be with very high pay connectivity channels, i.e. channels belonging to Star Plus.

Broadcasters: impact on advertisement revenues unclear

The impact on advertising revenues is not very clear at this point in time. There are two extreme schools of thoughts. The first viewpoint is that the channels would have to become free-to-air to get ad revenues after CAS gets implemented. The second viewpoint is that there would be no impact on ad revenues, as the opportunity to the advertiser would continue to lie with the successful channels only.

Morgan's analysts believe that the actual truth would be somewhere in between. On an overall medium term basis, they believe that CAS would lead to a well regulated, better managed cable industry with few revenue leakages in the system. This can only be positive for all market participants in the medium term. The uncertainty is on how would the ad revenues behave till the time rollout of boxes takes place fully.

Again, since the first phase of rollout is in metros, which are relatively affluent, the box adoption should remain reasonably high. Thus the initial impact on ad revenues should remain minimal.

In the longer term, the report assumes that there could be hybrid strategies being adopted by various networks. This could include keeping some channels as pay and making some channels FTA.

Will Bundling Continue Post CAS?

Currently, the channels are sold in bundled form to the customer. The report believes that the advent of CAS would not mean that bundling would go away. The existing bundles would continue to offer bundled entertainment solutions to customers in order to maximize pay revenues for marginal channels.

Broadcasters/Distributors - three main bouquets have arisen

The report points out that Star, Zee-Turner and Sony (One Alliance) form the three main broadcasters in the market.

Structure of the pay bouquets - six main clusters

As far as the structure of the pay bouquets is concerned, the report says that there are six primary pay bouquets existing in the cable TV market-Zee-Turner, Star package, Sony (One Alliance), ESPN-Star Sports, Modi Entertainment Network (MEN) and Sun TV Network (regional). Additionally, there are certain standalone pay and Free-To-Air (FTA) channels. Overall, the total number of channels that a consumer gets in the city is in the range of 75-85. Table 2 below shows the mapping of the channels by segment.

Subscription rates have been rising steadily

The report claims that the problem of low disclosure for the broadcasters has led them to a strategy where they try to offset under-declaration losses with greater rates.

Subscription rate hikes have been a regular feature once a year and at times twice a year for the bouquet. From the initial Rs2/month pay rates for Star Movies in October 1994, the pay TV rates have seen substantial rise. 

Table 3 shows how the rates of the five bouquets have changed over the past one year. Table 4 shows how the rates will increase in 2003.

Zee-Turner Bouquet's strength is its breadth

The report feels that the Zee-Turner bouquet has a lot of breadth despite the fact that Star Plus is clearly the most popular channel. Additionally, Sony's MAX, with the cricketing rights, is likely to draw large viewership during World Cup in February and March 2003 and the flagship Sony channel has usurped the No. 2 position from Zee TV. However, the report claims that the Zee-Turner bouquet provides the strongest value for the customer. Despite the current drop in popularity of the flagship channel Zee TV, the analysts believe that the drivers for the Zee-Turner bouquet are much more sustainable than the Star bouquet or One Alliance (Sony).

The report claims that it has checked its hypothesis with several cable operators. Nearly all of them felt that, ratings notwithstanding, the popularity of the Zee bouquet is certainly comparable to the Star and Sony bouquets. The operators opine that Zee TV has bottomed out and that they have definitely noticed an increase in Zee TV's visibility. Additionally, these operators feel that there is a demand for other channels in the bouquet like Zee Cinema, Zee News and Alpha.

Latest Reads

http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/13/james.jpg?itok=rGws6itt
Disney-Fox deal expected to happen on Thursday: CNBC

The Walt Disney Co. is expected to close a deal valued at $60 billion to acquire much of 21st Century Fox's assets, according to a CNBC news report. The two companies are likely to announce the deal on Thursday.

Television TV Channels News Broadcasting
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/13/zee-tamil.jpg?itok=zryzfAwz
World television premiere of Maragadha Naanayam on Zee Tamil

Zee Tamil announced the world television premiere of critically acclaimed Maragadha Naanayam – the fantasy-comedy-thriller film that features Aadhi Pinisetty and Nikki Galrani on Sunday, 17 December at 4:00 PM only on Zee Tamil. Written and directed by ARK Saravan, the movie is a perfect blend of...

Television TV Channels Regional
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/12/colp.jpg?itok=xKojrAKq
Republic TV to track real-time data for Gujarat elections

MUMBAI: Republic TV has partnered data-science company Gramener to track real-time data, along with analysis, during the Gujarat elections. According to a release sent by Republic TV, “Gramener will help enhance the visual look both on-air and on Republic’s digital platforms to present the data in...

Television TV Channels News Broadcasting
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/12/nakul1.jpg?itok=n95iPoI2
Nakul Chopra is new BARC chairman

MUMBAI: Nakul Chopra, currently president of Advertising Agencies Association of India (AAAI) and senior advisor of Publicis Communications, has been elected as the next chairman of BARC India. Chopra succeeds Viacom18 group CEO Sudhanshu Vats, who has completed his one-year tenure as chairman.

Television TV Channels Viewership
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/12/nitin.jpg?itok=w3KFq-K3
Nitin Kukreja joins iQuest

Former Star India sports head Nitin Kukreja has joined iQuest Enterprises as its chief executive officer. Kukreja had left Star in March this year. IQuest is an enterprise of Nimmagadda Prasad, the former owner of the Maa TV group, who has multiple business interests ranging from infrastructure to...

Television TV Channels Sports
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/12/sun.jpg?itok=qmg25IGp
Sun TV's unassailable lead continues, while Zee TV leads Hindi across genre

BENGALURU: The Sun network's flagship Tamil general entertainment channel (GEC) Sun TV continued its lead in ratings across all GECs on Indian television for week 48 of 2017 (25 November to 1 December 2017) according to Broadcast Audience Research Council (BARC) weekly ratings data

Television TV Channels GECs
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/11/vikas.jpg?itok=zxlytGcp
Republic TV, BTVI join hands for budget coverage

MUMBAI: Republic TV, spearheaded by Arnab Goswami, and Business Television India (BTVI) have entered into an alliance for content and programming around Union Budget 2018. The Republic TV- BTVI alliance promises to offer viewers a distinctive experience.

Television TV Channels News Broadcasting
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/11/nba_0.jpg?itok=C2zPkp_A
Mairu Gupta and the art of building the NBA in India

MUMBAI: For basketball fans worldwide, the US National Basketball Association (NBA) represents the mecca of the sport. But in India, the NBA has had its task cut out, what with cricket presenting a near impenetrable line of defence.

Television TV Channels Sports
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/12/09/cnn-news18-year.jpg?itok=rbLMcF5z
CNN-News18 'Indian of the year' 2017 special Telecast on 9 and 10 December

MUMBAI: The awards night of the annual and flagship initiative of CNN-News18, ‘Indian of the Year – 2017’ will be telecasted on the 9 and 10 of December at 9:30 PM on the channel. The initiative, whichrecognizes and awards the exceptional contribution and achievements of the iconic Indian citizens...

Television TV Channels News Broadcasting

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories