Impact on the Consumers
The impact on consumer can be looked at from the angle of what
payments would be made by consumers, pre- and post-CAS. See Table
The report envisages several scenarios: Let's take a consumer in
North India: currently, the customer is paying Rs 200 flat for 70
plus channels being received. Assuming that the customer would take
up the set top box on finance, Morgan's analysts believe that the
average cost to him would be computed as in Table 5:
The report has taken Rs100 as the monthly fee paid by the customers
towards boxes. It adds that the industry sources claim that the
box costs should come down to about US$70 or Rs3,400. Taking that
there would be some downpayment, Rs100 per month seems like a reasonable
The analysts also believe that the consumer opting for pay channels
would have to pay more if he does not make an outright purchase
Direct to Home (DTH) - on the backburner now
The Morgan report claims that the entry of CAS means that interest
in DTH would reduce. When customers take a box for CAS, the value
of DTH to consumers would naturally diminish. We also believe that
there is not enough extra local language content available that
is not accessible on cable TV. Therefore, DTH per se does not have
a compelling proposition to offer to the consumers post CAS.
Impact on the Local Cable Operators (LCOs)
The local cable operators would be relegated to the role of
collectors of FTA revenues when CAS gets implemented. His take home
would be limited to the FTA bouquet price. The impact on him is
as shown in Table 6.
MSO: Winner all the way
The biggest winners of the CAS implementation would be MSOs.
The Morgan report believes that the most likely scenario would be
MSOs taking control over the box in consumers' homes. This would
solve the longstanding problem of scattered 'last mile' control.
While there would be short-term gains on the profit and loss of
MSOs, they would not be very significant. In the longer term, however,
the analysts expect slow demise of the MSO-LCO model and emergence
of a pure MSO model. This would improve both revenues and valuations
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: Pay revenues
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
Broadcasters: Advertisement Revenues
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
Morgan's analysts believe that the actual truth would be somewhere
in between. On an overall medium term basis, we 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.
MSOs biggest gainers - JP
Morgan CAS report
Domestic pay revenues likely
to drive broadcaster profits - JP Morgan CAS report
Encryption at MSOs/ICOs
likely - JP Morgan CAS report
Zee bouquet has better breadth
- JP Morgan CAS report