DTH

'Market needs to rationalise their payouts to distribution bouquets' : MSM Discovery President Rajesh Kaul

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MSM Discovery is targeting Rs 10 billion in FY’11, an almost 40 per cent jump over the year-ago period, as it adds Neo Cricket into its distribution muscle.

The rise in revenues will also be aided by stronger performance from some of the existing channels such as Sony Entertainment Television (Set) and Sab.

Being the only distribution company that has entertainment and sports channels in its bouquet, MSM Discovery expects cable networks to rework their payouts to broadcasters and not take their decisions based on legacies.

Shepherding MSM Discovery‘s growth drive to combine the subscription revenues of an entertainment and a sports bouquet is Rajesh Kaul. As president of the joint venture company between Multi Screen Media (formerly Sony Entertainment Television India) and Discovery, his 11-year stint at ESPN Star Sports could come into use as he hopes to play the ‘soft-and-hard‘ tactics game to ramp up revenues.

In an interview with Indiantelevision.com‘s Sibabrata Das, Kaul talks about the need to drive up consumer ARPUs and have a regulatory policy that is fair to all stakeholders including broadcasters.

Excerpts:

Will the addition of Neo Cricket and Neo Sports compensate the loss of the Viacom18 channels including Colors?

I can‘t comment on the exit of the Viacom18 channels as the matter is sub judice. But we are still the biggest distribution company in the country.

When we had taken up the distribution of Colors, Sony Entertainment Television was around 75 GRPs and Sab 35 GRPs. Today, Sony is 197 GRPs while Sab has touched 134 GRPs.

So a big change has happened to our existing channels. And we are the only distribution company that has entertainment and sports channels in our bouquet.

Which is why MSM Discovery is targeting a turnover of Rs 10 billion this fiscal?

I can‘t comment on the financials but we are looking at a 40 per cent growth. With the addition of the Neo channels, we should be getting the combined subscription revenues of an entertainment and a sports bouquet.

Isn‘t that an ambitious target in today‘s environment when broadcasters are jostling for space in choked analogue cable networks?

We expect a redistribution of monies to take place. We are the only bouquet in the industry which has 3 out of the top 10 channels - Sony, Max and Sab. The mother channel, Sony, may not be No. 1 at this stage but is doing well. With KBC coming in and Amitabh Bachchan hosting the game show, the channel‘s ratings can only get better. We have leaders in Discovery, Animal Planet and Aaj Tak.

We also have the biggest sporting content in IPL (Indian Premier League) and BCCI cricket. We are, in fact, the best sports providing bouquet in the country. Let the cable networks and the DTH operators analyse the content and rationalise their payouts on the ground rather than be influenced by legacies.

Are you hinting at subscription monies moving out of ESPN Star Sports (ESS) as sports content has got fragmented?

I can‘t comment on whether ESS‘ content pool has weakened. What I can say is that probably people need to pay more to Neo and rework their payouts. For the next 15-20 days, we are going to carry out this campaign across the country to educate the trade.

Sources who are familiar with the deal say Neo is guaranteed a payout of Rs 2.7 billion net over three years. Isn‘t this an expensive deal as it excludes the DTH side of the distribution business?

Without getting into the commercial terms of the deal, let me state that we have paid the right value for the product. India cricket does not come cheap.

With the addition of the Neo channels, we should be getting the combined subscription revenues of an entertainment and a sports bouquet

Market sources say Neo was making an annual subscription revenue of Rs 600 million from analogue cable. Isn‘t your payout on the higher side particularly when the BCCI cricket has to be shared with the pubcaster?

Neo has got a guarantee of around 20 Test matches over three years that will not be simulcast on Doordarshan. That gives 100 days of Test cricket exclusive on Neo. Test matches still have a fan following and a very loyal base. We, in fact, will have 3-4 months of BCCI cricket, including ODIs and T20s, and almost 2 months of IPL in a calendar year. That puts us in a formidable position. While for all broadcasters major growth in the past has come from DTH, we also expect a healthy analogue growth this year because of Neo.

A correction is needed in the payouts. And redistribution has to take place, both in entertainment and sports bouquets.

Has Star Den become weaker after the exit of the Disney and Network18 group channels to Sun18 while in your case you tapped Neo?

Yes, I think so. But it is for the trade to decide.

The market feels that MSM Discovery has not exploited the IPL to drive its pay-TV revenues to the maximum. Is this true?

I agree that we haven‘t collected as much money as we should have, particularly when the IPL has become bigger in value. We need to collect the IPL money (from distribution) now. And with Neo and other things (improvement in performance of some of our existing channels), we will give it a combined push to ramp up our revenues.

Will you deploy the ‘hard‘ distribution tactics that you learnt during your 11-year stint at ESS?

I am hoping that the hard approach will not be needed. We will give friendship a chance. If people are not being fair, we have to use different strategies. For the next one month, as we have the India-Australia and India-New Zealand series, we will educate the trade on the depth of our content.

Are you looking at adding more channels to the bouquet?

Both the partners (Multi Screen Media and Discovery) are looking at launching new channels over the next 18 months. They are considering different genres - regional, music, kids, infotainment. They have deep pockets and are committed to investing in this market. This gives security to the joint venture company. Besides, we are talking to distribute third party channels.

The Telecom Regulatory Authority of India (Trai) has come out with a pricing cap for all digital addressable systems. The broadcasters have moved the court. What is your take on this?

I can‘t run into specifics as the matter is residing in the court. But on a more generic level, we feel Trai has been fair to other stakeholders so far except the broadcasters.

What do you think will drive the distribution business for the sector as a whole?

There is one thing that has not happened on the distribution front. Consumer rates, which are the cheapest in the world, will have to go up. That is where the actual business is - and not carriage. The MSOs have not worked on subscription rates because of carriage revenue. All broadcasters should come together to help MSOs collect more subscription from the ground and the consumers. Consumer ARPUs (average revenue per user) have to increase. That is going to drive the industry.

Why is that not happening?

I think the internal trust between the MSOs and the broadcasters is not there. The MSOs and the broadcasters are also fighting amongst themselves.
What gives you hope that this will change now?

Frankly, I do not have too much of hope. But I think good sense is ultimately going to prevail over us because there is pressure on bottom lines for everybody. Maybe this will lead to this kind of revolution.
But DTH has not been able to drive up ARPUs?

My concern is that in this country ARPUs, whether analogue or cable, are low. DTH played the penetration game when they possibly could have taken a premium position. The need of the hour is for ARPUs to go up. I hope that consumer rates will rise in case of DTH.
What do you think will drive cable digitisation?

Cable digitisation is going to be a slow process in India. Cas (conditional access system) was not implemented properly and could not be a success. The regulator also should have come out with a policy that made all the stakeholders happy to push for digitisation. A cap at Rs 5 was, perhaps, not the right decision. Besides, digitisation would require huge capital and India is a vast country.

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