Television

Star’s RIO approach should form template for other broadcasters: MPA

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MUMBAI: Leading broadcaster Star India’s move towards a more transparent and uniform template for distribution deals with cable multi-system operators (MSOs) should form a template for other major broadcast groups (i.e. Zee, Network 18 / IndiaCast, Discovery) to follow over 2015.



According to a report released by Media Partners Asia (MPA), over the next few months, all eyes will be on the MSO’s readiness to rollout channel packages and related consumer acceptance of price increases as well as potential churn to DTH.

Also critical will be the rollout of prepaid services for legitimate pass through of subscription revenues to MSOs and broadcasters. “If executed successfully, these new mechanisms will help bring in long-awaited addressability across the cable industry, reduce dependence on carriage fees while also drive ARPU growth to improve economics for all industry stakeholders,” the MPA reports says.



Star’s decision of providing channels on Reference Interconnect Offer (RIO) came after the Telecom Regulatory Authority of India (TRAI) came up with its regulation to unbundle channel aggregators, which further raised the prospect of a level playing field between broadcasters and distributors.



The unbundling of aggregators, according to MPA, exposed platforms favoured by vertically aligned broadcasters, thereby bringing to the fore the disparity of content costs amongst operators.



In the midst of the dissolution of top channel aggregator MediaPro in April 2014, major MSO Hathway levied a charge of disparate pricing by MediaPro in DAS (Digital Addressable System) markets, offering favourable channel rates to Den, which had an effective 25 per cent stake in MediaPro, as well as Siti Cable, a sister concern of the Zee group. “Hathway, despite having more digital subscribers in DAS markets than both Den and Siti Cable was asked to pay a ~15 per cent higher cost per sub or CPS (at Rs 35 per sub per month) for MediaPro channels,” the report reveals.



Hathway referred the matter to Telecom Disputes Settlement and Appellate Tribunal (TDSAT), claiming a refund of Rs 700 million from MediaPro.



It was In November that Hathway, which had been receiving channels from Zee on a RIO basis, settled with Zee and signed a CPS-based agreement.



Star, however, to bridge the divide on disparate pricing for operators, subsequently filed an affidavit making all its channels (including sports channels) available only at RIO rates. And since 10 November, all Star channels have been available, on a RIO basis, for cable operators.



Implications of Star’s distribution strategy for DAS markets



According to MPA, Star’s filed RIO rates are steep and are not reflective of the actual fees collected from subscribers. As a result of this Star rolled out an incentive scheme (based on number of channels carried, logical channel number and channel penetration) for MSOs. “The existing DAS markets remain characterised by an absence of tiers and limited addressability to monetise on subscription income; therefore, MSO dependence on carriage in these markets remains high,” says the report.



As per MPA, Star’s “RIO-only but incentivised distribution approach” is a bold step as it deprives cable operators of carriage fees. “In addition, we expect Star’s content cost for all MSOs to increase by at least 15-20 per cent, at a minimum. Therefore, in order to absorb the increase in net content costs and benefit from available price incentives, MSOs have been forced to introduce tiering and implement rate hikes in DAS markets,” highlights the report.

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