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  • News channels, MSOs wrangle over carriage fee

    Submitted by ITV Production on Oct 18
    indiantelevision.com Team

    MUMBAI: The television news broadcasters and multi-system operators (MSOs) will wrangle over carriage fees as they need to stitch deals within two weeks to aid digital cable roll out by 31 October in the four metros of Delhi, Mumbai, Kolkata and Chennai.

    News broadcasters have united and are working out a carriage payout formula that would not be acceptable to the MSOs. Having paid exorbitant fees over the last few years to occupy prime space on analogue cable networks, they have now come out with an yearly payout of 50 paise to Re 1 per set-top box subscriber per channel as carriage fee after 1 November.
    "We have agreed to pay reasonable carriage fees after the roll out of digitisation on 1 November," the News Broadcasters Association (NBA) said on Thursday.

    The MSOs, though, find this an unreasonable formula. "We have received individual letters from the broadcasters. We will also reply to them individually. But we find this totally unacceptable," said Digicable Network (India) managing director and CEO Jagjit Singh Kohli.

    Not without reason. Carriage is a significant source of revenue for the MSOs and news broadcasters are the main paymasters. While most of the news channels have worked out content deals with the MSOs for the digitised market, they have yet to settle on carriage fee terms.

    President MSO Alliance on digitisation of cable TV and executive vice president Hinduja TMT Ltd Ashok Mansukhani said, "I have no comments to make on the NBA statement. But there is no question of any agreement between NBA and MSO Alliance. Any agreement that happens will only be between individual MSOs and individual broadcasters."

    Let‘s look at the figures. NDTV pays around Rs 800 million a year towards carriage of its news channels while TV Today‘s distribution expense is around Rs 800 million and India TV Rs 450 million. The four metros constitute almost 50 per cent of this payout.

    "This is a very touchy topic. News broadcasters feel if they can drastically reduce their carriage payouts, they will be able to turn profitable. There is no other way they can be profitable. Hence this unity and this common fight," said a media analyst.

    The NBA said Thursday that despite the earlier objection of news broadcasters to the payment of any carriage fees, they are now agreeable to enter into agreements with MSOs for an initial period of one year, for the payment of carriage fees (inclusive of marketing fees, tiering fees, packaging fees or fees or charges under any other nomenclature) in the digitised areas, at a rate of 50 paise to one rupee per set top box subscriber, per channel per year.

    "The carriage fee will drastically reduce according to this formula that NBA is talking about. There will be around 10 million STBs from these four metros. So we are talking about Rs 10 million as carriage fee per channel. Such a corrective step will be impossible to achieve," a media analyst at a broking firm said.

    News broadcasters handle the carriage deals themselves while most of them are distributed by bigger distribution companies such as Media Pro Enterprise India (JV between Star and Zee) and TheOne Alliance (JV between Sony and Discovery). "This dichotomy means that MSOs have paid for the content while they are still haggling over carriage fees (or package fees)," said the head of a distribution company.

    Indiacast, which distributes the TV18 and Network18 channels including Colors, is the only distribution company which has inked integrated deals (subscription revenue and carriage payout) with all the MSOs except Den Networks. "Indiacast distributes news, entertainment and infotainment channels. It has done deals at the net level and this has been easier because it handles both the subscription and the carriage side of the business," a media analyst said.

    The MSOs will take recourse to another strategy. If they are not satisfied with the carriage fees, they will put the news channels outside their (MSO) basic package. Den Networks, for instance, has put the news channels under a separate package. "This will deprive the news channels from getting widely carried under their basic package. Another way is to put some of the news channels in the basic pack, thus creating a rift among the broadcasters themselves," said an industry observer.

    So what would be a realistic settlement? "A 20-25 per cent drop in carriage in these four metro markets would be more realistic. Some news broadcasters, however, will be able to see a 40-55 per cent drop in carriage fees in these markets," said a media analyst.

    Also read:

    News broadcasters agree to pay reasonable carriage fee

    Image
    Ashok Mansukhani
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