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Ever since NDTV Imagine & Colors launched a few years back, carriage fee payments to MSOs and headends in TRP cities hit the roof! SCaT magazine takes a look at the current situation & the trends …
Reports seem to indicate that the top five MSOs last year, gained Rs 13.5 billion in carriage fees from broadcasters. Leading the list is Hathway Cable & Datacom, with an earning of Rs 4.02 billion, a 33% growth over the previous year.
Den Networks earned Rs 3 billion in FY’11 and posted a 20 per cent growth over the earlieryear. IndusInd Media & Communications Ltd (Hinduja-owned IMCL) similarly collected Rs 2.4 billion in the year, a major amount of which came from the Mumbai region.
Digicable’s carriage income for FY’11 stands at Rs 2.3 billion, Wire & Wireless (India) Ltd. (WWIL) has a carriage income of Rs 1.8 billion.
The carriage market is also growing in smaller towns as regional channels are increasing their payout budgets to cable TV operators in these areas. As more and more small & regional channels are launched, the bandwidth on the networks in these towns got exhausted long back, and now these channels have to vie for carriage in their home states.
The discomforting pace at which the carriage market is growing could force a major consolidation in the pay-channel distribution business. It is with this in mind that we saw the recent merger of Star-Den and Zee-Turner, two of the largest channel distribution companies. On the anvil also seems to be the talks between SUN18 and MSMDiscovery platforms. These mergers provide a leverage to the channel distributors for negotiation of carriage fees as well as effective and advantageous placement of their channels on analog networks.
SHORTAGE OF ANALOG SPACE
“Niche and new channels are continuing to pour in. This will contribute to some swelling in the carriage fees as there is severe bandwidth crunch. The carriage market is expected to go up by 10-15 per cent,” says Star Den chief executive officer Gurjeev Singh.
“New entrants and regional channels with focus on some markets are the new spoilers. The carriage market could touch Rs 18 billion this fiscal,” says MSM Discovery president Rajesh Kaul.
Grabbing a small slice of the market are the direct-to-home (DTH) operators who are discovering this as a new revenue stream as they pile up subscribers. In FY’10, they took away close to Rs 600 million but the pace of growth is going to be slow.
Some broadcasters believe the carriage market will fall and is a short-run trend. Says Kaul, “This is not sustainable and a correction is bound to happen. We expect a downward trend after a year’s time.”
That could be wishful thinking. The size of the carriage revenue will depend on the overall market buoyancy. And at a macro level, as analogue frequencies are blocked, channels, facing stiff competition, will jostle for prime space on cable networks and pay a premium.
Agrees Indusind Media & Communications CEO and MD Ravi Mansukhani,”Where is the space? For all this empty talk about a carriage slowdown, there will be no correction unless we have cable digitisation.”
Cable companies, in fact, have turned around in the last couple of years purely due to carriage revenue growth. For the leading multi-system operators (MSOs), carriage is accounting for over 50 per cent of their revenues.
“Without carriage income, every MSO would have been in the red,” says Mansukhani, “MSOs, however, have expanded and acquisitions in smaller cities have been fuelled by profitable subscription revenues. In the era of digitisation, the business model will change. Presence in high ARPU – and not necessarily carriage – markets will be crucial.”
DIGITISATION
So if the MSOs are pushing for digitization, that would mean more channels are able to be carried on the networks, thus reducing the shortage of bandwidth.
Will that not bring down the Carriage Fee amounts?
“Yes, it will,” says a major industry player, much to the glee of the satellite channels, “However, the channels will then have to pay for other services to the MSOs, in order to be placed on their Digital Cable set-top box menu.”
The way this works is based on the classification of channels on the set-top boxes supplied by the MSOs. The MSO-owned software and channels line-up in the boxes decides on where the channel is listed and in which category. The channels are classified according to their genre – English News or Hindi News, Hindi Entertainment, Hindi Movies, English Entertainment, English Movies.. etc.
For example, if a News Channel is placed by the network in the “Music” category, the channel can be assured of a reduced viewership! Or if a Hindi GEC is placed in the “English News” category, it will result in lesser number of GEC viewers getting to know of the channel.
Hence, as is prevalent on other digitally developed markets internationally, the MSOs will then charge a “Placement Fee” to place the channel in the preferred genre or listings on the digital box!
One revenue source replaces another! n
http://www.scatmag.com/article2.htm
Reports seem to indicate that the top five MSOs last year, gained Rs 13.5 billion in carriage fees from broadcasters. Leading the list is Hathway Cable & Datacom, with an earning of Rs 4.02 billion, a 33% growth over the previous year.
Den Networks earned Rs 3 billion in FY’11 and posted a 20 per cent growth over the earlieryear. IndusInd Media & Communications Ltd (Hinduja-owned IMCL) similarly collected Rs 2.4 billion in the year, a major amount of which came from the Mumbai region.
Digicable’s carriage income for FY’11 stands at Rs 2.3 billion, Wire & Wireless (India) Ltd. (WWIL) has a carriage income of Rs 1.8 billion.
The carriage market is also growing in smaller towns as regional channels are increasing their payout budgets to cable TV operators in these areas. As more and more small & regional channels are launched, the bandwidth on the networks in these towns got exhausted long back, and now these channels have to vie for carriage in their home states.
The discomforting pace at which the carriage market is growing could force a major consolidation in the pay-channel distribution business. It is with this in mind that we saw the recent merger of Star-Den and Zee-Turner, two of the largest channel distribution companies. On the anvil also seems to be the talks between SUN18 and MSMDiscovery platforms. These mergers provide a leverage to the channel distributors for negotiation of carriage fees as well as effective and advantageous placement of their channels on analog networks.
SHORTAGE OF ANALOG SPACE
“Niche and new channels are continuing to pour in. This will contribute to some swelling in the carriage fees as there is severe bandwidth crunch. The carriage market is expected to go up by 10-15 per cent,” says Star Den chief executive officer Gurjeev Singh.
“New entrants and regional channels with focus on some markets are the new spoilers. The carriage market could touch Rs 18 billion this fiscal,” says MSM Discovery president Rajesh Kaul.
Grabbing a small slice of the market are the direct-to-home (DTH) operators who are discovering this as a new revenue stream as they pile up subscribers. In FY’10, they took away close to Rs 600 million but the pace of growth is going to be slow.
Some broadcasters believe the carriage market will fall and is a short-run trend. Says Kaul, “This is not sustainable and a correction is bound to happen. We expect a downward trend after a year’s time.”
That could be wishful thinking. The size of the carriage revenue will depend on the overall market buoyancy. And at a macro level, as analogue frequencies are blocked, channels, facing stiff competition, will jostle for prime space on cable networks and pay a premium.
Agrees Indusind Media & Communications CEO and MD Ravi Mansukhani,”Where is the space? For all this empty talk about a carriage slowdown, there will be no correction unless we have cable digitisation.”
Cable companies, in fact, have turned around in the last couple of years purely due to carriage revenue growth. For the leading multi-system operators (MSOs), carriage is accounting for over 50 per cent of their revenues.
“Without carriage income, every MSO would have been in the red,” says Mansukhani, “MSOs, however, have expanded and acquisitions in smaller cities have been fuelled by profitable subscription revenues. In the era of digitisation, the business model will change. Presence in high ARPU – and not necessarily carriage – markets will be crucial.”
DIGITISATION
So if the MSOs are pushing for digitization, that would mean more channels are able to be carried on the networks, thus reducing the shortage of bandwidth.
Will that not bring down the Carriage Fee amounts?
“Yes, it will,” says a major industry player, much to the glee of the satellite channels, “However, the channels will then have to pay for other services to the MSOs, in order to be placed on their Digital Cable set-top box menu.”
The way this works is based on the classification of channels on the set-top boxes supplied by the MSOs. The MSO-owned software and channels line-up in the boxes decides on where the channel is listed and in which category. The channels are classified according to their genre – English News or Hindi News, Hindi Entertainment, Hindi Movies, English Entertainment, English Movies.. etc.
For example, if a News Channel is placed by the network in the “Music” category, the channel can be assured of a reduced viewership! Or if a Hindi GEC is placed in the “English News” category, it will result in lesser number of GEC viewers getting to know of the channel.
Hence, as is prevalent on other digitally developed markets internationally, the MSOs will then charge a “Placement Fee” to place the channel in the preferred genre or listings on the digital box!
One revenue source replaces another! n
http://www.scatmag.com/article2.htm
