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With the deadline for the switch over to digital TV in 38 cities just four weeks away, it's a race against time for the industry. If the reports from the ground are to be believed, only a fourth of the 12 million cable homes have bought set-top boxes so far. The government's claims that 4.7 million cable homes have set-top boxes are exaggerated, say many in the industry.
They also say the seeding of the boxes in consumer homes might take another three to four months. The government, at least at the moment, is not ready to relent on the March 31 deadline.
This is the second phase of digitisation of cable TV households in the country. In the first phase, which got over in October last year, 10 million homes were digitised in the four metros: Delhi, Mumbai, Kolkata and Chennai.
Key milestone
The second phase is crucial for changing the economics of the TV broadcasting business, especially as a lot of money is being invested. MSOs (multi-system operators) such as Hathaway have invested over Rs 1,200 crore on buying set-top boxes and putting cable for the second round and they are anxious to get returns on their investment at the earliest. Combined with the first phase in the four metros, they have forked out over Rs 3,000 crore already. The broadcasters, too, are looking forward to it. As they get only a fraction of the subscription revenue owing to massive underreporting in the cable networks, their interest lies in ensuring digitisation is on track.
Uday Shankar, CEO, Star India India, just a few weeks ago was worried that ground reports were not encouraging. "Parliament has passed an Act and we expect the government to stick to the deadline. There is a lot of money involved," he had said.
India's broadcasting landscape will completely change after the second phase of digitisation. As much as 27 per cent of the 80 million cable homes across the country will be under the digital net after the second phase. And they will together constitute 50 per cent of all subscription revenue. As of now these cities have a 75 per cent weightage in the TAM report on ratings of programmes and channels, based on which the companies decide their advertising allocations. Also, in these cities live 60 per cent of the target audience for most advertisers.
Broadcasters say that the 38 cities offer immense new revenue generating potential. For one, cable service quality has been abysmally poor in these cities. Besides, analog has limited their choice of channels. "Currently, on an average, cable operators show a maximum of 80 channels in the analog system; this will rise more than four-fold to 350 (because more signal can be compressed into the pipe), giving customers more choice and better quality," says Gurjeev Singh Kapoor, chief operating officer of MediaPro, the joint venture distribution company between Zee Turner and Star-DEN. Currently, average monthly ARPUs(average revenue per user) in these cities are at Rs 180 to Rs 200 a month, but these are expected to rise 10 to 15 per cent with digitisation. The increase would bring the revenues more or less in line with ARPUs of the four metros.
Currently, over one-third of the subscribers are not reported by the local cable operators, thereby lowering the broadcasters' share of the subscription revenue. Currently, broadcasters earn only Rs 1,000 crore of the total subscriber revenue of Rs 1,500 crore because of under reporting by the local cable operators. Digitisation is expected to bridge this gap as every set-top box will then have to be accounted for.
THE CABLE TV ROLL-OUT
* The first phase, which ended on October 31, covered 10 million homes in Delhi, Mumbai, Kolkata and Chennai
* The second phase, the deadline for which is March 31, will cover 12 million cable homes in 38 cities. These include Pune, Lucknow, Navi Mumbai, Bangalore, Hyderabad, Thane, Chandigarh, among others
* According to industry estimates, set-top boxes in only 2-3 million homes have been seeded in the second phase so far. Government claims it is 4.7 million
* 27 per cent of the 80 million cable homes will be under the digital net after the second phase
* Average revenue per user per month in these cities is expected to rise 10 to 15 per cent from Rs 180 to 200 now
* The number of channels that users would be able to see after digitisation will go up from 80 to 350
* About 10 per cent of the new digital TV homes are expected to use the basic package of Rs 150 per month
* MSOs have invested over Rs 3,000 crore for both the phases of digitisation
Unfinished business
However, that may be easier said than done. Cable operators say a lot of work on the first phase is yet to be completed. After the seeding of set-top boxes , local cable operators are required to sign up a know-your- customer(KYC) form, detailing the channel preferences of the customer for the MSOs to create a unique customer identity and generate a bill. That has not happened at all, say cable operators. "MSOs are not giving us a rate card or a la carte rate of their channels, so how can I get a KYC from the customers," says Roop Sharma, president, Cable Operators Federation of India, the representative body of local cable operators in the country.
As a quick fix, Sharma says MSOs have entered into a bulk rate deal with the broadcasters and local cable operators. They are charging Rs 100 from us for each set-top box irrespective of the actual revenue generated from the subscriber. "What change has digitisation lead to," asks Sharma.
MSOs, of course, blame it on the local cable operators for not giving them the details of their subscribers' so that they can raise the bill, which is mandatory under the digitisation rules. They fear the same problem will plague them in the second phase too.
"Many MSOs haven't got even 20 per cent subscriber information forms. Of course, one can switch off any box if the person doesn't pay monthly subscription fee. But the process is taking too much time," says a member of the MSO Alliance. Broadcasters say the seeding of set-top boxes in the cities has slowed and the only way is for the MSOs to be tough.
Local cable operators have other grouses as well. They say consumers are not willing to spend on set-top boxes. "We have digitised only 25 per cent homes. Consumers are not willing to purchase boxes. And there is a dearth of boxes. We haven't got enough boxes and encoders. The subscribers don't want to pay Rs 600 for box and thenpay more per month. Moreover, this whole process will make local cable operators' business completely unviable," says a top executive of Matoba Cable Networks, a Pune-based cable operator.
A similar view is echoed by Virendra Singh Chauhan, owner of Suresh Electronics, a Bhopal-based cable operator, who serves three MSOs "Consumer demand is low. No one wants to spend extra to buy a set-top box."
However, the stakeholders say digitisation is irreversible, and therefore, getting it right in the second phase is crucial. The third stage will be a Herculean task, covering 31 million cable households in over 5,000 cities and towns; it will require more investments and time because of its huge spread across the country.
Execution flaws may hobble India's digital drive | Business Standard
They also say the seeding of the boxes in consumer homes might take another three to four months. The government, at least at the moment, is not ready to relent on the March 31 deadline.
This is the second phase of digitisation of cable TV households in the country. In the first phase, which got over in October last year, 10 million homes were digitised in the four metros: Delhi, Mumbai, Kolkata and Chennai.
Key milestone
The second phase is crucial for changing the economics of the TV broadcasting business, especially as a lot of money is being invested. MSOs (multi-system operators) such as Hathaway have invested over Rs 1,200 crore on buying set-top boxes and putting cable for the second round and they are anxious to get returns on their investment at the earliest. Combined with the first phase in the four metros, they have forked out over Rs 3,000 crore already. The broadcasters, too, are looking forward to it. As they get only a fraction of the subscription revenue owing to massive underreporting in the cable networks, their interest lies in ensuring digitisation is on track.
Uday Shankar, CEO, Star India India, just a few weeks ago was worried that ground reports were not encouraging. "Parliament has passed an Act and we expect the government to stick to the deadline. There is a lot of money involved," he had said.
India's broadcasting landscape will completely change after the second phase of digitisation. As much as 27 per cent of the 80 million cable homes across the country will be under the digital net after the second phase. And they will together constitute 50 per cent of all subscription revenue. As of now these cities have a 75 per cent weightage in the TAM report on ratings of programmes and channels, based on which the companies decide their advertising allocations. Also, in these cities live 60 per cent of the target audience for most advertisers.
Broadcasters say that the 38 cities offer immense new revenue generating potential. For one, cable service quality has been abysmally poor in these cities. Besides, analog has limited their choice of channels. "Currently, on an average, cable operators show a maximum of 80 channels in the analog system; this will rise more than four-fold to 350 (because more signal can be compressed into the pipe), giving customers more choice and better quality," says Gurjeev Singh Kapoor, chief operating officer of MediaPro, the joint venture distribution company between Zee Turner and Star-DEN. Currently, average monthly ARPUs(average revenue per user) in these cities are at Rs 180 to Rs 200 a month, but these are expected to rise 10 to 15 per cent with digitisation. The increase would bring the revenues more or less in line with ARPUs of the four metros.
Currently, over one-third of the subscribers are not reported by the local cable operators, thereby lowering the broadcasters' share of the subscription revenue. Currently, broadcasters earn only Rs 1,000 crore of the total subscriber revenue of Rs 1,500 crore because of under reporting by the local cable operators. Digitisation is expected to bridge this gap as every set-top box will then have to be accounted for.
THE CABLE TV ROLL-OUT
* The first phase, which ended on October 31, covered 10 million homes in Delhi, Mumbai, Kolkata and Chennai
* The second phase, the deadline for which is March 31, will cover 12 million cable homes in 38 cities. These include Pune, Lucknow, Navi Mumbai, Bangalore, Hyderabad, Thane, Chandigarh, among others
* According to industry estimates, set-top boxes in only 2-3 million homes have been seeded in the second phase so far. Government claims it is 4.7 million
* 27 per cent of the 80 million cable homes will be under the digital net after the second phase
* Average revenue per user per month in these cities is expected to rise 10 to 15 per cent from Rs 180 to 200 now
* The number of channels that users would be able to see after digitisation will go up from 80 to 350
* About 10 per cent of the new digital TV homes are expected to use the basic package of Rs 150 per month
* MSOs have invested over Rs 3,000 crore for both the phases of digitisation
Unfinished business
However, that may be easier said than done. Cable operators say a lot of work on the first phase is yet to be completed. After the seeding of set-top boxes , local cable operators are required to sign up a know-your- customer(KYC) form, detailing the channel preferences of the customer for the MSOs to create a unique customer identity and generate a bill. That has not happened at all, say cable operators. "MSOs are not giving us a rate card or a la carte rate of their channels, so how can I get a KYC from the customers," says Roop Sharma, president, Cable Operators Federation of India, the representative body of local cable operators in the country.
As a quick fix, Sharma says MSOs have entered into a bulk rate deal with the broadcasters and local cable operators. They are charging Rs 100 from us for each set-top box irrespective of the actual revenue generated from the subscriber. "What change has digitisation lead to," asks Sharma.
MSOs, of course, blame it on the local cable operators for not giving them the details of their subscribers' so that they can raise the bill, which is mandatory under the digitisation rules. They fear the same problem will plague them in the second phase too.
"Many MSOs haven't got even 20 per cent subscriber information forms. Of course, one can switch off any box if the person doesn't pay monthly subscription fee. But the process is taking too much time," says a member of the MSO Alliance. Broadcasters say the seeding of set-top boxes in the cities has slowed and the only way is for the MSOs to be tough.
Local cable operators have other grouses as well. They say consumers are not willing to spend on set-top boxes. "We have digitised only 25 per cent homes. Consumers are not willing to purchase boxes. And there is a dearth of boxes. We haven't got enough boxes and encoders. The subscribers don't want to pay Rs 600 for box and thenpay more per month. Moreover, this whole process will make local cable operators' business completely unviable," says a top executive of Matoba Cable Networks, a Pune-based cable operator.
A similar view is echoed by Virendra Singh Chauhan, owner of Suresh Electronics, a Bhopal-based cable operator, who serves three MSOs "Consumer demand is low. No one wants to spend extra to buy a set-top box."
However, the stakeholders say digitisation is irreversible, and therefore, getting it right in the second phase is crucial. The third stage will be a Herculean task, covering 31 million cable households in over 5,000 cities and towns; it will require more investments and time because of its huge spread across the country.
Execution flaws may hobble India's digital drive | Business Standard
