Frost & Sullivan, a multinational research and consulting company hosted an event, the Digital Media India Summit --"The New Digital Broadcast Era- Who can make money & how,"on Oct 18 at Hotel Hyatt Regency, Mumbai. The event addressed issues related to current and future trends such as high definition, leveraging content management, deploying TV-everywhere, using digital analytics, and monetizing digital Pay-TV services successfully. The objective of the forum was to provide key takeaways that could be adapted, deployed and optimized for long term top-line and bottom-line growth.
On the side of the summit, Cable Quest talked to Mrs Roop Sharma, President Cable Operators Federation of India (COFI) who was a panelist in a discussion on 'Pay TV- Monetizing it Effectively', representing LCOs and independent cable operators. We got the first hand information from her on LCOs role in the process of digitization and problems encountered for monetizing the same. Mrs Sharma has very deep roots in cable TV business in India, being the first cable operator in North India and also has been representing LCOs and Independent cable operators in the government since 1994.
CQ : What are the challenges to the growth of pay TV contribution to the revenue pie and ultimately the bottom line?
Roop Sharma : The biggest challenge to the growth of Pay TV revenue is perception of Pay TV market. India having 70% population as poor does not have such a large pay TV market as perceived.
In India there is no well defined pay TV market as there is no addressability and consumers never had the right to chose content and pay for it.
DTH a fully addressable service also functions like an analogue service, except that it is a digital service. Channels are forced in bouquets of Operator’s choice as DTH is mostly owned by pay channel broadcasters who treat this as their way of dictating the consumer what to view, good or bad. They always try to push their own content in the cheapest package which is subscribed the most.
Also statistics provided in the media are not based on the SMS system of the operators but on fixed minimum guarantee deals. All STBs including inactive ones are taken into account in the subscriber number.
ARPU in DTH is Rs 170 and in Cable Rs 165 where as DTH is supposed to be a premium service.
IPTV is nonexistent in India.
Even Digital cable does not yet give choice to consumers. It is working like DTH operation, relying on pushing one’s own content through allied / owned MSOs.
Only sports channel market could be defined since sports packages are being offered separately.
Hence there is a need to clearly distinguish between FTA market and DTH market.
1. FTA market- whole of Analogue cable market
2. Partial Pay TV market- DTH
3. Developing Pay TV market- Digital cable.
Real Pay TV market will develop now after CAF forms are honestly filled and SMS systems of MSOs are fully functional providing itemized billing.
No MSO is providing choice to consumers in the FTA basic package. This is not likely to happen till market is dominated by vertically integrated Media Groups.
CQ : In a digital environment, where content can be consumed on multiple screens, is the pie of Pay TV shrinking?
Roop Sharma : Yes, as long as right broadband infrastructure is not developed that can handle secured multi-platform distribution on cable, OTT, Hybrid TV (HbbTV) etc, benefit of digitization cannot be achieved.
MSOs of Pay TV broadcast groups have focus only on distributing Pay TV services.
Pay TV pie will shrink till it reaches the true figures after proper choice through a-la-carte is given to Subscribers. Then it will start rising again in the true sense as addressability is implemented in all markets. This lowering of the pie is scaring all the pay channel broadcasters because of which they resort to unethical methods of distribution.
CQ : For Pay TV to grow at a rapid pace on-demand content, exclusive and premium content plays a very crucial role. With the 'Must share' law in place how practical is it to see 'Pay TV' as major revenue garner?
Roop Sharma : Once the real Pay TV market starts operating on TRUE addressable platforms and broadband networks, a separate market will emerge other than TV channels that are part of ‘Must Share” content. These are –
a)HD, 4K (Ultra HD) and 3D on demand content.
e)Social media content etc.
‘Must Share’ helps Pay TV content reach more consumers. It is not a hindrance. At least for the next 5 yrs, we need to have ‘Must Share’ so that enough competition develops in the market, both among service providers and TV channels.
We don’t have adult content in India that generally is the prime mover for ‘pay’ TV revenues. However, sports is being used for the same purpose here.
CQ : Do the LCOs today understand the value proposition of Digitization- at their layer and what kind of avenues can be used for monetization by them?
Roop Sharma : In fact no one in the industry understands value of Digitisation and monetisation better than the LMOs. What is happening is that through large vertical monopolies we are forcing pay TV on consumers which does not give true picture of monetisation.
In early nineties LMOs Spread their networks providing video content to monetize it better than video libraries.
In late nineties they distributed satellite content from wherever possible to increase revenue.
By 2000 they upgraded their networks from two channels to one hundred channels on their own to provide greater choice to consumers.
Produced local content and monetized it well. All local video channels have better viewership than best of the ‘Pay’ channel.
Created markets for premium services within their networks and charged low subscription from economically lower market and a much higher subscription from rich consumers providing them special amplifiers and multi TV connections.
Provided internet as a value addition on parallel Ethernet network (because they could not upgrade to DOCSIS based broadband technology, being very costly). No MSO except Hathway has done it in a substantial manner.
In fact we all must learn from LMOs how to make best use of existing market which mostly comprises of economically lower strata. 70% of India lives in rural and semi-urban areas and 40% of this population watches cable/ satellite TV. Even urban areas and metros have about 40% population of lower economic strata who pay the minimum subscription.
Inspite of their low education and lack of technical expertise, they made Cable TV a lucrative business for so many years till government stepped in to cut their wings.
It is unfortunate that neither the government nor the MSOs have understood this and by reducing their revenue, have shut the doors of upgradation of the last mile which only LMOs own.
CQ : What kind of support are the LCOs today looking forward to from technology partners, MSOs and broadcasters?
Roop Sharma : Broadcasters should stop accusing LCOs. LCOs are the backbone of the industry. They must learn how to respect and stop criticizing them at various forums and misinforming investors, Government, Regulator, Advertisers and Research agencies.
MSO should share technology, give better Revenue Share to LMOs and let them Bill their customers; they should work one customer ID code system.
Support from Government
a)Ensure LMOs get adequate revenue per subscriber to operate and maintain their networks to the required broadband standards.
b)Remove unfair competition like MSOs who are giving them a signal feed are also allowed to run last mile networks in their competition. This is against Supreme Court judgment that says ‘ A competitor of a network cannot be the content distributor to the same network’.
c)Introduce a better business model of integration between an MSO and LMO so that the LMO retains full control on his business.
d)Frame separate regulations for small, medium and large scale networks so that each one gets a chance to grow. Consolidation should not be forced but should be a business decision. e) Provide incentives to triple play cable networks to encourage broadband. f) Provide electronic manufacturing support.
Support from MSOs
a)Consider LCOs as business partners and ensure their growth in business.
b)Give technological support in extending broadband services through LCO networks.
c)Carry out training of the last mile technical manpower.
d)Not to introduce unfair competition through dummies.
Support from Broadcasters
a)No discrimination in providing content.
b)Make affordable content deals with small networks( may be even lower than the price for larger networks) to enable their content reach every corner of the country including the interiors and institutional establishments like defence, PSU townships etc, where very small networks exist and there is no scope for growth.
a)Develop cost effective indigenous technology like EoC (Ethernet over Cable), GPON (Gigabit Passive Optical Network) for providing last mile broadband service.
b)Provide facilities and support for IP networks that can also be used as universal licensed networks for converged services and smart home technologies.
CQ : How important is billing system, middleware and content (GEC showing on repeated channels) protection as a part of the solution to give healthier revenues from pay TV by making the system leak-proof?
Roop Sharma : These are very important and are integrated part of every digital network. All partners in value chain must do their best to block all leakage of revenue because it is a loss to everyone.
a)They must be transparent and effective.
b)Billing and customer care system needs to be structured in a way that an LCO can bill and service his customers from his office without revealing confidential information of subscribers to the MSO.
c)There should be a system of registration of SMS and Billing system vendors and middleware vendors with an assurance of compliance with existing standards so that an MSO does not runaround to get his system audited after buying and installing these systems. It is a wastage of money and time and MSOs have to depend heavily on the favours of BECIL which is the only agency to audit digital networks so far.
CQ : Do you think transparency is a critical element in a pay TV value chain? Do we have the requisite transparency to have full confidence of every player in the value chain?
Roop Sharma : Even after seeding STBs Entertainment Tax and Service Tax is not being paid by MSOs. MSOs are even avoiding payment of VAT on STBs as they are showing it as ‘not sold’ and account it as CAPEX.
Transparency per STB
Neither Broadcasters nor MSOs are ready to accept transparency as their aim is only to sell their channels to all consumers. So they are all resisting itemized billing and providing choice to consumers. TRAI or the Ministry is not making any attempt to enforce regulations on Broadcasters or MSOs to bring transparency. Government had assured that customer will be able to control his billing but the reverse is happening and monthly bills have doubled. Government is yet to wakeup to this reality and react.
Yes transparency is very critical in a Pay TV value chain for a consistent growth in the industry. We don’t have any transparency at present as only a lip service is being done to the regulations.
Even the regulations have left many things to mutual negotiations which can never be transparent and trusted since vertical integrated monopolies exist.
CQ : How important is an honest rating system in creating a successful Pay TV business model?
Roop Sharma : Pay TV rating business has to be correct honestly reported. However it affects only the advertising revenue which is not a part of the Pay TV revenue that is subscription based. Like the distribution system, the rating system is also under the complete influence of a few large ‘Pay’ TV broadcasters. Under such circumstances, independent broadcasters will always suffer. I feel even activation of BARC rating system is deliberately delayed and government is too weak to take a strong action in this regards.
CQ : What kind of revenue sharing model do you think is ideal for MSOs, LCOs and broadcasters?
Roop Sharma : LCO and MSO must get their basic operating and maintenance expenses covered by the minimum subscription amount that a subscriber is likely to give.
1)They must get a reasonable profit on the basic subscription.
2)Pay channel revenue will depend on type of incentives/margins a broadcaster gives to MSO as well as LCO for selling the channel.
3)The basic subscription that satisfies the above must be affordable to majority of existing consumers.