 "Has another attempt at cable TV digitisation failed?")
Besides putting digital boxes into homes and increasing the number of channels on offer, "there hasn't been much progress pre and post-digitisation," agrees Sameer Manchanda, chairman & managing director, Den Networks (see Little Change: before and after digitisation). Sudhanshu Vats, group CEO, Viacom18, lists the reasons. One, LMOs, or last-mile cable operators, are unwilling to share revenues. Two, MSOs, or multi-system operators (firms such as Den or Hathway for wholesale TV signals), haven't focused enough on building processes and management bandwidth to take digitisation through. And three, price control.
To this list, Tony D Silva, managing director and CEO, IndusInd Media and Communications, adds poaching of subscribers. Jawahar Goel, managing director, Dish TV, contends that broadcasters are too taken up with programming, the glamorous part of the business, leaving distribution for people down the line. The resulting lack of coordination with the digitisation task force has created this situation.
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While cable struggles with the "same old problems", direct-to-home (DTH) and online video keep growing. Now there is a new force: Reliance Industries has just applied for an MSO's licence. Its fibre optic network means that it can offer voice, Internet and television nationally without all the accompanying angst. And cable, which is a better technology to get broadband Internet into homes, loses the game. Is it already too late? Has India failed in its third attempt at digitisation?
The green shoots
Even its worst critics do not believe that. With 160 million TV homes, India is the world's second largest television market after China. It is, however, a structural nightmare that makes it the least profitable among most emerging markets. One big reason is that out of the Rs 20,000-odd crore collected on the ground, barely 10-15 per cent reaches the broadcasters. A bulk just leaks away. More than two-thirds of the cable operators in India have political affiliations, making the industry a source of political funding and a strong lobby against any move towards transparency.
It was never going to be easy to digitise this market. The fact that more than 95 per cent of the homes in Phase 1 (metros) and Phase 2 (38 towns) of the digitisation drive have a box is an achievement, point out most analysts. There are other "green shoots" too, as Manchanda points out. One, the MSOs' share of revenues has risen. Though it is still less than 40 per cent of the revenues collected, analysts see the Rs 55-90 per subscriber that MSOs like Hathway are now getting as a good sign. Eventually it should be Rs 120-150 per subscriber (at higher retail prices) if the investments on the boxes are to start paying off. Two, there is growth in cable broadband, with its higher average revenues per user, or ARPU, pushing LMOs to become more transparent. According to an analysis done by Kotak Securities, Hathway's operating profit per subscriber (including carriage fee) on cable TV is Rs 10 but on cable broadband, it averages Rs 200 per subscriber.
The third is the change in the LMOs. In a survey that IndusInd commissioned across 1,600 LMOs in eight states a month-and-a-half ago it discovered that most wanted the MSO to help them understand pricing and packaging. "They are saying, help us be competitive with DTH services," says D'Silva. This goes against the popular perception about cable operators. And lastly, Star recently started selling its channels on the wholesale card rates. This eliminates carriage from the equation by bringing in discounts if certain conditions are met. Zee is thinking of doing the same. If two of India's largest broadcasters can push for a carriage-free, transparent pricing driven market, others will follow.
Half-baked dish
"Just by digitising, what he (the cable operator) pays will not increase," says Manchanda. "The last-mile infrastructure has been built by operators. Just by putting in a set-top-box, the MSO is giving the idea that the consumer belongs to him," says Arvind Prabhoo, president of the Maharashtra Cable Operators Federation. This "complete mistrust" between the two is what Telecom Regulatory Authority of India, or TRAI, lists as the biggest reason for the halting speed of digitisation. Last year, it put off the deadline for total digitisation from December 2014 to December 2015.
While the delay will help to fix the issues in Phases 1 and 2, it is a blow to MSOs. They raised a lot of money on the promise of a better share and more consumer numbers. These remain elusive even as the debt servicing costs rise. According to Media Partners Asia, the net debt of three large MSOs - Hathway, Den and Siticable - rose by almost five times from Rs 310 crore in March 2012 to Rs 1,470 crore in March 2014.
"The know-your-consumer forms have been given to MSOs four or five times but they have not put the data on their system. They are unable to cope with the demands of digitisation," says Prabhoo. Of all the charges LMOs make, this one sticks the most. Most MSOs admit in private that they were simply too focused on seeding boxes - because TRAI and the ministry were pushing. Most had thought that once the box was in, it would be a cakewalk.
History too is at work here. Earlier if an LMO had 10,000 subscribers, it probably declared only 5,000 and kept increasing the number or the value it paid to an MSO through on negotiation. A limited cable capacity meant the game was about trade relationships and bargaining power. Now capacity is ten times higher, so there is no need to pay carriage fees. The whole focus has to shift to marketing to consumers with packages, prepaid services and more channels, says Anuj Gandhi, group CEO, IndiaCast Media Distribution (part of Viacom18). But carriage fees remain at the same level as 2011 because broadcasters agreed to 'support/subsidise' the digitisation process. This negates any of the increases in broadcaster share.
A large part of the mess also comes from price control implanted from voice telephony to the content business by TRAI. While the price control operates at a wholesale level, it is benchmarked to analog rates. Its complicated nature and the litigation around it had a devastating effect on TV's growth and everyone's view of digitisation. It first came in 2004 but in the current market where several options are available to the consumer - DTH, cable, IPTV - it seems archaic. Across the board, MSOs say that in markets where prices move up operators are more than willing to share and digitisation moves smoothly.
Earlier this month, TRAI started a series of interactions across cities in India to get MSOs and LMOs talking to each other. This one will unfurl in full Bollywood proportions before we see some light.