Cable operators are fighting, multi-system operators (MSOs) are lobbying, broadcasters are worrying and direct-to-home (DTH) operators are rubbing their hands in glee. So far the whole mandatory digitisation story in India is playing to script. With just under 90 days to go, how ready are we?
The answer: it is going to be a last-minute dash but we might just make it, at least in Mumbai, Kolkata and Chennai. Delhi is a problem. Chances are all the four metros will be digital by June 30 this year, thanks to aggressive DTH operators rushing in to fill the gap.
A quick background. The 142-million home TV market in India is one of the largest in the world along with China and Brazil. However, in top line ($7 billion, or Rs 35,000 crore) or margins, it is way behind either of those countries. One big reason is that just about 15 to 20 per cent of the money cable operators collect comes back to broadcasters, against 70 per cent globally. This leads to revenue leakage and tax loss.
If all TV homes were digital, it would release Rs 10,000-15,000 crore into the business annually. But digitisation, in the semi-mandatory form of the conditional access system or the voluntary one, never took off. After almost 10 years, only two million of India’s 80 million cable homes are digital. In a market where distributors (MSOs) make a bulk of their money from carriage fees and retailers (cable operators) generate huge amounts of undeclared cash, nobody really wanted it.
The game-changer was DTH. Within seven years DTH has acquired more than 30 per cent (42 million) of India’s TV homes, digitising without any of the pain associated with cable. DTH now contributes more to pay revenue for broadcasters than cable. This drove home what digitisation can do to recalcitrant broadcasters and sanguine regulators.
Finally, last year, the government amended the Cable Television Network Act of 1995. It is now mandatory for cable operators to provide all channels through an “addressable digital system”. By the end of June this year, cable TV homes in all the four metros should be digital. By December 2014 all of India should be.
Media Partners Asia, a Singapore-based consulting firm, estimates that the cost of digitising all TV homes is about Rs 40,000 crore. The first, four-metro phase will need Rs 1,500 crore. Most cable companies have enough cash on their books or are capable of raising it, at least for phase one.
If the benefits are clear and the money is available, why this perpetual air of strife and stress about digitisation? One big factor is the texture of the Delhi market. It is hugely fragmented. Yogesh Radhakrishnan, managing director and CEO, Media Network and Distribution, reckons that there are about five times more head-ends (distribution points) in Delhi compared to Mumbai.
What he doesn’t say is that it is also a market full of rabble-rousers. Most national cable companies will not admit it, but they have little control over their joint venture partners (distributors, cable operators) in this market. Policy makers, who also sit in Delhi, face the intractability of the trade rather directly.
Even as DTH continues to take away consumers, cable operators in Delhi have been resisting digitisation. Consider a recent YouTube video by the Cable Operators Association of India: it paints a picture of conspiracy from foreign media firms and large Indian ones. There is misinformation on who owns media companies in India and on how the cross-holdings work. For instance, it states – incorrectly – that Star and Rupert Murdoch own a stake in ACNielsen. To counter such things the Indian Broadcasting Federation will be releasing a campaign, created by Prasoon Joshi, to educate consumers, says Gurjeev Singh Kapoor, COO, Media Pro Enterprise.
In most countries, the march to full digitisation has been slow — it takes anywhere between two and eight years to implement. But it has been exceptionally painful in India. That is because the biggest gainers – broadcasters, MSOs and cable operators – never believed in it. The big change now is that margin-pressured broadcasters want this to work. Radhakrishnan points out that among the biggest supporters of digitisation is the new breed of broadcasters (UTV, Viacom et al) who suffer most from the legacy system of carriage fees and no transparency.
If broadcasters, who are the face of the TV industry, truly believe that digitisation is a good thing, then chances are it will happen. The only question is: how much more pain will the industry and consumers go through before we stop using the word “under declaration”?
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