Even though the government is desperate to put a cap on the carriage fees, its call seems to be falling on deaf ears. This is evident from the fact that the Indian broadcasters paid Rs 300 crore more as carriage fee in FY 2011-12 as compared to the previous fiscal year.
In 2010-11, the total transaction of carriage fees for Prime, S and UHF bands amounted to Rs 1,600 crore, which has now increased to Rs 1,900 crore.
The prime band (old B&W television sets are only equipped with prime band) and colour band (channel number 5 and 16-19), which can accommodate only 17 channels, are already packed and booked. It is very difficult to dislodge the existing channels from this band as they enjoy a very high content pull. So, for any new channel, the next option is the S-Band or UHF band, for which the fight between the new and existing players intensifies.
Chrome Data Analytics and Media has launched its second round of data on the carriage fee -- Distribution Investments Index (Dii). The study suggests that there has been a major correction in rates across the nation between the last fiscal (2011-12) and the previous one (2010-11).
The cost burden has increased both for the new as well as the existing players across North, West, Central and East regions. The only market to have shown a decline in carriage fee is the South.
Chennai, which claimed more than 50 per cent of the carriage fee collected in the four southern states, has seen a massive dip in carriage fee in the last one year. This has happened primarily due to the government's control on the cable distribution system.
If the S-Band in Chennai was available for Rs 9 crore in FY 2011, the rate for the same has dropped by 46 per cent to Rs 4.85 crore. For the UHF band, the fall is even steeper - 65 per cent from Rs 6.5 crore to Rs 2.25 crore. Not only for the new channels, even for existing deals, the prices have come down by 39 per cent and 61 per cent for S-Band and UHF band, respectively.
For existing deals, the S-Band rates have increased by only 6 per cent, while for that of UHF band, the figure is 24 per cent.
In Kolkata alone, the rate for S-Band for a new channel has increased by 76 per cent. For a new channel which opts for a 100 per cent penetration on S-Band in Kolkata, it should pay Rs 10.42 crore, which is about 40 per cent or Rs 3 crore more than the existing player.
The North continues to be the most expensive area for the broadcasters, thanks to the crowding by the Hindi GECs (general entertainment channels). However, here, there is little difference between the S-Band rates for the new and existing players. A new player would have to pay 25 per cent more than the existing player for an S-Band placement.
The cost for S-Band in North India has gone up by 11 per cent, from Rs 25.3 crore to Rs 28.03 crore for a new player, and for the existing players, there has been a 10 per cent increase in rates, from Rs 20.24 crore to Rs 22.32 crore. For the UHF band, there has been a steeper increase in both new as well as existing deals in the North. For new players, the rates have increased by 29 per cent, while for existing deals the increase is 19 per cent.
While on one hand, the MSOs are asking for more money, the fact is that the number of C&S households has decreased due to increasing number of DTH homes (direct-to-home) and IPTV connections. This has increased the cost per contact per household for the channels.
At an all India level, the cost per contact per household for a new player has increased by 43 per cent for S-Band, from Rs 18 to Rs 26. For UHF band, the same has increased by 42 per cent, from Rs 12 to Rs 17.
For existing players, the cost per contact for S-Band and UHF band has increased by 39 per cent and 37 per cent, respectively.
In FY 2011, the cost per contact per household was the highest for the North. However, in the current round, Central India has taken away the top spot. Though the S-Band rates in Central India have only increased by 8 per cent as compared to 58 per cent in the East and 11 per cent in the North, the cost per contact is still high. This is because the number of C&S homes in Central India has dropped by 38 per cent. In Central India, the cost per contact per household has increased from Rs 18 to Rs 30 - a jump of 73 per cent. In the UHF band, the cost per contact for an existing player has almost doubled from Rs 9 to Rs 18.
In the East, the number of C&S households has decreased by only 9 per cent but the rates for S-Band for a new player has increased by 58 per cent, which is why the cost per contact on S-Band has also increased by 74 per cent.
Even for the West, there has been a massive drop in the number of C&S homes. Here, the figures have come down by 40 per cent, from 1.1 crore homes to 67 lakh homes.
Amongst MSO's, DEN continues to command the highest premium followed by Hathway. The carriage fee for DEN across new channel launches has risen by a significant 44 per cent and 22 per cent for UHF-band and S-band, respectively.
The reason is that DEN now commands the highest footprint of subscribers which translates to 18 per cent of all India C&S households across chrome reported markets.
Chrome Design & Media provides consultancy to broadcasters on optimising distribution carriage fee investments. Each average in the Chrome study took into account six deals per network with a maximum variance of 15 per cent from the mode.
Dii is worked out on the basis of deals done by broadcasters over the last one year. An average of 6 solo deals per cable network is taken into account. It includes investments for S band and UHF (550 & below).