Pay television: The challenges ahead - Part II

By , agencyfaqs! | In
Last updated : January 23, 2002
As more and more channels go digital, smaller cable television companies are finding it difficult to compete


(Continued from yesterday.)

As more and more channels go digital, smaller cable television companies are finding it difficult to compete. That is primarily because the cost of the related infrastructure is squeezing out the small operators, in favour of the bigger companies, such as InCable (backed by Hindujas), Siticable (Zee) and Wincable (Hathway Cable & Datacom), which have the financial muscle of big media conglomerates.

The marketing tactics of the major channels - cutting deals with the bigger cable operators, isolating the ones who are willing to resist - are also contributing to such consolidation. Lately, in the tiff between ESPN and STAR Sports over telecast rights in Mumbai, only InCable held out. Cable networks affiliated to MSOs Hathway and Siticable as well as several independent cable operators meekly agreed to pay ESPN and STAR Sports higher rates effective December last year.

While internationally, the ratio between subscription and pay TV is roughly 50:50, in India it is more in the order of 80:20, or even 90:10. Pay television companies argue that greater organisation in the cable industry will ultimately benefit the consumer as he would get better quality. Foreign companies, now discouraged because of the last mile problem, would be willing to invest massively. This would mean that the Indian consumer would have access to several hundred channels worldwide, rather than the comparatively limited range that he has access to now. And, he could also play a greater role - for example, for an additional fee, he could decide which movie he wants to see, and have it telecast exclusively for him or her.

Ironically in India, the contest is still between the cable operator and the television channel. Right now, the only interface that the consumer has with the channels is the cable operator. Often, local operators use old cables to receive signals - resulting in weak and poor quality images - the blame for which is laid at the door of the television channel. This works to the disadvantage of television companies - for viewers, unless the programme is extraordinarily important, are content to just go to the next programme on another channel.

One avenue that has not been explored significantly is convincing the consumer to pay directly to the company in return for better services. Analysts say that a franchise system, or a system by which the consumer can directly contact the channels, would work to the advantage of the companies. This would also benefit both consumers and cable network providers as conventional one-way pay television services - from distributor to the customer only - are replaced by two-way systems that can pipe not only TV signals, but also telephone service and high-speed Internet access.

With fibre optics and better data compression, such networks will allow consumers to interact - for example, choose the exact angle from which they want to watch a cricket match on television. Consumer research, as well as the experience of telecommunication companies in areas such as mobile telephony, also shows that the Indian consumer is willing to pay if service is prompt and efficient. All this works to the advantage of the bigger companies.

Yet, in many ways, the cable operator, is on the losing side of the battle. For one, the biggest weapon in their armoury - cutting off the TV signals of a particular channel - is blunted to a large extent. "There is substantial pressure on the cable operator from the consumer. Sooner or later, the consumer will have to pay. There will be some give and take between cable operators and channels, but they will have to compromise as they need each other," points out Ashish Bhasin, president, Initiative Media, Mumbai.

Another factor is undercutting among the channels themselves. Rivals allege that in the city of Ahmedabad, Sony is giving cable operators its bouquet for Rs 1, against the marked price of Rs 27. And Zee Telefilms (when it went pay in 2000) priced its bouquet at a cutthroat price of Rs 11, and its digital set top box at around Rs 2,000 against the Rs 5,000 or so levied by STAR. However, Zee's weakness is that STAR programmes are more popular, and this is what counts in a media planner's calculations.

"The biggest problem with this market is not undercutting, it is under-declaration by the cable operators. The under-declaration is so ridiculous, that if they accurately reported figures, pay television rates would actually go down," Partha Pratim Sinha, director, marketing, Zee Network.

"The question is not of under reporting. It is that pay television channels are changing the price so frequently that we cannot keep up with their demands," says Rajesh, a cable operator based in Chembur. He does admit to under-reporting but is quick to protest that does not compensate for the amount that pay television channels charge

However, the crucial question is how far the cable operator is able to affect the chances of a television company in the crucial television advertising market. "Not really. Television advertisement reflects TRP ratings, and not whether a channel is paid or not," points out Priya Raj, vice-president (publicity, promotions and PR), Sahara TV. What decides advertising is TRPs, and not the reach of a particular channel.

Yet, to a certain extent, free-to-air channels may benefit from a boycott of paid channels. "Cable operators are likely to prefer free-to-air channels on the prime-time band, since they do not have to pay anything to the companies," opines Sandeep Singh, vice-president, marketing, SABe TV.

The market for pay channels may be open, but it is unlikely that the Indian consumer will pay the $10 (Rs 400) to $50 (Rs 2,000) that the US consumers pay for TV. At the end of the day, the whole battle could be for just a few hundreds more. Or maybe even a couple of hundreds more.

That is the battle that the channels are now fighting.
© 2002 agencyfaqs!

First Published : January 23, 2002
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© 2002 agencyfaqs!