ICRA Research Services' report, titled 'Indian Media and Entertainment Industry: TV distribution', states that with the end of the third phase of mandatory digitisation approaching fast (December 31, 2015), there are ground-level challenges and unsolved issues even in the Phase I and II markets. The report adds that it is because of these issues and challenges that even after three years since its start, digitisation has not achieved its target of addressability and transparency in billing systems.
The report further states that as the multi-system operators (MSOs) struggle with last-mile 'addressability' hurdles for their digitised customer base, the industry's ability to deliver customised and value-added content remains restricted. "As a result, the expected benefits of higher subscription revenues for MSOs and broadcasters are yet to be achieved. The end consumers are also yet to benefit from targetted subscription packages, which were expected to optimise the user experience," the report states.
Implementation challenges and slow progress in Phase I and II markets have restricted monetisation for MSOs. The report says that addressability continues to remain a concern in Phase I and II markets due to slow progress in consumer application form (CAF) collection.
Local cable operators (LCOs) have effectively retained their control over the subscriber base. Further, disputes over sharing of entertainment tax liability between the LCOs and MSOs have restricted the implementation of gross billing and channel packages for most players in key markets such as Mumbai and Phase II areas.
Additionally, the growth of average revenue per user (ARPU) for MSOs has remained constrained, as collections continue largely on per-subscriber basis and not on the basis of channel packages chosen.
For DTH players, the key growth drivers in Phase I and II cities have been price hikes, higher penetration of VAS, ability to segment the market by offering channel packages targetting niche requirements and HD channel packages.
Significant decline in carriage fee payouts from broadcasters unlikely in the near term: While carriage fee payouts by large broadcasters is expected to remain stable, disbanding of channel aggregators has resulted in higher bargaining power of distributors (MSOs and DTH operators) with smaller broadcasters as well as new channels. New channel launches and wider audience measurement metrics (through inclusion of tier II and tier III markets) will keep carriage revenues buoyant for MSOs in the near term.
To read the full report, click here.