Pay television: Has the time come? Part I

In a country where free television is considered almost a birthright, how is the Indian viewer going to be convinced to pay?

This is a task that has the cable industry up in arms against channels that, after years of free-to-air television, are finally giving the model of subscription television a good hard look. With an estimated 30-million-plus C&S homes, pay TV, on the face of it, appears a lucrative proposition. Seventy million television homes. A viewing population of close to 400 million individuals. A hundred-plus channels.

Except that thinking the whole problem of pay television is just one of cable operators versus television channels could be missing the whole point.

The challenges that pay television has to overcome in India are formidable. Techological glitches, consumer patterns, an entrenched disorganised cable television industry with considerable clout and unsavoury means of enforcing it, rivalry between channels, and the immense problem of convincing the Indian consumer to pay.

The issue has acquired a sudden urgency. In the latest of a no-holds barred contest, InCable in Mumbai took out large advertisements in the city's popular tabloid Mid Day explaining how a hike in pay TV charges is a blatant and gross attack on its revenue. InCable is also fighting a court case in the Mumbai High Court for restoration of ESPN and STAR Sports signals that were switched off by ESPN Software India following the expiry of the service contract on December 31, 2001.

According to InCable, cable television charges have gone up by 475 per cent from 1999 to 2002. For example, the STAR package, which was going at Rs 3.80 per month in 1999 now goes for Rs 41 per month. The flip side of the story is that cable operators regularly under-report the number of homes they reach "If the cable operators gave the correct number of subscribers, the rates would come down. While television programming has come a long way in terms of quality, subscription rates are still low," avers Yashpal Khanna, senior vice-president, corporate communications, STAR India.

The problem could go well beyond a fight between the channels and cable networks. Right now, what is at work is brutal economics. Television software has become all the more expensive to produce, and yet, television viewership charges have almost remained stagnant. For example, for each episode of KBC, Amitabh Bachchan was paid a reported Rs 10 lakh - roughly the cost of a small budget serial in the early 1980s. Right now, the Rs 3,500-crore television advertising market is stagnant, and heavy fighting is on between TV channels for their respective shares. It is time to look beyond advertising. But is pay TV the answer?

First the structural snags. India's networks are controlled by an unorganised cable industry that alone has the power to decode signals and then pass them on wholesale to the viewer. This is thanks to the last mile problem and the absence of a return path in more than 70 per cent of Indian cable TV networks. Additionally, addressable boxes have yet to make their way into subscriber homes.

This has resulted in cutthroat competition and varying rates - which is the crux of the whole debate. While subscription costs at the posh Malabar Hills in Mumbai could be around Rs 350 per month - still cheap compared to international standards - in some of the slums of the city, the costs are just Rs 50 per month. In contrast, just to take one example, in the United States, around 150,000 subscribers pay the Dish Network between $22.99 and $29.99 a month to receive Al Jazeera as part of a multi-channel Arabic package. And this is just one package. However, the fault may not be with the channels or the cable operators alone.

One of the biggest obstacles is technology. Though, there are 70 million television homes, more than 60 per cent of these are B&W television homes, with access to the SEC C&D. B&W television sets can also receive only 10 to 12 channels - the so-called prime band. Of these, four go to DD by law, two to the channel operator's own channels, one to such services as pagers etc, and three to the most popular pay channels - usually, STAR, Zee and Sony. It is for the remaining two that competition between companies becomes cutthroat.

The pay TV model also makes little sense, given the fact that though 60 per cent of Indian homes now have a television, only one in three can receive satellite channels - mainly through small-scale cable operators. To such households, the average investment of Rs 4,000 for a television set is enormous. It is unlikely that they would be willing to pay more - say, Rs 200 per month - to pay television companies. This alone works out to an annual investment of Rs 2,400, just short of the price of a television set.

Another problem is the debate between analog and digital sets. The older analog version takes up a lot more space to carry a particular TV signal; the signal is accessible to anybody. With television channels going digital, there is the need for separate decoders for the signals. And each decoder, for each pay channel package, costs around Rs 3,000. In the current scenario, all that it takes for a cable operator to transfer a signal is to feed a wire into a receiver's home; with decoders, this primitive mode of transmission becomes impossible.

Right now, cable and television operators say that if they pay the Rs 250 or so that television channels are asking for, plus Rs 100 for routine costs like laying the cable, sending over the signal, electricity etc, the cost does not become viable. Yet, with such low subscription costs, don't the cable operators suffer as well? © 2002 agencyfaqs!