Pay channels likely to drop rates post CAS

CAS has given rise to many questions.

As pay channels reach a consensus about its implementation, and cable operators try to come to grips with the situation (Hathway, for example, is investing Rs 120-150 million in CAS infrastructure), two issues still remain. The number of set-top boxes that would be available by July 14 and how television broadcasters would fix the price of their channels post June 14.

The answer to both these questions lie in the key issue of connectivity. In other words, how many houses these pay channels will effectively reach after the implementation of CAS. All media strategies - especially the key question of buying - hinges on that one single issue. As Anita Nayyar, executive director, Starcom, North, puts it, "Connectivity is a big issue. If pay channels are asking for a certain amount of money, it has to be in proportion to the connectivity."

A media analyst, who does not wish to be quoted, seconds Nayyar's observation. "We are going to put connectivity as a clause when it comes to pay channels. There is no problem with the free-to-air (FTA) ones. But since the actual numbers (subscriber homes) will become available for pay channels post CAS, rates should be worked out accordingly."

The C&S population in the top four metros is currently pegged at 6.6 million and the number of set-top boxes (STBs) currently available is estimated to be between 1 lakh to 3 lakh, say market sources. This figure is unlikely to go up drastically by the CAS due date. The difference may even be large, though operators claim they are investing enough in STBs. Citicable has reportedly ordered 2 million STBs, SUN TV has placed an order for half a million, while RPG is supposed to have invested Rs 12 crore and has ordered for 50,000 STBs. Yet, a substantial number of the C&S population would not have these boxes for two simple reasons. One, inadequate supply of boxes by July 14, and two, given the prices involved, many viewers may decide to skip pay channels altogether.

Given this, under the CAS regime the C&S population for pay channels is bound to come down. And if that happens, pay channels would be forced to slash prices, at least in the short term.

A direct corollary, explains a senior media planner, would be that airtime rates of FTA channels (Sahara TV, SAB TV, DD Metro, Aaj Tak, BBC, Headlines Today, STAR News, Sahara Samay, NDTV 24X7, NDTV India, MTV, etc, B4U Music, ZEE Music, MCM, Eenadu Marathi, DD Sahyadri, SUN, Asianet, Splash, SS Music, the local cable movie channel, CVO and CCC) could go up.

Explains Atul Phadnis, director, S-Group, TAM Media Research, "On an average 3,000-3,500 brands are advertised on TV every month. These 3,000-odd brands collectively end up buying a total of 70,000 GRPs per month. A substantial chunk of these 70,000 GRPs come frinom channels like STAR Plus, Sony and ZEE etc. Post CAS, the subscription for pay channels is like to fall. Consequently, their ability to contribute to the current share (of GRPs) will come down. This shortfall may be bridged - at least in the interim period - by some of the FTA channels. Consequently, the rates, and therefore the revenue, of the FTA channels is likely to jump." Adds another media planner based in Delhi, "Even in the case that demand for pay channel air time outstrips its supply, the rates for some of the FTA channels will go up."

What would be interesting to see in the CAS regime is how, among the pay channels, do niche channels fare vis-à-vis mass channels. "Any new phenomenon is known to start from top down, just like the Internet, cellular phones, air conditioners, cars etc. Because the viewership of niche channels is small and is skewed towards the upscale target group - which is the also target group that is likely to buy the STBs initially - the viewership is not likely to be dramatically affected for niche channels," opines Phadnis. So if Phadnis' conjecture turns out to be true, niche channels need not start worrying - not at least now.

However, until one is clear on how many STBs will be available by July 14, and how many household will actually buy them, the broadcasting industry will continue to be rife with speculations. © 2003 agencyfaqs!