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DAS and the ARPU conundrum
PUNE: The broadcast sector will continue to be under turbulence unless broadcasters, multi-system operators (MSOs) and local cable operators (LCOs) work together to grow average revenue per user (ARPU), observe industry stakeholders.
Even as the price of every commodity has shot through the roof in the last decade, it has remained stagnant in the case of cable TV. The result is that there is not enough money for the three stakeholders, a fact that triggers only disputes.
The digital addressable system (DAS) drive was expected to correct several anomalies in the market. However, the lack of movement on billing due to MSO-LCO disagreement over revenue share has elongated that process.
DEN Networks CEO SN Sharma said that it is a double whammy for the MSOs as, on the one hand, the broadcasters are demanding growth in subscription fee and, on the other, the LCOs are reluctant to increase subscription fee pay-out.
“The disputes are arising between stakeholders due to revenue squeeze. This squeeze has come because we are not increasing collection from the ground. There is a need to increase collection from the ground. It’s not that customers are not willing to pay, but they want good service,” Sharma said during a panel discussion in Pune. GroundPost’s digital summit, organised by TelevisionPost.com, was attended by over 300 cable operators.
To make matters worse, the tax authorities are also raising fresh demands on MSOs to pay entertainment tax on the declared subscriber base, which has only increased the burden. In Delhi, entertainment tax collection has shot to Rs 7 crore (Rs 70 million) a month from Rs 60 lakh (Rs 6 million).
He also rued the fact that MSOs have invested Rs 5,000 crore (Rs 50 billion) in STBs for the first two phases of digitisation without any tangible return so far.
Sharma also revealed that as per a research conducted by DEN, the revenue of LCOs has gone up after digitisation. “It’s a fact whether you agree or not,” asserted Sharma.
He also advised the cable TV industry to willingly embrace change as it will be in the interest of all the stakeholders in the long run. Customers, he said, belong to no one as they have the choice to migrate to DTH. He also urged the LCOs to join hands with the MSOs to face the looming threat of Reliance Jio that will launch 4G services next year.
Assuaging the LCOs’ fear that their business will be taken over by the MSOs, Sharma said that the value chain of cable TV will remain unaltered. “How can anyone take over your business as the last mile is owned by you?” asked Sharma.
Dish TV CEO RC Venkateish opined that the broadcast industry has failed to extract value from customers. He said that cable TV subscription rates have remained where it was 20 years back.
“If we increase the ARPU from Rs 250 to say Rs 500–700, all these disputes will also vanish. We must grow the value chain of the entire industry so that all of us can reap the benefits. As the consumer ARPU has not grown in the past many years, in cable there is friction among stakeholders,” said Venkateish.
He also said that the cable TV industry must work to have standard rates across cities to grow the revenue pie.
Concurring with Sharma and Venkateish, IndiaCast COO Gaurav Gandhi said that the overall revenue pie must grow. The pie, according to Gandhi, can only grow if the MSOs start packaging and tiering.
He cited the example of multiplexes that have managed to attract money from customers by providing quality service. Cable TV operators, he said, must take their cue from multiplexes and increase ARPU by providing better services.
He also pointed out that the threat of new technologies like over-the-top (OTT) is very real and the cable TV industry must prepare itself to compete with these technologies. He said that cable can combat new technologies by providing broadband.
Gandhi said that the general entertainment channels invest anywhere between Rs 400 crore (Rs 40 billion) to 800 crore (Rs 80 billion) in programming every year. Therefore, there is pressure on the broadcasters to ensure return on investment.
Digicable MD and CEO Jagjit Singh Kohli said that the MSOs, LCOs and DTH operators are fighting each other which ultimately benefit the customers. “We subsidise the service by fighting each other,” Kohli lamented.
He also said that the MSOs and LCOs must brace for new technologies like 4G and OTT rather than fighting over issues like billing and revenue share.
“We will keep fighting each other, and somebody will come and take away our business. Therefore, we must seriously look at broadband and VAS rather than fighting each other,” Kohli advised.
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