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Digitise India: Carrying all pay channels in base pack holding up ARPU growth

MUMBAI: Even as three years have passed since the implementation of Phase I of digital addressable system (DAS), the average revenue per user (ARPU) needle is yet to move, thanks to the lack of understanding between broadcasters, multi-system operators (MSOs) and local cable operators (LCOs).

While the differences between MSOs and LCOs over revenue share is often touted as the major reason for the lack of packaging on the ground, executives of national MSOs say that the insistence by the broadcasters to carry all their channels in the base pack is also a big deterrent to implementing packaging and tiering. However, broadcasters feel that the MSOs should take a leaf out of direct-to-home (DTH) operators on how to package and upsell premium channels.

This, in essence, was the sum and substance of the debate during a panel discussion titled ‘Digitisation: Promises and Challenges’ at TelevisionPost.com’s ‘Digitise India’ seminar in Delhi recently. The session was moderated by TelevisionPost.com co-founder and editor-in-chief Sibabrata Das.

“When you are forced to offer all the content in the base pack, how can you expect the prices to go up? Why will the customers pay? When all the content providers want content to be shown to each subscriber because of their interest in ad revenue, why will ARPU go up? This is why implementing packaging has become difficult,” said Hathway Cable & Datacom president of video business TS Panesar.

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According to him, the cable TV ARPU at the consumer level is as good as DTH ARPU, which is around Rs 250.

He was supported in his assertion by fellow panellists Siti Cable head of content and carriage Bibhash Jha and GTPL Hathway COO Shaji Mathews.

“We have been providing all the channels for Rs 200 so now it’s difficult to go and ask the same customer to pay more for fewer channels. Our LCOs face this difficulty. Since broadcasters are doing fixed-fee deal, we have to carry all the channels,” Jha said.

He pointed out that even the DTH operators were offering all the channels to all the subscribers during the initial days. “First, they did the SD piece, and then seven years down the line, they started doing HD,” he noted.

Mathews said that ARPU will only grow when MSOs start providing broadband and HD channels. “We have to increase our offering by providing broadband and HD. We can’t expect ARPUs to increase from the same SD channels,” he added.

Giving a broadcaster’s perspective, NDTV head of affiliate sales/BD and network distribution Rahul Sood said that the tiering of channels is the only answer to taking ARPU up.

“I think that in order to increase ARPU platforms need to go through that short-term pain and delink this whole issue where you can’t have broadcasters force down all the channels in base packs. If you offer all the channels for Rs 200, there is no motivation for him to pay Rs 300. You should put premium channels in different packs and try upselling,” he stated.

He also said that the benefit of an increase in subscription revenue is yet to flow to the smaller broadcasters. In fact, in the case of NDTV subscription revenue has gone down ever since it started handling distribution on its own. “Earlier we were part of MediaPro so we had a big upside coming in on subscription revenue. But that has become stretched after the disintegration of bouquets,” he noted.

However, Panesar retorted by saying that the MSOs do not have the liberty to decide packaging due to the nature of the deals done with broadcasters. “I should be at the liberty to create packages, to offer channels, to layer them properly. We are desperately trying to bring that in the system,” he averred.

While Sood was optimistic that carriage fee is on a downward trajectory, the MSOs contended that carriage fee is here to stay.

“Our carriage fee is more or less flat. We had seen a big reduction in DAS Phase I because that was really the primary market. We expect it to decline in the next one year or so,” Sood noted.

Panesar said that the very fact that the broadcasters want every channel of theirs to be available in every package is itself an indication that carriage fee is going to be there. “I see carriage fee to be growing, if not to remain constant, but if you ask per se about our network, we have seen a decline because of various issues,” he said.

Jha said that Siti Cable’s carriage revenue has grown by 7 to 8 per cent largely due to an increase in footprint. “When DAS Phases I and II kicked off, carriage did come down, but eventually everybody wanted to be placed all across. So much so that a broadcaster decided to take a different route, but the moment they saw a dip in their reach, they came back to a fixed-fee kind of a deal,” he stated.

Concurring with Jha on Star’s RIO agreement, Panesar said that the broadcaster did not have a good experience with RIO, so they went back to fixed-fee deals as their visibility got affected.

Mathews argued that the objective of digitisation is not to reduce carriage fee but to provide choice to the customers. He also said that carriage fee is nothing but a marketing fee. The broadcasters pay carriage fee of their own volition to ensure wide reach for their channels.

For once, Sood agreed that carriage fee depends on the business objectives of the broadcaster. NDTV, he said, has refused to do deals with networks where it did not see RoI. He also came out in support of TRAI’s recent consultation paper where it sought stakeholders’ suggestion on whether there is a need to regulate carriage fee.

“Carriage fee regulation is needed because there is ad cap so the regulator needs to discuss things in totality. We don’t want to play 15–20 minutes of ads. Given a choice, we want to be ad free or carry only 7–8 minutes of ads,” he maintained.

He also pointed out that there has been a swift shift in the consumption behaviour of consumers particularly in urban areas, meaning that content producers are no longer at the mercy of traditional platforms to carry their content.

Panesar seconded Mathews’ point that the MSOs do not force broadcasters to pay carriage fee. “I can carry all the channels on my network, but I will place the channels at my liberty. The channel is available and if the customer wants to watch it, he can go and watch it,” he asserted.

The MSOs also pointed out the difficulties in having a prepaid model to collect subscription revenue.

“Prepaid is not a prevalent model in cable TV business because of technology like tying up with a payment gateway. It’s not practically possible for LCOs to start prepaid,” Panesar said.

Jha revealed that Siti Cable has allowed its LCOs to activate and deactivate set-top boxes (STBs) as they are the ones who deal with the end consumers. The MSO has also put some of its packages on the prepaid model for the time being.

Mathews said that GTPL is working on an arrangement where LCOs can prepay on their own. He also said that the MSO is offering a la carte channels on prepaid basis. The revenue from a la carte channel will be split between the MSO and LCO, and the latter’s revenue share will be transferred to its account.

Contending that the prepaid model is not a consumer-friendly system, Mathews said that it might lead to higher ARPU, but overall revenue will take a hit.

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