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‘We are in talks with other DTH ops and MSOs to join our JV’
Dish TV chief executive officer RC Venkateish is at it again. He is out to tame broadcasters and has this time aligned with Siti Cable Network, another Essel Group-controlle
Comnet, the joint venture between two distribution platform companies, will aim to snatch the balance of power away from the bigger broadcast networks. The JV will welcome other direct-to-home (DTH) and cable TV companies as well.
What will be the knock-on effects? How will the separate business dynamics of a DTH and a multi-system operator (MSO) provide a common ground? Will the muscle power be effective or just figurative?
In an interview with Sibabrata Das, Venkateish explains how content and carriage deals can tilt in favour of distribution platforms if they unite.
Q. This is the first time in India that two distribution platforms are joining hands to stitch content deals. Is Comnet going to function like an agent for distribution platform operators?
Ours is the content aggregator model, but on the distribution platform side. A joint venture company is being formed with Dish TV and Siti Cable as equal partners. But it will be like any other aggregator company, having an independent team with a separate CEO, and operate as an agent. While it will negotiate with the broadcasters on behalf of the two companies, ultimately the contracts will be done individually.
Q. What will Dish TV and Siti Cable aim to achieve through Comnet?
Our main purpose is to keep content inflation manageable. We have a combined strength of 20 million digital subscribers. We will get better commercial terms once we sit down to negotiate with broadcasters. Consumers stand to benefit if our content costs are lower.
Q. Dish TV has guided to content cost staying in lower single-digit increase in FY16. The content deals only come up next year in September, by when the company would have reached 15 million subscribers. So is Comnet formed more to protect Siti Cable as we near the deadline for Phase III of digital addressable system (DAS)?
Nothing’s been sorted out in this business. It is true that we would have reached 15 million subscribers on our own by the time our deals with the bigger broadcast networks like Star India fall due. But it is better to be prepared before the renewal time arrives. If we always look at our own pond, we won’t be able to grow.
We are from the same group and we feel that there are synergies that we can benefit from. But there will be operational flexibility of each of these companies so that they benefit individually.
Q. How much of a game-changer do you think this move will be?
We are not restricting Comnet to just two distribution companies from the same group. We are actively talking to a couple of distribution platforms to join us. They are a DTH and a cable company, but I wouldn’t like to name them. Having a common entity that is dealing with over 30 million subscribers can change the game. It is a long-term play.
Q. Dish TV was earlier in talks with Videocon d2h and Airtel Digital TV to form a joint venture that would seek to reduce content costs and demand higher carriage, but nothing came out of that. What gives you the confidence that other distribution platforms outside the Essel Group will join Comnet?
When we are able to demonstrate that we can get better deals from broadcasters, others will join.
Q. DTH and MSOs operate in separate dynamics. While broadcasters do longer-term deals with DTH operators, they normally have annual contracts with MSOs. How do you build a common ground?
The market trend is to do cost-per-subscriber (CPS) deals. We will not do fixed-fee deals. Comnet will negotiate better CPS rates. This will be shared by all the platform providers that come under our roof. Though the business dynamics of a DTH company is different from that of an MSO, it ultimately boils down to negotiations. With superior subscriber numbers, we can do better.
Q. Negotiations purely for content deals may look theoretically simpler. But what about carriage deals where the gulf between the DTH operator and the MSO is so wide? How does that work in case of Dish TV and Siti Cable?
As in the case of content where it is cost-per-subscriber, carriage could evolve into a charge-per-subscriber. We know a wide gap needs to be bridged there, but we will see how it goes. We are working out the modalities and are in the process of formulating the basic template. We could be flexible on carriage and work out a differential charge-per-subscriber initially. All that is open right now. We will see how the negotiations go. But eventually, carriage should be on similar terms.
Q. When do Dish TV and Siti Cable start working jointly in dealing with broadcasters? Since your next round of renewals start only in September 2016, how is it possible to negotiate from now?
We can start with the smaller broadcasters. Even on carriage, our monetising ability will be better. When a new channel is in its launch phase, what we will offer them immediately is a reach of 20 million subscribers. Just being with us will give them immediate visibility, good reach, and the possibility of getting better ratings. The bargaining power will tilt in our favour. The value of our deal will be more than the sum of the parts.
Q. What other synergies will open up?
We can use it for sourcing set-top boxes (STBs) and other equipment. We can use our joint strength for bettering advertising rates because of the enhanced reach we offer. We can also use it for value-added services.
Q. Wasn’t Dish TV looking at manufacturing STBs?
Even if we decide to do so, that will take time. The idea was more to get our vendors to come here. We would work with the existing vendors and provide ancillary support. But the government has not yet offered any tax sops to make indigenous STB manufacturing attractive. We will have to wait to see how GST works.
Q. Will Comnet help Dish TV and Siti Cable to expand aggressively in Phase III and IV of DAS?
When it comes to subscriber additions, we will be competitors. There is no synergy line in this part of the business. We will aggressively try to pocket our consumers independently of each other.