May 12 , 2003  Copyright Mediaware Infotech Pvt Ltd

The Indian television industry seems in a predicament. Multiple interest groups are promoting divergent, individual agenda. This has resulted in what seems to be a stalemate. And the Govt. seems loth to issue tax/duty concessions & guidelines which will hasten implementation.

Once again our Database Group decided to analyse the situation.

A Divided Industry
The Indian television industry is not united. Different interest groups within the industry promote conflicting opinions. Even within the broadcaster community there is discord. The current situation stands out when we compare with other countries. Take Belgium for example where state-owned broadcasters, private channels & cable / broadband service providers are currently setting up a Digital Pay TV platform.

Here is an overview of the stake-holders of the Indian CAS implementation project:
Broadcasters
* Multiple channel owners * Specialty channels * Free-to-air channels * Cable channels * Public sector Channels * Channel Distribution cos.
MSOs
* MSOs who are owned by / aligned with broadcasters * MSOs who are independent Last Mile Operators (who are attached to MSOs) The Government stands to gain additional revenues in taxes as well as import duties for Set-top boxes.

Significant events of the past few weeks
* Pioneer private broadcaster Zee Group has announced a flat rate per month for ALL its channels. (No break-up is mentioned for individual channels.)
* Leading broadcaster Star Group has expressed its apprehensions pertaining to viewership & revenue in the CAS regime.
* Govt. views bundling of pay channels as a dilution of user's choice.
* Large broadcasters Star, Sony, Sun & others have proposed a concept of multiple tiers (bouquets) for Pay TV post-CAS implementation. Roughly, they are as follows: Basic tier (of entertainment channels) Basic-plus tier (which includes special interest channels) Premium tier (which will include movie channels, action-adventure channels & sports channels)
* Established MSO Incablenet is against the concept of super bouquet of pay channels proposed by broadcasting groups. They have asked for individual channel subscription rates.
* Major broadcasters Zee, Star & Sony have cut off feed to Incablenet on grounds of non-payment of dues.

The Cable Industry in India
Unlike other countries, most major Multi-System Operators (MSOs) in India are owned by or aligned with major broadcasters. Except Hinduja Group's InCablenet, the major MSOs Siticable, Hathway & Sumangali Cable are owned/aligned to Zee TV Group, Star TV Group & Sun TV Group respectively.

Investments for CAS are therefore effectively no different from investments by broadcasters (except in the case of Incablenet).
Incablenet is reportedly insisting (so far unsuccessfully) that broadcasters declare individual pay channel subscription rates, prior to CAS implementation. Broadcasters have announced package/bouquet rates.

As on May 9, 2003, all 3 major broadcaster groups (Zee, Star & Sony) had discontinued feed to Incablenet.

View from the Front
Now for a view from the other side : in front of the television set. Once the dust settles, the television viewer will face 2 major issues
* Monthly subscription fee All things considered, the average Indian viewer may or may not afford to pay for 5 to 6 pay channels of his choice (all family members included).
* Price of the set-top box (STB) For most viewers, this is a major issue. Prices quoted range from Rs 3,000/- ($60/-) for a low-end analogue box to Rs 8,000/- ($110/-) for high-end digital box. This includes a Govt.-imposed import duty of more than 50%. To make the STB affordable for the average Indian viewer, there are 3 possible solutions: reduce import duty offer easy finance options reduce cost
The situation is certainly not conducive for the television viewer to make quick decisions as far as buying a set-top-box is concerned.

The Government's Role
The Govt is not helping matters with its slow decision-making process. The I&B Ministry has to date issued a single notification - announcing the basic tier of minimum 30 FTA (free-to-air) channels for a subscription fee of Rs 72/- ($1.50) per month. Along with July 14 2003 as the deadline for CAS rollout in 4 metros.

Further, the Govt has indicated that it will not intervene in pricing of pay channels. And permit cable operators to distribute free-to-air channels without CAS (no need for viewer to invest in a set-top-box).

Media Planners & Advertisers
As on May 2003, channel viewership seems quite uncertain post July 2003, provided CAS is enforced in the 4 metros. Naturally all post-June TV plans & budgets are at best "tentative" (if not on hold).

Television Progam Producers
if the current impasse is not cleared, television producers have reasons to worry. Major investments in programming may have to be reviewed as channels are expected to review their contracts with producers. Producers of popular running serials are especially concerned about the 'break' in continuity (& subsequent loss in popularity) due to non-availability of pay channels in a majority of households.

The Future
Since most MSOs are controlled by broadcasters, the first round of pricing may see package/bouquet subscription rates, i.e. no individual channel rates. Unless of course, the Govt. intervenes.
Viewer acceptance (or lack of it) may later usher in one or more of the following:
* Individual channel subscription rates
* Smaller packages
* User-defined packages.
To retain viewers, pay channels may offer variable subscription rates based on locality / neighbourhood and almost certainly by city. Cable operators will perforce offer free-to-air channels @ Rs 72/- per month without the need for a STB. Naturally, a substantial number of viewers are expected to initially switch over to this option. The majority of viewers may thus adopt a "Wait & Watch" attitude : wait for the CAS implementation & STB prices to stabilize. And watch free-to-air channels without a set-top-box.

For the initial implementation phase of CAS, it is obvious that the Govt. needs to define detailed guidelines, leaving nothing to the industry. For example, if Govt. guidelines specify whether it is mandatory (or not ) for broadcasters to offer rates for individual channels, there is no uncertainty. (Subsequently, guidelines could be reviewed / modified based on market feedback.)

The uncertain situation may actually prove to be a boon for free-to-air channels in July.

CAS for the Indian TV Industry
Copyright Mediaware Infotech Pvt. Ltd.- August 27, 2002