June 16 , 2003  Copyright Mediaware Infotech Pvt Ltd

Indian pay channels plan for change in revenue models post implementation of CAS

Most pay channels who intend to stay pay (!) are trying to predict / make preparations for changes in their existing revenue models in anticipation of the CAS regime.

Here are the 2 basic categories of pay channels:
Mass Entertainment Pay Channels
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Mass entertainment pay channels' current revenue is split between advertising & subscription. If they continue as pay channels, they have to face 2 eventualities-

Initial period:
Revenue from subscription will depend on number of viewers who opt for set-top boxes as also the subscription fee per month. If we assume initial inertia in buying set-top boxes, revenue from subscription fees are expected to drop initially. This will naturally lead to an initial drop in viewership, which in turn is certain to result in a fall in advertising revenues. More importantly, this will take loyal viewers to other (waiting) free-to-air channels, which may result in a permanent dent in viewership & advertising revenues.

Long Run:
By the time CAS implementation has stabilized (many months later), free-to-air channels may have captured their viewers' eyeballs. And what was once a mass entertainment channel may perforce become a (relatively) niche pay channel.

Strategic Options:
Clearly, for popular, mass entertainment pay channels it would be preferable if set-top boxes were enforced without choice (as against the current option of free-to-air channels without the set-top box).

However, given the situation, there seem to be 2 options:
1. Distribution of set-top boxes free of cost. Like-minded broadcasters form a collective to absorb the initial investments.
2. Become free-to-air. This will cut the subscription fees but save the viewership & advertising revenue. Parallely they could set up a pay channel which will target premium viewers. or Set up a 'parallel' free-to-air channel & shift the top high TRP mass programs This will effectively sustain viewership for their popular programs (& hold on to advertising revenues) via the parallel channel. And continue to broadcast the same programs along with premium programming in the original (pay) channel (with reduced viewership & subscription revenue).

Niche Pay Channels
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The typical niche pay channel also presents an interesting picture.
To begin with, a good portion of current existing Indian subscribers receive pay channel signals as a part of a 'bouquet'. CAS implementation promises to put an end to such 'bouquets'. Niche pay channels will have a smaller, more transparent set of subscribers who (hopefully) will pay more out of genuine interest. Although the casual viewer will not pay the (increased) subscription fee, resulting in some loss of viewership, overall subscription revenue may be sustained due to additional income via value-additions.

CAS is clearly the way ahead for niche pay channels.

Value Adds for Premium Events & Markets
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Broadcasters will generate additional revenue by introducing value-adds like VOW (video-on-demand) & pay-per-use viewing of premium events like (say) a World Cup final match. This will give the viewer ad free viewing, and the channel additional subscription revenue which will justify cost of content acquisition.

Another route is to reach directly for the high-end homes with DTH (Direct-to-home) satellite broadcast. This will open up a host of possibilities.

Choice for the Consumer
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Presence of multiple serious players in the same market genuinely promotes the consumers' choice. Take the mobile 'phone market in India - probably the world's most competitive. The difference lies not just in the number of options available to the user but more importantly, the freedom to switch at will between operators. Compare this with the bastion of free market economy - the US.A. - where mobile phone users reportedly have to contract annually with their cellular operators!

Given the large number of serious broadcasting groups who seem "here to stay", the Indian television viewer may enjoy the ultimate benefit of multiple choice. Popular, mass entertainment pay channels are deliberating on their (post CAS) decision to stay pay, mainly because a number of free-to-air, mass entertainment channels are waiting to pounce on their 'loyal' viewers.

When the dust settles, the Indian television viewer (like his mobile 'phone counterpart) may be the recipient of the greatest benefit: the freedom to choose.