Cable digitisation to deliver transparency for investors

Author: | Published: 1 Aug 2012
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In the Cable Television Networks (Regulation) Amendment Bill 2011, it is stated that the mandatory digitisation process should be completed by 2014. How will this affect the broadcasting industry in India?

VC: The cable digitisation process will bring a great deal of transparency to the industry. Of the total US$6 billion subscription revenues collected today by cable and satellite platforms, broadcasters only receive 10% of this: digitisation with increased transparency is expected to increase this pie to between 30% and 40%.

For television broadcasters, digitisation is expected to bring a substantial reduction in the yearly amounts paid as carriage fees. For news broadcasters in particular, this change will be significant as carriage fees account for between 30% and 40% of their overall costs and severely impacts their profitability and leverage to invest in content without worrying about ratings.

Broadcasters, platforms and advertisers will all know the total number of people watching a particular channel or a particular programme. This will help to establish who the clear leaders are in a particular market and bring about true efficiency in advertising spend and subscription revenue realisation.

Presently, due to under-reporting of subscribers by local cable operators, there is a great deal of tax evasion on varied fronts (income tax, sales tax, service tax, entertainment tax). With digitisation, the government will benefit from a manifold increase on all fronts as the information will be clearly transparent and visible to all.

Niche international broadcasters, who were unable to enter India due to the prohibitive cost of entry and limited bandwidth availability, will now be able to run sustainable businesses in the country by reaching out to their target audiences.

Subscribers will benefit from the availability of low cost, efficient broadband and an enhanced television viewing experience through new services such as video on demand, personalised recording, pay-per-view and HD services.

Cable MSOs, who were dependent on carriage fees as their primary source of income due to under-declaration by the last mile operators, will now have multiple sources of revenue.

The monthly average cable bill per subscriber is US$3, which is not too different from the 1990s or early 2000s. This will increase and can be expected to double over the next two years. And it will go higher subsequently on the back of value added services and demand for niche content. This will lead to increased top lines and bottom lines, higher valuations for all industry players and consequently higher tax revenues for the government.

To what extent is this a positive development for foreign investors who plan to invest in India's television industry?

AJ: It is definitely a favourable change as they can invest across all segments. Broadcasters will report lower costs in the short term, due to reduction in carriage fees, and higher revenues in the long run on the back of increased subscriber numbers.

Cable and DTH platforms will be able to increase their ARPUs on the back of value added services. They will also benefit from higher subscriber declarations, greater control of the last mile and increased cable penetration in India.

International broadcasters not in the Indian market can plan for entry in the next couple of years due to significant reductions in the cost of entry, and more demand for niche content as the market matures.

Finally, the increased tax collections will also enhance the image of cable in the eyes of the government as a legitimate industry that will have a key role in making the population more informed and knowledgeable.

What are the biggest concerns in the television industry for regulators?

VC: The biggest concern is the successful implementation of the regulations. This is dependent on a lot of factors, such as clarity on the regulations, readiness of all industry players, financial incentives such as foreign investment, and adherence to timelines.

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