What is broadcast industry
value chain?
As per the TRAI (Telecom Regulatory
Authority of India) Consultation paper dated Nov’11, number of TV households in
India is approximately 148 million. More than 800 channels have been registered with I&B ministry out of
which @165 are pay channels.
Figure 1 depicts the value
chain for Indian broadcasting industry. Content producers and manufacturers
being on one side of the value chain catering to a market of 145 mn content hungry households through various
distribution channels. Depending on the technology leveraged, there are four major ways
of distribution prevailing in the Indian market
Figure 1 Broadcast Industry Value
Chain (click to enlarge)
Aerial and Terrestrial distribution is the most
basic form of content distribution. Doordarshan has pioneered this in India
with analogue terrestrial channels. However, recently, Doordarshan has also
embarked on digitisation and has come out with Digital terrestrial channels. As
per the recent statistics from Prasar Bharati (parent body of Doordarshan),
DD’s channels can reach 86% of the total population of India
Direct to Home (DTH), High Speed Broadband/IPTV
and Cable are other channels through which the content is distributed to the
viewers. The channels seen on Cable TV (pay channels or free to air channels)
are created by different broadcasters such as Zee or NDTV etc. and transmitted
from satellite to receiving stations (head ends) owned by MSOs (Hathway,
Incablenet etc.). The MSOs in turn re-transmit these signals through cables to
the LCOs, who have their last mile cable network to individual homes.
Bottom-line is- India has around 88mn TV
household subscribers who are being served by the analogue cable TV systems.
What are the issues with Analogue Cable TV?
Analogue cable TV suffers significant
challenges such as capacity constraints, under-reporting of the subscriber base
by the LCOs resulting in revenue leakage for MSOs and broadcasters and less
than expected tax returns for Govt of India, poor quality of transmission,
inefficient usage (4 times higher consumption for analogue vis-à-vis digital) of
spectrum leading to lesser number of services and hence lower revenue for the
spectrum consumed.
How digitization is changing the business
model?
Given this, Indian parliament passed Cable
Television Network (Regulation) Act in December 2011 spelling out roadmap for
digitisation of the Cable TV by 2014 and in process setting the stage for the
transformation of Cable TV business model in India.
From broadcasters perspective digitisation is
expected to bring about full addressability, thereby eliminating the menace of
under-reporting of subscriber base by LCOs. This clarity around customer base will
result in an increase in subscription revenues for broadcasters. Further, the
increased capacity of digital distribution channel is likely to spur greater
investments by broadcasters toward niche, targeted and HD content and lead to
diversification of their revenue streams. The carriage costs paid by
broadcasters to distributors, which currently remain high in view of the
limited bandwidth of analogue cable, may decrease post digitization. However,
the extent of correction would hinge on the growth in the number of channels
going forward - a high growth is likely to maintain high carriage costs for broadcasters.
From an MSO perspective, there is a significant
opportunity to increase the ARPU (average return per user) from current INR 160
to > INR 200 in a short period of time primarily due to efficient usage of
the spectrum due to digitisation and being able to configure and push value-added
services to their customers. At the same time, there is also a risk of customer
churning towards other technology platforms such as DTH or IPTV.
Figure 2 Emerging Business Model
After Digitisation (click to enlarge)
Figure 2 shows emerging business model for
Cable TV industry in India. MSOs have the biggest opportunity in this entire
value chain and in the emerging business model they are fast becoming the
centre of gravity. Given the requirements for 80mn plus new Set Top Boxes (STB)
to be installed at the customer end as they convert, MSO are finding themselves
in the centre of emerging eco-system with Telecom Equipment Manufacturers
(TEMs) to Value Added Services (VAS) providers to Content Providers all vying
to associate with them. Freeing up of the spectrum opens up the possibility of
pushing triple play bundled offerings (Voice, Broadband and TV) to the
customers increasing ARPU and bettering customer experience. This model has
stemmed from the need for diversification thereby increasing the APRU and
reducing the churn to other platform technologies.
Set top box also opens up the possibility for
MSOs to introduce sophisticated user data analytics and identify different
trends locality wise. These can then be monetised by the MSO by selling it to
advertisers or broadcasters.
Global trend is for the MSOs to integrate
backwards and create an integrated business model. Ziggo from Netherlands is a
case in point. Ziggo started off as a cable operator in the Netherlands, now
diversifying broadband internet, and telephony services to both residential and
commercial customers
