Ashish Kaul, CEO (Television & Digital business), Prakash Jha Productions
Digitization is leading multi-facet transformation of the cable and satellite industry in India. Over the last 4 years, I have seen Industry stakeholders resisting the inevitable change. Resistance meant living in denial to new technologies, new systems, new revenue streams, and above all denying transparency. Four years hence, majority has accepted, though reluctantly but wisely, that placement and carriage revenue will be an endless battle to maintain OpEx (operating expenditure). Yet some stalwarts who refused to accept the change are on the precipice of extinction with pride keeping them alive, sadly, burning shareholder value. However, for the vast majority, first step has been acceptance of the fact that the business has shifted to consumer domain and is driven entirely by consumer marketing benchmarks. Digitization has opened up a whole new world of revenue opportunities that did not exist before, thus creating a win-win situation for LCOs, MSOs, and broadcasters together. However, caution has not ended; with web-based digital platforms joining the fray, the threat to cable operations has only grown stronger. If cable operators thought DTH was an opponent – think again! Web-based are potentially more lethal. Easier said than done – cable operators took over 20 years to realize that competition could pull the rug off under their feet, while they cozied in the warmth of their non-transparent bedrooms.
The facts of content business today are more than alarming for cable-delivered medium. Billing and primary addressability is still laughable; a majority of MSOs still do not have an efficient EPG and customer service is still a silly old joke from the early 90s. VOD and other platform services are still treated as fancy expense drains, not realizing that almost 12 percent of revenue on DTH and true addressable system platforms is contributed by these platform services. Not just platform services, even our relationships with broadcasters need to radically transform. It has been two decades that we have had an extramarital relationship with them. MSOs have to deliver multi-dimensional value to broadcasters apart from just a carriage. Distribution management has to change from the art of forced collection into a science of channel management where delivering market share for broadcasters will also be a part of MSO's KRA.Now, all this is the basics of the business and does not need a NASA or ISRO to lead us; it is sheer arrogance of the old vanguards who are scared of stepping into the light. Anymore of living in denial and one fine morning the cable operators will realize that OTT, IPTV, Wi-Fi/Terrestrial, and other digital platforms have edged the cable grandpas out of business.
Industry is on a precipice and it can either emerge as the largest consumer service and value-added service (VAS) driven as the largest VAS revenue aggregator in the world or lose out to DTH. With industry size expected to touch 120 million C&S consumers by the end of 2017, significant revenues will be driven by VAS, which will push the revenue over 7 trillion crore with PPV, exclusive server-based content, events, and broadband among other peripheral streams contributing over 60 billion in the DAS areas alone. Pay-per-view (PPV) on digital cable will be the biggest wave to hit India entertainment industry. The in-market revenue for C&S market is likely to cross 7 trillion crore by the end of 2017-18. For the first time, post-Gulf War over 22 years ago, the revenue landscape has radically changed and will continue to do so at least for the next 24 months amidst serious challenges from rival DTH brethren. Cable operators continue to discount the DTH/digital revenue from their high bar-stools. Direct delivery mechanism can burn cash in the long term as raising finance will never be an issue for businesses that are transparent and demonstrate validated reach and growth of unique homes unlike cable operators.
Digitization has opened a whole new world of advertising opportunities for FMCG industry, which will benefit tremendously from C&S reach into the hinterland. Digitization empowers MSOs and LCOs together to offer services to advertising industry region-wise and language-wise. Nearly 1000 crore will be contributed by PPV from Bollywood considering 80 percent of the releases do not cross 7 days (and over 400 movies languish unreleased annually) and largely are removed between two major releases. Digitization offers the single largest revenue opportunity for Bollywood premiers for Tier-2 and 3 movies and especially the regional movies. Digitization will pave the way for creation of a whole new regional and niche content industry in Mumbai, which traditionally has been a bastion of Hindi content. Digital cable will bring unparalleled value in comparison to TRP-laced TV environment and will emerge as the most credible and value-based advertising platform poised to garner a significant share of over USD 1.2 billion TV advertising opportunity.
Digitization offers the single largest revenue opportunity for Bollywood premieres in Tier-2 and 3 towns, especially regional movies. Over 400 movies languish unreleased every year, and an equal number of movies do not see more than 2 days in the box office. Between the two Fridays, regional cinema has been lying dead and now with digitization creating channel capacities in excess of 500, will create opportunities for regional movies and content to debut and earn money.
Broadcasting Industry in India cannot survive without LCOs as an integral backbone and invaluable business partners. As a matter of fact, the role of LCOs will undergo a radical transformation and will aid in introducing multiple products and services and generating revenues. Branded content, niche server-based channels and city events will usher in the real DAS for the industry and consumers alike. National/Local ISP services with VAS will be a game changer to move ARPU from 150 approx. to 500 and beyond. I believe the entire industry realizes the importance of ISP push which of course will need investments for strengthening ground infrastructure; however, with LCO-MSO combined partnerships, ISP capabilities will bring in the required thrust.
Over a period of time, DTH will find it difficult to compete with digital cable on multiple accounts. Technologically, digital cable is a far superior variant of digital in-bound entertainment; DTH cannot offer even remotely the far higher number of channels, VAS, ISP among many other features. Digital cable marginally defeats DTH in a highrise metro environment, torrential/coastal weathers and unmatched HD quality due to bandwidth advantage. Where a DTH operator will struggle to offer channels in two digits, a digital cable operator can offer almost all channels in true HD. Furthermore, digital cable offers uninterrupted entertainment as against DTH due to loss of signal in agitated whether conditions. "Aandhi Baarish ya Toofan Digital cable hamesha aapke saath!"
The cable industry is on a precipice and it can either emerge as the largest consumer service and VAS-driven as the largest VAS revenue aggregator in the world or lose out to DTH. It is not only the revenue from traditional VAS elements but also innovative peripheral revenue streams like SMS, barker channels, and exclusive network-specific channels that will contribute to enhanced ARPU and importantly act as brand flankers for the discerning consumer. Broadband services have been on a back-burner and now is the time to bring these services on. The digital cable industry is entering into the era of household acquisition and deploying the magic of triple play/bundled solutions. The rainbow has emerged and now it is for the Industry to paint it black or blue.