SATELLITE & CABLE: TV prepares for war in India - Everyone's hoping to finally cash in on the tantalising promise of profits

<p>For Indian cable and satellite audiences, it's the end of the free </p><p>world as they know it: pay-TV is here, addressiblity is around the </p><p>corner, and DTH finally has the government's nod of approval. </p><p><BR><BR> </p><p>But for a little more money than cable and satellite homes are used to </p><p>shelling out, a whole new world is about to be revealed. </p><p><BR><BR> </p><p>Now broadcasters, cable operators, and free-to-air channels are hoping </p><p>to finally cash in on the promise of profits held out so tantalisingly </p><p>by the oceanic Indian middle class. </p><p><BR><BR> </p><p>Since the eight-year old liberalisation of the economy, there has been a </p><p>spontaneous eruption of private enterprise in broadcasting - 40 </p><p>broadcasters with around 80 channels offer programming in English and in </p><p>several of the 16 Indian languages. </p><p><BR><BR> </p><p>The broadcasting community is not restricted to heavyweights such as </p><p>NewsCorp's Star TV India, Sony Entertainment TV India, CNN, BBC, CNBC, </p><p>and Zee TV India, but includes an eclectic assortment such as a cloth </p><p>merchant from Hyderabad who runs an Urdu language station, a sitting </p><p>member of the Indian Parliament, and last but not least, Maharishi </p><p>Mahesh Yogi, cult guru to the Beatles in the '60s. </p><p><BR><BR> </p><p>Following their lead, a host of studios, programmers, technicians, </p><p>technology innovators, manufacturers, and services have mushroomed, </p><p>chiefly in the cities of Delhi, Mumbai, Bangalore, Hyderabad, and </p><p>Chennai, in less than a decade. </p><p><BR><BR> </p><p>While better quality transmission, targeting, and programming are now </p><p>going to be widely available, they will come at higher prices for both </p><p>audiences and advertisers. </p><p><BR><BR> </p><p>The cost of cable service to viewers has risen steadily over the last </p><p>two years as broadcasters have switched over to digital transmission, </p><p>but even so the average household now pays only USdollars 3 for upwards </p><p>of 50 channels, possibly the lowest in the world, as compared with </p><p>dollars 25 in the US. </p><p><BR><BR> </p><p>Subscriptions have grown from 412,000 households in 1992 and was </p><p>expected to touch 46 million by the end of 2000. At the same time, the </p><p>total number of TV homes was estimated to have hit 86 million by last </p><p>month. </p><p><BR><BR> </p><p>The gap between TV-owning households and cable penetration is expected </p><p>to continue till 2005, according to a status report compiled by the </p><p>Federation of Indian Chambers of Commerce and Industry (FICCI) and </p><p>Arthur Andersen - and cable operators have a major opportunity to </p><p>increase their subscriber base. </p><p><BR><BR> </p><p>Until recently, the cable market has been a bazaar run largely by </p><p>mom'n'pop entrepreneurs and someday, Indian historians will recognise </p><p>the contribution of these independent 'cablewallahs', 60,000 of them, </p><p>spread across the length and breadth of the country. </p><p><BR><BR> </p><p>They have dodged threats from satellite majors, side-stepped outdated </p><p>broadcast laws, and paid enormous 'fines' - all to be allowed to </p><p>continue to operate and to bring global viewpoints, information, </p><p>entertainment, and opportunities, to Indians who had until recently been </p><p>barracked by government-point-of-view broadcasts. </p><p><BR><BR> </p><p>It is this cottage industry which has recognised that fibre optics is </p><p>the future especially in India, and it is currently fattening the </p><p>sidewalks in several cities with cables that will bring Internet TV, as </p><p>well as other convergence media to middle class homes. </p><p><BR><BR> </p><p>Per capita access to computers here is very low, 1.5 for every thousand </p><p>as compared to China's three. </p><p><BR><BR> </p><p>On the other hand cable households are growing steadily, and India is </p><p>the third largest cable market in the world, after the US and China; and </p><p>say analysts including Bill Gates, among the markets with the best </p><p>potential for Internet TV. </p><p><BR><BR> </p><p>For cable operators, whose revenues are directly linked to the network </p><p>size and channel menu, this is a signal opportunity indeed. </p><p><BR><BR> </p><p>For a long time, its been 'Broadcasters' versus 'The Cable Guys': they </p><p>accuse the cable fraternity of falsifying the number of subscribers. </p><p>They have certainly under-reported the number of subscribers - and the </p><p>government too, estimates entertainment tax losses at USdollars 1 </p><p>billion annually. </p><p><BR><BR> </p><p>Advertisers too have reservations about the 'Wild, Wild West' conditions </p><p>in the cable industry. Said Ms Punitha Arumugam, spokesperson, Madison </p><p>Communications, which is the AOR for Coca-Cola and other blue-chips, </p><p>"Cable is a goldmine that advertisers have always wanted to use but </p><p>never could because of its disorganised nature: too many cable players </p><p>in each area; unprofessionalism; inability to monitor spots. </p><p><BR><BR> </p><p>"Currently the software or time of telecast is left to the individual </p><p>cable operators' whims and fancy in each area." </p><p><BR><BR> </p><p>But the day of the independent cable operators is drawing to a close, </p><p>partially because of the level of investment involved: the industry is </p><p>now consolidating under multi-service operators (MSOs) some of which are </p><p>subsidiaries of broadcasters like Zee TV or NewsCorp's Star TV. </p><p><BR><BR> </p><p>In addition, genre-leaders like HBO, Nickelodeon, and Hallmark, all </p><p>await addressability as their programmes depend on subscription </p><p>revenues. However, most broadcasters currently work with the </p><p>advertising-led revenue model - and although there is good growth in TV </p><p>adspend, there simply isn't enough to go around. </p><p><BR><BR> </p><p>TV channel ad revenues will grow by 80 per cent says the FICCI-Andersen </p><p>report - currently, TV adspend is around dollars 800 million, while </p><p>overall adspend is dollars 2.2 billion. TV is the first choice of the </p><p>majority of advertisers, agreed Ms Arumugam. </p><p><BR><BR> </p><p>"Overall the medium holding its own is definitely TV primarily and </p><p>outdoor/cinema to a certain extent. The media losing ground are press </p><p>and radio," she said. </p><p><BR><BR> </p><p>Even so, worry lines have appeared as broadcasters review their weekly </p><p>performance graphs. </p><p><BR><BR> </p><p>HSBC Securities and Capital Markets predicts a shakeout in the </p><p>electronic media sector over the next 18 months and said that only four </p><p>or five national channels, and a couple of India region channels in each </p><p>language, are expected to survive. </p><p><BR><BR> </p><p>In fact, the shakeout is a reality today, said Ms Arumugam. She said </p><p>that broadcasters will have to: </p><p><BR><BR> </p><p>- offer larger choices through a bouquet of channels, as does the Star </p><p>TV network and to tie up with competitors if need be to offer movies, </p><p>sports, news, lifestyle content if they cannot provide it </p><p>themselves; </p><p><BR><BR> </p><p>- offer unique programming, like Discovery, HBO, or regional fare like </p><p>Sun TV; </p><p><BR><BR> </p><p>- control distribution on the ground; be the first in a genre, or </p><p>regional language; </p><p><BR><BR> </p><p>- and, most importantly, to work at being able to charge a fair amount </p><p>per 10 seconds from Indian advertisers. </p><p><BR><BR> </p><p>Her prediction for satellite broadcasters? </p><p><BR><BR> </p><p>"Like press, there will be two or three leaders in each (India) region </p><p>or genre who will survive," she said. </p><p><BR><BR> </p><p>"But this does not mean that the playing field will reduce only to these </p><p>leaders - there will constantly be entries and exits of a lot of smaller </p><p>channels that will try to keep grabbing a share of the pie or will get </p><p>bought out by a bigger network." </p><p><BR><BR> </p><p>Outlining the coming scenario, she said, "With the heavy competition </p><p>that will exist , the advertising rates of the top two or three will </p><p>stagnate with each player trying to outdo the other (for example, Zee vs </p><p>Sony vs Star Plus). </p><p><BR><BR> </p><p>"This may not be in terms of lower rates on lead channels as much as </p><p>through better cost efficiencies and impact from their basket of </p><p>channels. </p><p><BR><BR> </p><p>"The smaller channels, in order to get advertisers on the channels will </p><p>offer throwaway rates, which will in fact prove to be their </p><p>downfall. </p><p><BR><BR> </p><p>"Given the competition for the ad pie, channels will increasingly start </p><p>to explore other avenues for revenue generation - like pay and DTH, or </p><p>programming." </p><p><BR><BR> </p><p>She said that advertisers and media agencies would simply play one </p><p>channel against the other and try to get the best possible deal. </p><p><BR><BR> </p><p>"They may also decide to consolidate spends with one single network for </p><p>long term gains and these may be consolidation at the international </p><p>level for multinationals." </p><p><BR><BR> </p><p>Most importantly, satellite majors will have to do more than take out </p><p>their first-aid kits to create programmes with salience for advertisers </p><p>and audiences. </p><p><BR><BR> </p><p>Among the first to recant is Mr Subhash Chandra, chairman, Zee TV India, </p><p>which has been routed from primetime by Star TV. </p><p><BR><BR> </p><p>Zee's forte so far seems to have been more in programming public </p><p>relations for its stock market offerings than in bringing audiences and </p><p>marketers together. </p><p><BR><BR> </p><p>Uncharacteristically repentant, Mr Chandra said: "This (media) is my </p><p>business. I shouldn't be worrying about the markets." </p><p><BR><BR> </p><p>That, coming from a doughty, intelligent marketer, signals the start of </p><p>a new and fiercer stage of competition than Indian cable and satellite </p><p>has seen so far. </p><p><BR><BR> </p>