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

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

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