How did cable TV and pay TV originate in the United States?

It is important to delve deep into the genesis of conditional access, Pay TV and cable TV in the United States (US); as its origin there is very different from what happened in India in the last decade. CAS was conceived in the US as a way in which incremental revenues could be created for the cable operators and the producers. Home Box Office (HBO)actually offered a solution to the cable operators by creating a premium tier that wasn't under the US government's purview.

Pay TV in the US is potentially a large revenue stream - sometimes bigger than advertising - and was invented to offer the consumer increased qualitative and quantitative choices. Interestingly, Pay TV happened before cable advertising took off. It is important to understand the differences between the implementation of cable TV and Pay TV in the US as opposed to their origins in India.

The origin of cable TV was to enable people living in remote areas to obtain the signals transmitted by broadcasters such as ABC, CBS and NBS. Special community centres were set up to catch signals and soon there was a proliferation of original cable channels.

The government regulated cable rates and cable operators were looking for new revenues streams. Home Box Office (HBO) came to their rescue with a great solution. In December 1975, HBO, an all-movie channel owned by Time Inc., became the first programmer to distribute its signal via satellite. It created another tier above the basic tier proposed by the Government. The consumer had to use a set-top box in order to access the premium layer offering superior content. Thus, conditional access (CAS) was born in the US.

CAS was conceived as a way in which incremental revenues could be created for the cable operators and the producers. It was a channel that bypassed the regulations that governed the basic tier. Somehow, the cable operators used their lobbying skills to ensure that the Government refrained from formulating any regulations for the premium tier.

More and more channels were born this way including Disney, Showtime and Sports channels. Consumers were willing to pay for the high-quality fare. From an amount of US $ 10 in the 1980s, it has increased to US$20 today.

MTV, Cable News Network (CNN) and several other independent channels started slowly. The consumer eventually benefitted.

From the consumers point of view, what are the essential differences between the implementation of CAS in the US and that which is slated to happen in India?

Primarily, in India, it looks as if the legislation is imposing itself on the broadcasters and the cable operators but the consumer is not getting any benefits in terms of superior fare. The consumer is actually being punished and not being served in the way in which he ought to be. There are several differences:

Issue of who invests in the STBs:

Market forces drove the implementation of conditional access in the US. The consumers, however, didn't pay for the set top boxes (STBs) and they don't pay anything even now. The cable operators undertook the burden of risk.

Nowhere in the world has the consumer been asked to purchase the Consumer Premises Equipment (or STBs in the Indian context). The Indian viewer must protest against this issue with the help of consumer interest groups (NGOs).

In the US, the giants who produce STBs such as Motorala and Scientific Atlanta charge US$ 100 for the STBs. One wonders what the Indian consumer will have to eventually pay.

Issue of higher payouts resulting in superior fare or new tiers being added:

Primarily, in India, the legislation is imposes itself on the broadcasters and the cable operators but the consumer is not getting any benefits in terms of superior fare. The consumer is not being served in the way in which he ought to be. There is no new tier that is being added as it happened in the US with HBO's entry. The existing bouquets, that were essentially free or at a low cost, are being given to the viewers in India.

The cable operators in the US had comprehensive agreements on how they would share the revenues from consumers with the broadcasters and the studios (large production houses with massive libraries of content). They were passionate about the fact that better content is the key that would encourage consumers to spend more.

How can you give something free, then take it away and return it with a burden of added costs? This is exactly what, one assumes, will happen in India. No original or offbeat content or programming is being offered with the implementation of CAS.

Issue of higher payout resulting in lesser interruptions:

Pay channels in India will continue to persist with advertising related interruptions. In the US, pay channels don't air any advertisements. For instance, HBO has several tiers of offerings and the premier fare airing the latest movies is very costly and has no commercial breaks.

Why should the Indian consumer pay for the average fare and still suffer the needless breaks? The Indian consumer must force the broadcaster and the cable operator to utilize the revenue to offer superior content.

From the trade (cable operators, MSOs, producers and broadcasters) point of view, what are the essential differences between the implementation of CAS in the US and that which is slated to happen in India?

Here again, there are several issues that are being tacked differently in India.

In the US, the cable operators undertook the burden of risk and paid for the installation of STBs. The cable industry in the US has a tremendous sense of entrepreneurial spirit. The operators have not hesitated to adopt cutting edge technology - in fact they are early adopters. However, they take risks and simultaneously create new revenue streams. This is something that their Indian counterparts have still to learn.

Proper sharing of revenues and propensity to contribute to investments in better content:

In the US, the cable operators also had comprehensive agreements on how they would share the revenues from consumers with the broadcasters and the studios (large production houses with massive libraries of content).

The US based cable operators are willing to split revenue with the broadcasters and studios who plough the revenues into better quality productions. In India, the cable operator is unwilling to share revenues with the broadcasters and the producers. India also doesn't have large studios.

The cable operators in the US were passionate about the fact that better content is the key that would encourage consumers to spend more. The generous cable operators were willing to share/split the remuneration (a major portion) with the broadcasters and the studios even in the initial phases. In India, the cable operators have not directly involved in the content offered by the broadcasters and have high resistance to contribute towards the betterment of the fare.

The broadcasters, studios and the producers in the US are willing to plough this money back into excellent content and programming of the highest order.

What kind of deals are worked out between the cable operators, producers, broadcasters and studios in the US? How is this different from what happens in India?

I must say that transparency is a key issue in the distribution chain. In the US, there is a great deal of transparency in the deals between the consumer and the cable operator; the cable operator and the broadcasters as well as the studios. As I mentioned earlier, the cable operators are willing to share revenues with each link of the content production chain.

Although, some of the Business to business (B2B) deals are confidential, everyone has a fair idea of the terms and conditions. In India, there is a clear-cut lack of transparency and distrust.

Presence of large corporatised producers with better bargaining power: In the US, the film industry had become institutionalised and corporatised much before television became popular. Hence, the studios (large distributors with huge libraries of films and serials) can negotiate better deals with the channels and broadcasters. In the US, there are seven major ones: Warner, MGM, Disney, Viacom/Paramount and the non-US ones such as Sony, Fox and Universal/Vivendi.

The presence of such large studios has a bearing on the revenue sharing deals between the broadcasters and the cable operators.

In the US, fiction (film based and serials), sports, reality televison, localized news are the top programming genres. The studios and the broadcasters commission A-grade producers to get quality content in the above mentioned genres that is offered to the consumer.

Consider the fact that HBO used the cable revenues to produce offbeat content - a case worth referring is that HBO produced Gandhi with India's NFDC. Such examples must be shared with the Indian cable operators and MSOs.

In India, there are no major studios, but only individual producers who cannot command much clout, nor do they have a strong bargaining power. For instance a Balaji Teelfilms cannot have the same clout that a Warner or an MGM or Viacom would have. The production houses cannot command more revenues and therefore compromise on the quality of future offerings. The consumer suffers.

Large groups with presence in all the links in the distribution and production chain:

In the US, there are certain studios such as Time Warner that have a substantial presence all through the supply chain as a studio as a broadcaster and as a cable operator too. This gives them additional clout.

In India, Zee may have produced a film like Gadar (content producer) and owns subsidiaries like Siticable (cable assets), but its archives cannot compare with that of Time Warner.

Eventually, one would see the emergence of large set-ups that would emulate the US studio-based systems. However, one hopes that the Indian companies start thinking on these lines on an immediate basis.

What are the alternative revenue streams available for cable operators in the US?

The cable industry in the US has a tremendous sense of entrepreneurial spirit. The operators have not hesitated to adopt cutting edge technology - in fact they are early adopters. However, they take risks and simultaneously create new revenue streams. This is something that their Indian counterparts have still to learn.

Advancing digital technology and increasing wiring of US cities with fibre-optic cable that permits massive transmission of digital signals are giving cable TV subscribers a host of new interactive services.

The convergence of the computer with TV is permitting a host of new "interactive" services in which the viewer no longer watches passively, for example "Movies on demand" which allows a viewer to choose between several thousand videos is one interactive service. Voice, video and the Internet will be available on the same network. The same will be true even for India.

Another example is "shop-at-home channels." The next generation revenue streams will come from pay-per-view - a big opportunity. In fact, people are willing to pay up to US $ 40 for specific events such as boxing matches or premium movies. However, popular sports will go onto the pay-n-view mode because this could be considered as anti-people (consumer). Gaming and video-on-demand will also flourish in the near future.

How do the cable operators in the US promote such offerings?

The cable operators use various channels to promote their superior content. For instance, their monthly bills could have promotional inserts. In India, I suppose that CAS will initiate a proper billing system - currently very under-developed.

The US based cable operators use electronic TV guide channels. Others use Barker channels which air trailers on a continuous basis. This is an upcoming trend.

Some cable operators use the net for promoting their fare and viewers can make their choices online.

What is your final piece of advice to the various trade constituents in India as to how they should go about the implementing conditional access?

I would request the various constituents to remember that the television industry (and entertainment ) shouldn't be treated as a purely business proposition. The medium of television has to pay society back. It is not a medium that will enable middlemen (cable operators) to make profits at the expense of the consumer.

The middlemen are bridges between the producers of content and the viewers of content. In the developed nations, the industry constituents actually believe in this logic. The Indian mindset must align with this aspect.

The Indian trade must develop an innate passion to create new and different content. They must accept the challenge and strive to pursue this never-ending dream.

The zest for superior content and its eventual acceptance by the critics and consumers is a constant one. In the US, this phenomenon is clearly witnessed even in the trade circles during the Golden Globe Awards and the other awards ceremonies. If Indians imbibe and internalize this logic, things will change for the better. After all content and the consumer are kings.