MUMBAI: Given below are relevant excerpts of a document prepared by Zee Telefilms and put out earlier (before the passage of the Bill in the Rajya Sabha) on the implications that CAS will have on the industry in general and Zee in particular.
The document had been prepared some time after the Lok Sabha (Lower House) of Parliament had cleared the Bill during the Monsoon Session over six months ago. The excerpts are as follows:
The size of the cable TV industry is estimated at Rs 100 billion with a penetration in 40 million homes. Zee estimates it will cross 70 million homes in the next five years, with a growth of about 12 per cent per annum. Currently, broadcasters receive approximately Rs 7 billion per annum whereas the remaining Rs 93 billion is retained by cable operators, with MSOs receiving a negligible percentage of the same.
The consumers do not currently exercise any choice in the channels they receive or want to view, since the transmission of signals is decided solely by the cable operators. The CAS Bill proposes that all such pay channels would need to be addressable at the consumer end, thereby giving the consumers the choice of what they would view, and pay for the same.
The benefits of the CAS Bill would be:
a) to ensure transparency of connectivity, which is absent today;
b) to enable consumers the choice of selecting the channels, which is not possible in the present structure;
c) price the FTA channels uniformly and in an affordable manner such that consumers are not overcharged, nor does the cable operator lose out in the process, it is likely to be not more than Rs 50 p.m.;
d) most important, ensure a fair share of consumer spend to broadcasters and MSOs and cable operators.
With the cable subscription industry growing to more than 70 million homes and Rs 230 billion by 2007, in line with international trends, the broadcasters with even 50 per cent penetration of CAS, receive more than Rs 100 billion of which 80 per cent will come to the broadcasting industry, and the remaining 20 per cent being distribution margins (between cable operator - CO - and MSO).
In FY2002, the Zee Turner bouquet of 16 channels received subscription revenue of approximately Rs 1.3 billion. In five years time, with 50 per cent penetration of CAS, even at the same average price of Rs 2.6 per channel, the revenue would increase to Rs 18 billion, representing a more than ten-fold increase in revenues. However if we project price increase in line with industry trends, the revenue accruing to Zee could be much higher.
Even in the CAS regime, in line with international practices, the bouquet concept will prevail with each broadcaster offering different bouquets of channels on a published price list and giving price discounts for channels volume subscription.
Besides, in pricing terms today, consumers receive 16 channels of Zee Turner at an average price of Rs 2.6 per channel, as compared with Rs 8 per channel for Star, and Rs 6.8 per channel for Sony-Discovery-CNBC. Therefore in affordability terms, the Zee Turner bouquet on current pricing would have a significant edge over competing bouquets.
Even though the government has initially specified a six-month time-frame from the date of gazette notification (not yet notified) for seeding the set top boxes (STBs) in consumer homes in the four metros, such time frame depends on the availability of STBs in large numbers, and can be extended, since it may take anything up to five years to seed 35 million STBs in a 70 million C&S home market.
Siticable, a wholly owned subsidiary of Zee is the largest MSO in the country and would present a significant first mover advantage to Zee in the seeding of STBs compared with other broadcasters and MSOs.
It is the opinion of Zee Telefilms' management that the consumers spend has gone up in last 12 months to an average of Rs 350. (The cable operators smartly increased the prices to the consumer saying that they have to pay Rs 170 per home to pay channels as per current prices)
a) Zee Turner bouquet: Rs 42
b) *Star bouquet: Rs 40
c) **ESPN Star bouquet: Rs 24
d) ***Sony Discovery bouquet: Rs 40
e) Modi (FTV, DD Sports etc): Rs 24
TOTAL: Rs 170
Actually the cable operator is paying a fraction of the Rs 170 by underdeclaring.
The CAS will be positioned as a money saving device for middle income households and will be positioned as obtaining value added services for upper income households.
The cost of analogue STBs is just Rs 1,500 and Digital Boxes will cost Rs 4,000 each. The cost can be absorbed by the household for a lease rental of Rs 100 pm.
Since the Cable operator currently is making a net margin of Rs 150 - 200 per month he will have to support the CAS (if Government allows only Rs 50 for FTA channels)
Some of the pay channels, which are either out-priced or are being pushed at present with a driver channel (Hindi / Regional language) are likely to lose out revenues as they may go up in tier 2, 3 or 4 as per demand.
There is hardly any cable market in the world, which does not work on CAS.
In the short term, Zee's view is that the status-quo will be maintained as the government have to state the price of FTA channels and the intent clearly is to implement CAS over a longer period. The first phase is given as six months in four metro cities. There will not be any negative impact on advertising or pay revenues but it will have positive impact in medium and long term.
*The Star bouquet now costs between Rs 30 and Rs 40 depending on the level of declaration by the cable operator
**ESPN Star Sports has hiked its rates to Rs 32
***Sony-Discovery bouquet is now priced at Rs 55 with the addition of HBO.
