"Digital TV is the future. Content created for specific audiences - special interest, niche, premium, ad-free - is the way forward for our industry. Can you imagine the sheer opportunity if cable were to go digital?" Punit Goenka, CEO and MD, Zee Entertainment Enterprises, said during a one-to-one recently.
With India's president, Pratibha Patil, giving the nod to the government's ordinance on digitisation of cable TV services on October 13, Goenka's poser is set to become a reality by December 2014, if the specified deadlines are met. The government has mandated that digitisation of cable TV in the four metros be completed by March 31, 2012, in cities with 10 lakh-plus populations by September 2014, and nationwide by December 2014. All subscribers will have to be given set-top boxes.
Anil Uniyal, CEO, CNBC-TV 18 and CNBC Awaaz, commented: "This is a proactive step and when implemented, will be a win-win for all stakeholders. It will get TV broadcasters better transparency in subscriber numbers and more earnings from more varied content; cable operators higher subscriber revenues due to better rates and added earnings from value added services (VAS) which will enable higher average revenue per user (ARPU); and consumers more variety and better quality of content." Pay TV universe
For broadcasters, a huge problem in the analog cable system has been the massive under-reporting of subscriber numbers by close to 85%. This, combined with high carriage fees paid to the cable operators, has broadcasters applauding the digitisation mandate.
Meenakshi Menon (Madhwani), founder and chairperson, Spatial Access, a media analytics company, said, "Since subscription earnings will go up, broadcasters will no longer be solely dependent on advertising revenues, so viewership ratings will no longer be as critical. This will enable more non-mass programming. Moreover, there will be rationalisation of ads which are in oversupply currently, sending pricing haywire. Fighting clutter has become a vicious cycle and viewers are getting put off."
Even the DTH industry is happy. "This is great news for us since addressability will get forced. For DTH companies, there will be a level playing field on pricing and costs. Till now, cost structures for DTH and cable have been vastly different," said Vikram Mehra, CMO, Tata Sky. Digital wave
But no one in the industry is denying that the task will be huge. "Distributing six-odd million set-top boxes in the four metros the first phase in five months' time is a tall order. Plus, huge investments are needed. This is just the first step in a long journey," said Uniyal.
Ashish Pherwani, associate director, media and entertainment practice, Ernst & Young, said, "The shift to digital will be extremely difficult to implement. It has taken up to 10 years in markets where such digitisation has happened. The challenges include outright set-top box sales; speed at which the digitisation has to be done; and the fact that cable operators will need to change their entire business orientation from a B2B model to a B2C model."
Menon added: "The cable operator is limited by the string theory - if something is happening at one end, it has to be accepted at the other end. The consumer at the other end needs to accept buying a set-top box, and paying more subscription fees."
While many agree that the last mile connectivity will be a challenge for the cable operators, there are those who insist that not only is cable digitisation a big opportunity and a must, but that it can be done within the stated timelines. They are quick to dismiss the notion that since the government has not put down any punitive measures for implementation failures on the defined timelines, the entire effort could go the same way - nowhere - as the earlier CAS (Conditional Access System) implementation. There is also a proposal to lift the FDI limit in the cable and satellite industry from 49% to 74%.
"Going digital is the only way broadcasters and cable operators can remain alive - they are currently debt-ridden. The cable subscriber base is not growing. The government does need to relax the price cap on channels for cable subscribers, something DTH is not limited by. Once the sunset date arrives, there will be no option left - the government will stop the analog signal. Once Doordarshan goes digital, analog will lose emphasis," said Timmy Kandhari, ED and leader, entertainment and media practice, PricewaterhouseCoopers (PwC). The government has announced that it will take Doordarshan and All India Radio digital, spending Rs 1,500 crore on this over the next three years.
Jayant Changrani, country head and GM, NDS India, is confident that cable digitisation can happen within the deadlines. "Why do people assume that cable operators are not already doing something about going digital? Larger operators such as Hathway and Den are already into the digitisation process. Our large cable operator clients have digitised in good numbers in the phase 2 cities already. Smaller and medium operators are coming on board too. GTPL (Gujarat), Jack (Tamil Nadu) and Darsh (Bihar) and many more are getting ready for phases 2 and 3."
The NDS Group provides digital broadcast technology and solutions to broadcasters for secured delivery of content to TV and other digital platforms.
According to news agency reports, while Hathway has announced a spend of Rs 600 crore towards going digital, DEN has announced a budget of Rs 1,000 crore.
Changrani also pointed out that many of the existing cable lines were capable of digital traffic. "A 500 MHz cable can support 200-plus channels in the digital format. There are existing 150 MHz cables in remote areas, 750-850 MHz cables in metros and large towns, going up to 1 GHz. Operators will have to incur set-top box costs, but technology evolves and get cheaper fast. Since 2003, set-top box prices have reduced by 50% and will dip further by phases 2 and 3."
On the failure of CAS, he said: "In 2003 when CAS was initiated, cable was monopolistic. In 2006, CAS's second round, DTH had just started. Today, consumers have a choice on formats. Market forces decide on such things."
He said that once cable operators start offering VAS, they would need higher capacity cables. But the payoffs would also be significant - digital cable services can offer TV channels and broadband access, for example, something that DTH cannot. "A lot of solutions will emerge in the course of the mandate," Changrani said.
Given the large investment requirements, consolidation will happen in the cable industry, everyone agreed. Smaller operators will get acquired or merge with bigger ones, or just close down and their people redeploy within the industry. "They will have to consolidate or die," Kandhari said.