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Pay Channels: Warming up

Jun 15, 2001

The hype for the prospects of pay channels is gaining momentum once again. Broadcasters are making a beeline for it and existing channels are digitizing and encrypting. In a scenario where advertising revenues are not growing fast and thirst for high quality content is increasing, the option that is being adopted the world over is the pay channel route. Though the revenue prospects for the pay channel industry are bright, the bottlenecks cannot be overlooked.

Consider this. In terms of critical mass, India's cable industry is second only to China in the Asia-Pacific region with more than 28 million cable connected homes. And the numbers are rising by the day. But the basic problem in India is ‘addressability’ i.e. the broadcasters have no means to track which homes are receiving their signals. Cable operators grossly understate their subscriber numbers to reduce their cash outgo i.e. though the cable operators collect revenues from the end consumers for cable services, it is not passed on the broadcaster. It is estimated that cable operators disclose just 25% of their total subscriber base.

Thus revenues accruing to content providers like ZTL (Zee Telefilms Ltd) is a small part while cable operators gobble up the larger share, as there are no strict regulations governing the industry.

The rationale for pay channels is simple. Pay channels are distributed via the Direct to operator (DTO) route (DTH is still a distant dream). Satellite channel providers equip cable operators with set-top boxes, which are used to decode satellite signals, which in-turn is digitized to ensure compliance from cable operators. However, quite obviously the concept is finding strong resistance from cable operators. However, encryption at best is only up to the cable TV headend. Cable operators descramble the digitized signals and pass them on in a wholesale manner to all their subscribers.

This is thanks to the last mile problem and the absence of a return path in more than 70 per cent of Indian cable TV networks. The direct to home (DTH) addressable set-top boxes have yet to make their way into subscriber homes. The next best option for broadcasters is to acquire the last mile, which presently is not affordable.

Pay channels, put together, currently earn Rs 2.5 bn, which is around 7.3% of the total subscription revenues. Though a modest beginning has been made by the industry to increase the number of pay channels, it would require further concerted efforts by the industry, introduction of better regulation, change in mindsets of consumers to pay for quality content before a mature pay TV market develops in India.


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