Media: Demystifying the 'CAS' order... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Media: Demystifying the 'CAS' order...

Sep 5, 2007

The regulator for the media sector, Telecom Regulatory Authority of India (TRAI) had announced its tariff order for pay channels to be implemented in CAS* notified areas, which got effective from 31st December 2006. This order intended to increase the affordability of cable television services, besides improving the quality of transmission. *Under Conditional Access System (CAS), the cable operator installs a STB (Set Top Box) at the subscriber's end. This enables the viewer to choose the channels he wishes to view, increases the number of channels that can be transmitted and improves picture quality.

What's in it for
Local cable operators: The Local Cable Operators (LCOs) resort to the unhealthy practice of under reporting their subscribers. On the implementation of CAS a subscriber management system at the MSO's facility will ascertain subscriber volume. Thus the LCOs will not be able to under-declare subscribers and revenues. However, the implementation of CAS would change the distribution structure. The share of the local cable operators in subscription revenues would reduce from 80% to 25%. Thus while in the short-run the revenues of the LCOs will be badly hit, in the long run they may benefit due to the increase in average revenue per user (ARPU) as various value added services are provided to the viewers.

Broadcasters: The share of the broadcasters in subscription revenues would increase from 15% to 45% post CAS implementation. Thus the broadcasters revenues will increase substantially going forward reducing their dependence on advertisement as a major source of revenue. However the price cap of Rs 5 per channel per subscriber per month does not bode well for the broadcasters, particularly the niche channels such as TV 18, and sports channels such as Star Sports, ESPN. We believe that viewers interested in financial news would be willing to pay much more than Rs 5 per month for CNBC TV 18 as their monthly expenditure on financial newspapers may be greater than Rs 50. Similarly, sports enthusiasts would also be willing to pay more for viewing live sports events. This will reduce the ability of the channels to spend on content. Thus we believe that the price cap is too low and may be revised upwards in the future. The viewers will be able to choose the channels they wish to view so the broadcasters would need to improve the quality of their programming so that they are able to maintain their viewership ratings. Thus in the short run the broadcasters will loose out as at present their subscription rates are higher. However, in the long run they will benefit as the declaration of subscribers by local cable operators will increase and the price cap may be revised upwards.

Consumers: At present the viewers do not have the choice to choose the channels they wish to view. So a viewer residing in Western India may not be interested in viewing a Tamil channel but he is still offered this channel by the local cable operator. Under this order all pay channels have to be compulsorily offered on an individual basis. Besides, there is a ceiling on the maximum retail price of any pay channel, whether new or existing, of Rs 5 per channel per subscriber per month (excluding taxes). Thus this order will enable the viewers to choose the channels they wish to view helping them to reduce their monthly cable bills. Further, as per this order, the local cable operator will have to offer minimum of 30 Free To Air channels at Rs 77 per month. With this, many consumers whose monthly cable bills are up to Rs 300 currently may see their expenses reduce substantially and this proposition could make the process more acceptable to them, notwithstanding the STB cost.

We believe that the order, while on one hand plays the role of making the television media sector more organized and regulated, it also aligns the business model of domestic players with that of their global counterparts.

Equitymaster requests your view! Post a comment on "Media: Demystifying the 'CAS' order...". Click here!


More Views on News

What Fuelled the Sudden Surge in PVR and Inox Shares Today (Views On News)

Sep 27, 2021

Shares of both multiplex chain operators surged almost 18% to hit their 52-week highs.

8 Penny Stocks with Exceptionally High Promoter Holding (Views On News)

Sep 25, 2021

While high promoter holding is a good thing, there can be rare cases where penny stock promoters use misleading information about the actual valuation.

Shareholder Activism Triggers a 30% Rally in Zee Entertainment Shares (Views On News)

Sep 14, 2021

Zee Entertainment shares zoom after top investors seek CEO and MD Punit Goenka's removal.

Here's Why Affle India Hit 5% Upper Circuit Today (Views On News)

Jul 2, 2021

In the past one year, the company's share price is up 202%. Can it go higher?

More Views on News

Most Popular

10 Indian Companies with the Fastest Growth in Dividend Payouts... (Views On News)

Jan 10, 2022

These companies have been consistently paying higher dividends for several years.

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

Watch Out for these 4 Indian Companies Betting Big on EV Supply Chain (Views On News)

Jan 11, 2022

The upside in supply chain players could be huge but a delay in the transition to EVs, or any policy related hiccups could end the momentum.

Tech Mahindra's CTC Acquisition: Too Expensive? (Views On News)

Jan 18, 2022

Tech Mahindra's acquisition of European IT-company fails to excite investors.

These 5 Penny Stocks are Held by Rakesh Jhunjhunwala. Worth a Look? (Views On News)

Jan 18, 2022

Rakesh Jhunjhunwala is holding these penny stocks in his portfolio for several years now.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Jan 21, 2022 (Close)