are metros ready for the digitization deadline

7/29/2019 Are Metros Ready for the Digitization Deadline

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Are metros ready for the digitization deadline?

Are all industry stakeholders ready for the Nov 1 digitization deadline in Mumbai, Delhi, Kolkata and Chennai?

We analyse the ecosytem

November 1, 2012 is slated to be a landmark date for the Indian broadcast industry as analogue signals are

switched off in the four metro cities of Delhi, Mumbai, Kolkata and Chennai, and they move to the Digital

Addressable System (DAS). This means that a viewer without a Set-Top Box (STB) or a Direct-To-Home (DTH)

connection would be faced with a blank screen in these cities. We set out to estimate to what extent that will

happen, and its effect on other stakeholders in the chain, i.e., advertisers, broadcasters and distributors. What

emerges is that though digitization is seen as a gamechanger with every constituent of the eco-system - from

broadcaster to end-consumer- set to reap benefits, it wont arrive without the initial hiccups. The industry is

likely to go through a short period of flux before all the concerned parties are able to overcome the hiccups.

TALE OF FOUR CITIES

THE DIGITIZATION ECOSYSTEM
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NUMBERS STILL A MYSTERY

With the first phase of digitization already having been deferred once - from June 30, 2012 to October 31, 2012

- as not enough STBs had been seeded by the cutoff date, the government is now keen to ensure that the switch-

over takes place on November 1. As per Ministry of Information & Broadcasting (MIB) estimates, 77% of cable

TV digitization has been achieved in the four metros, with Mumbai seeing the maximum penetration and

Chennai the least, as of October 10.

The Indian Broadcasting Foundation (IBF) is as keen as the government to push for digitization. IBF and its

members are strong supporters of digitization and believe it is a win win for all participants in the business,

from consumers to MSOs/LCOs to broadcasters and also the government. We have been working closely with

the I&B Ministry and MSOs to ensure a smooth transition to the digital era, says Man Jit Singh, IBF president

& CEO, Multi Screen Media.

Local Cable Operators (LCOs), however, totally dispute the figures put out by the government, saying that the

on-ground situation is very different. According to Roop Sharma, President, Cable Operators Federation of

India, demand remains low, especially among the low income groups. She cautions that the prospect of a large

percentage of blank screens in metro households is high. The situation is particularly dire in Chennai, where

the state-government-owned Arasu Cable TV has still not finalized the tenders for the purchase of STBs. As to

how the situation could pan out post digitization, Ashok Mansukhani, president, MSO Alliance, says, Post

November 1, a month will go in stabilizing DAS in Phase 1 by incorporating consumer choices and meeting any

pent-up demand. Mumbai is best poised for DAS followed by Delhi and Kolkata. Chennai is a challenge until

Arasu Cable deploys STBs.

Another reason for the low seeding of STBs is the ongoing tussle between LCOs and Multi-System Operators

(MSOs). Sharma claims, Many LCOs have still not signed interconnect agreements with MSOs as the terms are

biased and favour the MSOs. The other bone of contention between MSOs and LCOs is revenuesharing.

According to AK Rastogi, president, Avishkar Dish Antenna Sangh, We still have no clarity on the revenue-

sharing arrangement. If 65% of the pay channel revenue goes to the MSOs and broadcaster, we are left with

only 35% and this does not even cover our basic costs.


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One of the biggest selling points for digitization has been that the consumer will have the freedom to choose

and pay what he wants to see. This in turn could lead to the channels, especially niche, focusing and targeting

consumers directly resulting in better content for the viewer. According to Ashok Venkatramani, CEO, MCCS,

Post digitization, the consumer will finally have a choice and given the fact that a typical household surfs

between 15-20 channels at the most, consumers may not pick all the channels. LCOs, on the other hand, saythat STBs are an additional expense for consumers belonging to the lower strata of the society and the

government should subsidize STBs.

BATTLE FOR THE VIEWER

While the entire focus at the moment is on installation of STBs, the real concern area is whether the MSOs are

geared to meet the challenge of servicing customers post digitization. The MSO working business model will

change from a B2B (Business to Business) to B2C (Business to Consumer) and this is where the DTH players

have a head-start over the MSOs. The DTH players already have customer-centric systems and processes in

place while the MSOs will have to learn the processes of being a B2C company quickly. According to Devendra

Parulekar, Partner & Segment Champion, TV Distribution, Ernst & Young, The real problem which most of theMSOs are really grappling with is readiness to meet the requirements either from a regulatory standpoint that

TRAI has laid down in the DAS order or digital requirements to serve customers. The biggest boost for MSOs

will be the subscription revenues, expected to rise substantially with proper subscriber reporting.

According to K Jayaraman, MD & CEO, Hathway Cable & Datacom, Hathway will have the opportunity to

monetize its reach and we expect nearly a four-fold jump in our revenues post digitization. For MSOs, the race


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to acquire subscribers could mean that the Average Revenue Per User (ARPU) may be low in the short to

medium term before gradually picking up.

WHAT BROADCASTERS EXPECT

Broadcasters too will see a healthy addition to their bottomline on the back of a verified subscriber base and

reduced carriage fees. But, with digitization unlikely to be 100% by the sunset date, the broadcaster may loseeye-balls in the initial stages. And, with the festive season just around the corner, any potential drop in reach

and subsequent fall in televised ratings could be a cause for concern for advertisers. In fact broadcasters have

even called for ratings to be suspended for the metros for a short time during this teething period. According to

Sunil Lulla, MD & CEO, Times Global Broadcasting Company, Such a large scale event cannot be synchronized

with perfection, given widespread stakeholders. Broadcasters have asked TAM to suspend measurement and

release of any data for a short period, to avoid knee jerk reactions.

WILL ADVERTISERS BE AFFECTED?

This uncertainty around the actual penetration figures and likely drop in viewership could see advertisers re-

negotiating with channels and shifting their advertising spend from TV to Print, Radio, Digital, OOH and even

cinema. However, many believe that the impact on the advertiser will be minimal and the change in ratings will

not be as severe as anticipated. According to Sam Balsara, Chairman & MD, Madison World, Back of the

envelope calculations I did indicate that impact on ratings wont be more than 5%. This view is also echoed by

Parulekar, who says, For most advertisers in the run-up to Diwali, the target is not the metro markets but the

non-metro urban India. So perhaps the advertisers may not be impacted significantly even if TAM data is not

available. The impact will thus be minimal. To quell all speculation about television ratings, LV Krishnan,

CEO, TAM Media Research, says, From a measurement perspective, just be reassured of the fact that

everything we are doing is to keep pace with the changes that are happening. From TAMs perspective, we are

all set for digitization and we are looking forward to a new phase of measurement itself beginning November 1.

are metros ready for the digitization deadline

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