The Hindu Business Line : Revenue split tricky affair for pay channels

WITH the CAS (conditional access system) coming into play from July 15, bundling of channels is going to be a tricky affair with broadcasters fighting it out among themselves on the revenue-sharing arrangement.

Sources in the broadcasting industry said that while broadcasters are planning to sell genre-wise bundles of channels to households, there seems to be no consensus on how the revenues will be split.

"For instance, if general entertainment channels such as Star Plus, Sony and Zee are bundled together and sold at a price, the real tricky issue is how the three would share the subscription fees among themselves.

"There is no agreement on this. And unless this matter is sorted out, genre-wise bundling will not become a reality."

Broadcasters had earlier said that they were working together to ensure that the consumer would not have to shell out more to watch fewer of channels, a proposal that has met with favour from the Government as well.

Industry sources also said that there seems to be a split between pay channels on bundling as well, with Star, Sony, ESPN-Star Sports and Modi Entertainment Network (MEN) on one side and Zee on the other.

Earlier, Star, Sony and ESPN had proposed a `super bouquet' against the Zee Turner package.

They had offered different tiers of channels called basic plus two entertainment channels, basic plus seven channels, sports channels and language channels.

However, channels from the Zee-Turner stable were not part of these packages.

Broadcasters, however, are trying hard to put up a united front with Mr Sameer Nair, Chief Operating Officer, Star India, having stated that Zee would also be part of the new tier system.

Pricing is CAS key

The pricing of pay channels is key to the success of CAS in the four metros.

Consumers are likely to opt for set-top boxes (STBs) only if prices of pay channels are kept low. The Government has also suggested that monthly cable bills should not exceed Rs 200.

Even as there is speculation that several popular pay channels would become free-to-air (FTA) once CAS is implemented, niche channels seem to be happy about the prospect of using an addressability system to reach out to consumers. They are firm that they would continue to remain pay.

Mr Anshuman Misra, Managing Director, Turner India, which owns Cartoon Network, said that the channel would remain pay and that there was no question of going FTA.

Similarly, Mr Amitabh, General Manager, Hallmark Channel, also said that there were no plans to go FTA. Others such as CNBC and Discovery feel that CAS would only help the channels shore up revenues.

This is because these channels believe that their existing subscribers would remain loyal to the channels.

"Hallmark offers programmes and films which are different and can't be watched in theatres. We are convinced that the Hallmark viewer is a loyal viewer. In the initial stages of the implementation of CAS, there could be a decline in viewership due to non-availability of set-top boxes. But I don't think our viewership will take a massive dip."

These channels are betting on proper declarations by cable operators to shore up revenues. Currently, due to under-declaration, niche channels have been facing revenue losses. "Post-CAS, with a good subscriber base, we can hope to get better advertisers," an official with a niche channel said. Worldwide, niche channels have been doing well and have become the focus of advertisers. Shopping channels such as QVC, and auction channels like Bid Up TV and NASN (a US sports channel) have all generated revenues of over £100 million. While some of these channels garner revenues only through subscription, others attract ad revenues as well.

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