The Indian Cab & Sat Reporter, indiantelevision.com's weekly subscription newsletter, had predicted earlier this week that Star's announcement to slash carriage rates was merely an eyewash, and that it would hike rates eventually.
We present here the full text of the item that appeared in the Indian Cab & Sat Reporter dated 8 November 2001:
MUKERJEA PULLING A FAST ONE WITH TALK OF SLASHING SUBSCRIPTION RATES?
Star India CEO Peter Mukerjea is mouthing a new mantra these days. Slash basic carriage rates for cable ops for the Star digital bouquet of six channels if they in turn are willing to declare higher subscriber bases.
Currently, Star charges cable ops Rs 30 for the Star package, but they disclose only 20 per cent of their actual subscriber counts, he says. "Now if they are willing to take their disclosure up to 40 per cent, we are willing to charge these cable ops, half of what we are charging them currently," says Mukerjea.
Mukerjea has given his own spin to the whole affair by declaring that the valuations of cable enterprises will go up if they buy into his proposition. This might have made sense in a context outside that existing in India because internationally valuations are based on connectivity. The Indian market operates quite differently so where Mukerjea derives the confidence that his idea is workable is a bit of a mystery.
Mukerjea, along with his distribution head Arun Mohan, has started discussions with two large MSOs - Hathway Cable (in which Star has a 26 per cent stake) and the Hinduja-run Incable - on this issue. InCable has often been involved in arm wrestling matches with the network as it has refused to cough up even the 20 per cent carriage fees. Star in turn has on occasion switched off the receiver boxes in InCable headends in order to get them to pay up.
Mukerjea says he is taking this step because broadcasters are getting payments from cable ops for only 5-6 million of the 40 million cable and satellite homes in India. At around RS 100 for all the basic subscription channels, that works out to about RS 600 million a month or RS 7.2 billion a year. Total cable subscription revenues garnered by cable ops amount to about RS 4,000 million a month (@RS 100 per month) or RS 50,000 million a year.
These figures are nowhere close to reality. If the pay channels were collecting so much money they would be laughing all the way to bank. Last year, they reported pay TV collections of only RS 3,000 million for the 12 months. Obviously Mukerjea is flinging the numbers out of thin air, or he expects the digitisation and encryption efforts of Zee TV and Sony Entertainment to result in the increased figures he is talking about for this year.
Or he could be voicing that he is making a desperate grab at subscription revenues at a time when ad spends are vanishing.
Will cable ops buy into his scheme? Unlikely. The reason: what guarantee is there that Star will not hike its rates after cable ops disclose higher subscriber numbers. Even if Star promises that there will be a lock-period what guarantee is there that it will stick to it? The trade is known for the conflicts between broadcasters and cable operators.
A school of thought is that Mukerjea is letting loose some smoke to camouflage the real issue. Once cable ops refuse to buy into his scheme, he is going to propose a hike in subscription rates for cable ops at the existing subscriber levels.
For the cable TV trade it is likely to be a Catch 22 situation. If they refuse to buy in to the higher disclosure or higher subscription schemes and their headends are switched off, they will face flak from the viewers who have become diehard fans of Star Plus, the numero uno entertainment channel. Clearly, this will be a hard fought battle.
