If the tone in 2005 was set by second bouquets, the fight for band placements and the emergence of Tdsat as a settler of disputes, the big story in the coming year will be DTH for all in the TV business, especially the distribution folks. SET Discovery President Anuj Gandhi crystal gazes and spells out how the distribution scenario will shape up in 2006 and in the coming years.
The big story this year was to settle the second bouquet of channels on cable networks. Every distribution company had to face this challenge as the industry was loaded with new channel launches. It may have taken shorter time for some and longer for others, but the fact is that the bouquets got carried in most markets.
Of the three platforms, our task, in a way, was easier because we had existing channels like Ten Sports, NDTV 24X7, MTV, Nick, Animax and Sab TV in our second bouquet. Zee-Turner also had HBO which hopped out of our bouquet, but the other channels like VH1 and CNBC Awaaz were newly launched. Star India, perhaps, had a tougher job till Star One got established.
There has been growth for all the three distribution companies, mainly from the second bouquet. Though it took time, all of us have been able to establish the value proposition of our second bouquets in various degrees.
We were also allowed a seven per cent hike on rates by the Telecom Regulatory Authority of India (Trai). The cap on rates, however, limited our ability to garner in more revenues.
The second big story of 2005 was carriage fee and the fight for band placement. Everybody got sucked into it. Cable networks had the advantage because bandwidth was just not available on analogue systems to carry so many channels. Even Zee Sports had to pay for distribution, becoming the first sports channel to do so. Carriage or placement fee has grown by five times over the last two years.
The third thing to happen was the takeover of Tdsat (Tribunal Dispute Settlement & Appellate Tribunal) as the arbitrator of disputes. That is one of the big changes we are witnessing in the way the business is being done. Earlier the disputes between broadcasters and cable operators were left to individual negotiations and settlements.
As for 2006, the big expectation is that new delivery platforms will emerge. Direct-to-home (DTH) and new technologies offering video services will launch in 2006, though it will take them 2007 to sink in and establish. The last mile telecom operators are expected to get into play. We can also have pure play digital cable TV providers.
The thing to look forward to is surely new technologies. It will offer a lot of opportunities. Unlike analogue, it will be a transparent and clean business. Besides, there will be no capacity problem.
What is exciting us at One Alliance is that we have two big events to drive these technologies - Champions Trophy and ICC World Cup. There can be several value-adds which can be created around cricket. This will differentiate digital cable and DTH from the analogue players. While pricing will still remain a criteria, differentiators have to be created to build different market segments.
The challenge for these emerging platforms, however, is to drive numbers. We will have to see how we can maximize our revenues from these technologies.
DTH could not get content from major broadcasters this year. We were in talks but couldn't reach a conclusive agreement with Dish TV. The content challenge in 2006 will be to strike deals and be available on all the platforms.
While time was spent on establishing the second bouquet in 2005, the trend next year will be to hold on to the band positions on cable networks. Bouquets are more or less complete. There is no point now in adding more channels. We won't see that story in 2006.
Even from the consumer's angle, there is no real requirement. In fact, last December viewers had a good mix of 30 channels in their prime band. Today, it is not the same thing. Placement fees have decided which channels to load in which band. In Delhi, for instance, there are too many news channels in the prime band list.
If you look at it, most of the channel launches in 2005 were in the news genre. Even in the kids' space, the last to come was the Walt Disney channels in 2004. And it is news channels that have initiated and are the prime drivers for carriage and placement.
Channels, in fact, are investing in distribution. There is no point splurging on marketing without ensuring carriage on cable networks. Broadcasters have realized this even when they are launching channels.
Established bouquets have the power to push weaker channels on the back of stronger ones. For a standalone pay channel, there is no hope; you will need crutches in today's situation.
But won't digital cable take off? There is resistance from last mile operators who have, after all, not faced competition for over a decade. But once DTH happens, it will change so many things. Last mile operators will not want to let their business go away to DTH. The market will drive digital cable. And value-added services will start happening next year.
Digital including DTH, cable and IPTV will take market share of analogue. Estimates are that by 2010 there will be 10 million digital subscribers.
What about carriage fees? These will stay. In some smaller markets where there are no multi system operators, low-cost digital headends will come up. As the signal will not be encrypted, addressability won't be possible. Consumers can't select and pay for the channels they want to buy. We expect carriage and band placement to reduce in these places, but not in the short term.
What will be the challenge in 2006 on the revenue front? We will have to maintain what we get from analogue cable and try to squeeze in some growth. Already, the 4 per cent hike on rates allowed by Trai in 2006 is being disputed in courts. We will have to live with whatever the outcome is. And we will also have to live with the fact that we will have to share our premium cricket content with Doordarshan.
The opportunity is also in exploiting new revenue streams from the delivery platforms that will come up in 2006.
