Significant subscription revenues will be driven by VAS which will push subscription revenues over Rs 6 trillion crore with PPV. DAS has thrown up multiple challenges around the last mile and the mother of all challenges has been acclimatisation of LCOs
Ashish Kaul | Mumbai | September 18, 2014
The in-market subscription revenue for C&S market is likely to cross Rs 6 trillion crore by the end of the next financial year. Digitisation is going to change the subscription revenue model forever with industry entering a quasi-consumer domain for the first time since its debut in the Indian market since the first Gulf War over 20 years ago.
The subscription revenue landscape has radically changed and will continue to do so at least for next 24 months amidst serious challenges from rival DTH brethren. The industry is undergoing a metamorphosis on various fronts. The first step is to accept that the business has shifted to the consumer domain and driven entirely by consumer marketing benchmarks. The digitization has opened a whole new world of subscription revenue opportunities that didn't exist before, thus creating a win-win situation for LCOs, MSOs and Broadcasters together. The industry is on a precipice and it can either emerge as the largest consumer services and VAS driven as the largest VAS subscription revenue aggregator in the world or lose out to DTH. The industry size is expected to touch Rs 120 million C&S consumers by the end of 2015-16.
As for any consumer goods business, the digital cable business is driven by developing products and services and then develop marketing channels both on and offline, and ATL/BTL to encourage consumption of VAS. Digital cable inherently presents unique opportunity for service providers to market their VAS through STB capability and barker channels among a host of other features. Marketing services will play an important role in strengthening subscription revenue channels especially during the launch of PPV products. Prepaid business is how digital cable will move from strength to strength in the next 36 to 60 months. A significant majority of the digital business model will comprise multiple prepaid variants thus creating a need for robust sales and marketing encompassing unified customer services platform.
Significant revenues will be driven by VAS which will push revenues over Rs 6 trillion crore with PPV (Pay Per View), with exclusive server-based content, events and broadband among other peripheral streams contributing over Rs 52 billion in the DAS areas alone. Digitisation has opened a whole new world of advertising opportunities for the FMCG industry which will benefit tremendously from C&S reach into the hinterland. Digitisation empowers MSOs and LCOs together to offer services to the advertising industry, region and language-wise. Nearly Rs 1,000 crore will be contributed by PPV from Bollywood considering 80 per cent of the releases do not cross seven days and largely are removed between two major releases. Digitisation offers the single largest revenue opportunity for Bollywood premieres in Tier 2 & 3 towns, especially regional movies.
Over 400 movies languish unreleased every year, and an equal number of movies don’t see more than two days in the box office. Between the two Fridays regional cinema has been lying dead and now with digitization creating channel capacities in excess of 500, will create opportunities for regional movies and content to debut and earn money. Digitisation will pave way for creation of a whole new regional and niche content industry in Mumbai which traditionally has been a bastion for Hindi content.
DAS is a sunrise era in India and, in comparison to most advanced markets, DAS presents a technology leapfrog for the Indian broadcasting Industry. DAS has certainly thrown up multiple challenges around the last mile and the mother of all challenges has been acclimatisation of LCOs as happens in any restructured environment. The last few months have seen tremendous forward movement considering the desired acclimatisation reflecting acceptance and stability. From here and onwards, it is just the sunrise and we have a great day ahead of us.
Having known the consumer in a digital environment, DAS has opened never before opportunities for LCOs and MSOs. The Indian digital cable industry presents the biggest ever segmented and focused advertising / messaging opportunity for Indian consumer goods. Currently, advertising is largely driven by TRPs which at best is still a pale estimation in comparison to informed consumer base that a digital and addressable cable landscape will offer to consumer goods. I believe Indian digital cable industry will emerge at the most credible and value based advertising platform well poised to garner a significant share of over $ 1.2 billion in TV advertising.
The broadcast industry in India cannot survive without LCOs as an integral backbone and invaluable business partners. As a matter of fact, the role of LCOs will undergo a radical transformation and aid in introducing multiple products and services and generating revenues. Overall, LCOs are poised to be the next parallel multi-services retail chain in the world. Together the LCOs and MSOs in the next 24 to 36 months will transform the revenue and services structure of M&E industry. Digitisation is going to change the revenue model forever with industry entering a quasi-consumer domain for the first time since its debut in the Indian markets since the first gulf war over 20 years ago.
Subscription revenues structures depend on multiple aspects in a chequered Indian media landscape; however, things are far better than the analogue sunset last year. Subscription revenues are on an upward swing and introduction of prepaid business model will be the next big thing to galvanise the LCOs and MSOs momentum. In the next 24 months, with prepaid and VAS comprising PPV (Pay Per View formats), branded content, niche server-based channels and city events will usher in the real DAS for the industry and consumers alike. Most of the MSOs have already placed their orders but some impact due to the dollar canibalisation is inevitable but under control.
National / Local ISP license coupled with VAS will be a game changer as far as ARPU is concerned. Digital cable can move from a traditional Rs 150 ARPU to Rs 500 and beyond. I believe the entire industry realises the importance of the ISP push which of course will need investments for strengthening ground infrastructure.
In letter, the industry has transformed into B2C in a certain manner, but significant ground needs to be covered. Digital cable companies need to internalise ways of digital business which will need internal transformations along with developing a talent pool. Going forward, the first step is that business models have to be reworked and approached as a traditional consumer goods business and in my opinion that in itself is a significant challenge.
In principle MSOs are driven by a sense of camaraderie and traditional rules of the game. However, over a period of time DTH will find it difficult to compete with digital cable on multiple accounts. Technologically, digital cable is a far superior variant of digital in-bound entertainment; DTH cannot offer even remotely the far higher number of channels, VAS, ISP among many other features. Digital cable marginally defeats DTH in a high-rise metro environment, torrential / coastal weather and unmatched HD quality due to bandwidth advantage. Where a DTH operator will struggle to offer channels in two digits, a digital cable operator can offer almost all channels in true HD. Furthermore, digital cable offers uninterrupted entertainment compared to DTH due loss of signal in agitated whether conditions. ‘Aandhi Baarish ya Toofan Digital cable hamesha aapke saath!” Yes, DTH has the first mover and well marketed category advantage that enjoys patronage of superstars. However, I would say move over DTH, digital cable is here. Digital cable is sensitive to the fact that business differential will come in through a well-orchestrated and structured unified marketing services.
The industry is on a precipice and it can either emerge as the largest consumer services and VAS driven as the largest VAS revenue aggregator in the world or lose out to DTH. It is not only the revenue from traditional VAS elements but also innovative peripheral revenue streams like SMS, barker channels and exclusive network specific channels that will contribute to enhanced ARPU and, importantly, act as brand flankers for the discerning consumer. Broadband services have been on a back-burner, and now is the time to bring these services on. The digital cable industry is entering into the era of 'household acquisition' and deploying the magic of triple play / bundled solutions. The rainbow has emerged and now it is for the Industry to paint it black or blue.
(The writer is a media and entertainment professional with over 20 years of experience in managing transnational businesses and marketing pioneering brands globally. The views are personal.)