Slumdogging the Indian broadcast industryOctober 1, 2010
*This is an old speech, but we thought that it is relevant even today so we thought about sharing with you.
There’s the world way of thinking and the Indian way of thinking, says Aroon Purie, chairman at media conglomerate The India Today Group. In his own words, India media veteran Purie on the underbelly of the Indian broadcasting industry…
Call it the slumdog syndrome but I want to expose the underbelly of broadcasting. I know many Indians didn’t like Slumdog Millionaire for its negative portrayal of India but please excuse me for slumdogging and not doing what former US president George W Bush calls the ‘vision thing’.
I think it’s high time we recognised and dealt with some ground realities. As I am a practical person who likes details, I will get into the nitty-gritty of the broadcast mess.
What is this mess? I see it as three-pronged. First and most important is that our distribution system is completely outdated. So it can be likened to the great Indian traffic jam. Everybody is stuck and nobody can move forward. Even if you do, it’s only at the expense of someone else. Nobody obeys rules here. And that has made it difficult for the industry to move forward. Second is the lack of transparency in our industry. We see this industry growing at 10 per cent annually in the coming years. But there is no transparency whatsoever for the stakeholders on how revenues are shared. The third is there is inadequate audience measurement system.
As I said, the mother of all problems is distribution. It’s often said that content is king and distribution is god. And it couldn’t be truer than it is today. A diverse country like India has billions of gods but this one is the supergod right now. At least for the broadcasting industry. Of the 84 million viewers the country has, 76 million, or 90 per cent, use the multiple system operator (MSO) route. About 6 million are direct-to-home (DTH) subscribers and 2 million are conditional access system (CAS) ones.
The burgeoning increase in the number of channels is making analogue cables burst at the seams. They can’t carry that many channels. So broadcasters are vying with each other to put their channels on air at the cost of someone else’s channel. They are paying carriage fees to cable operators and MSOs to carry their channel. No surprise then that in the last one year, registration cost has shot up 50 per cent.
This cable race has had an impact. Today, if you want to launch a channel, it’s hard to do it in this scenario because the cable operator doesn’t care what kind of a channel you are. Whether you are an entertainment channel or a news channel or even a kiddie channel, he’ll ask you to shell out whatever the market price is. Today, it takes nothing less than Rs 25-30 crore to secure national distribution for any channel in this country. That means even before you produce one minute of content, you have to loosen your purse strings by Rs 25-30 crore for national distribution!
When we launched our news channel Aaj Tak in 2001, our distribution cost was zero. But now, carriage fee is the biggest expenditure for us. Our up-linking costs are higher than the salaries of all the employees combined.
The positive fallout of the financial meltdown is that it has stopped what I call spreadsheet capitalism, which means a spreadsheet that shows a great future in the broadcasting industry. Whenever a new channel comes in, all existing channels get displaced. Money flows freely and broadcasters try to outdo each other and kill each other altogether.
Every year, channels pay carriage fees of about Rs 1,500 crore. But broadcasters don’t share information with each other on how much they’re paying. So there are no standards and you can be charged any amount any time.
This is where the government needs to step in and make digitisation mandatory within a certain timeframe. And broadcasters should help in this process. I would even say that broadcasters should start a digitisation fund like all carriage fees that we pay. On its part, the government has made very feeble attempts at digitisation. It was to start CAS with four cities – Mumbai, Delhi, Chennai and Bangalore. But it succeeded only in Chennai. CAS had ambitious dreams of going to 55 cities by 2007, something that doesn’t seem likely now. Digitisation is the only way to make the consumer pay for what he wants and ensure that the broadcasters get their fair share of that payment. At the moment the consumer pays a lump sum, getting a whole bundle of channels, 90 per cent of which he doesn’t watch.
Ironically, even broadcasters seem to be resisting digitisation. Perhaps because they fear that once digitisation is done, the ‘real’ viewership numbers would emerge, affecting advertising revenues. But then the whole industry seems to be at war anyway. Broadcasters are fighting each other over eyeballs, and the MSOs over the carriage fees. And MSOs are fighting with cable operators as they aren’t getting enough money.
Despite this free-for-all the government hasn’t done much to set things right. The government is more interested in the price of the channel and the bouquet. The government of India is probably the only one in the world who thinks that having a cheap cable connection is the fundamental right of every citizen. What right does the government have to decide how much a channel should charge a consumer? It has not spent a rupee on setting up any infrastructure, be it distribution or anything else. It doesn’t tell print how much to charge so why broadcast?
What the government should be doing is setting standards and encouraging broadcasters to go ahead and digitise and even help them do so. They should make it mandatory. The industry then can move forward. Unfortunately in India, most of the time, the government has it head in the sand while drafting policies for the broadcasting industry.
I remember the first satellite TV channel made its way to India in 1991 during the Gulf War. The government suddenly woke up in 1994 with an ordinance and by that time there were already 75,000-80,000 cable operators in the country. Besides, the only thing the government woke up to was the tax potential of this industry. Since then, it has come up with very few legislation, a case of too little, too late. But then, the government has always been out of synch with what happens in the world. For example, in the earlier days of satellite TV, there were too many restrictions on up-linking for foreign countries. At that time, media baron Rupert Murdoch wanted to set up a big base in China. He said then that India is the only country that has no down-linking restriction but has only up-linking curbs.
Even when DTH was introduced in 1997, the government first banned it. Only after 2000 was it allowed and that too with conditions that destroy the idea of exclusivity of content by different DTH players. Now, DTH has become just a clone of cable where you get a bundle of channels. Besides, DTH also charges carriage fee! So there is the world way of thinking and the Indian way of thinking. And this is what we ended up with. The industry has not grown the way it should have.
In India, the government has the largest terrestrial network that nobody can compete with. But if the government did its job well all broadcasters would have been out of business. The government has the capacity to reach every home.
If there was digitisation, there would have been a lot of transparency. Consumers pay cable operators about Rs 15,000 crore. Of this, cable operators pass on only around Rs 2,500 crore as subscription fees, a measly 15 per cent of what they collect. So even though they pay Rs 1,500 crore as carriage fees, broadcasters earn only Rs 1,000 crore of the Rs 15,000 crore that is actually forked out by consumers. This is rather unfair!
This is what the government needs to look at more than what a channel should charge. In a developed country, broadcasters get about 35-40 per cent of what the consumer pays. And they don’t pay carriage fees! So you see, India has a long way to go. And the economic slowdown has only put the spotlight firmly on this problem.
I also believe that media comes cheap in this country. Not only broadcasting but even in print. An Indian newspaper costs around Rs 2.50 to Rs 3.50 for a full 32-page issue. Similarly in cable, you are getting around 100 channels for Rs 150. Compare this to America or elsewhere, you will get only 40 channels for Rs 450. But the consumer there is ready to pay for what he wants. And there is enough money for everybody.
The last point I want to make pertains to audience monitoring. TAM is not efficient enough a measure of viewership. It is also inadequate for niche channels and detailed market analysis. For example, an English channel showed zero rating in an important city like Ahmedabad in January 2009, which is really impossible. At the moment the audience meter is tracked by the ministry of research. I believe there should be a body to looks into this.
There are many other issues like content regulations as well. Distribution has now become so profitable that even politicians are getting into it. And that’s an interesting phenomenon, especially for news channels because it gives content regulation a whole new meaning.
What I want to say is that bringing about some logic to the broadcasting industry will only bring in a better system. In the end, we have nothing to lose but our losses.
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