Cable operators crippling broadcasting industry

‘Under-declaration of revenues by as much as 90 per cent affecting business’.

Making a strong pitch for revamping TV industry’s subscription model, STAR India today said that under-declaration of revenues by cable operators by as much as 90 per cent was crippling broadcasters. “Of the 80 million cable homes, we get paid for eight to nine million homes. So, only about 10 per cent is declared,” STAR India CEO Uday Shankar told PTI. “The cable operator does not share the rest 90 per cent with anybody else, and he does not pay taxes on that... The economics of the business has become so crippling that people are somehow just trying to stay afloat,” he added.

He said the total subscription revenues fall in the range of Rs 13,000 crore to Rs 15,000 crore. “Of this, only about Rs 3,000 crore reaches broadcasters. Even from this amount, Rs 1,000-1,200 crore gets paid back as carriage fee to cable operators.” Shankar said this situation was leading to a serious dearth of investments in technology and programming, and despite large numbers, the Indian television industry continued to be a very small business. Citing the example of the TV news business, he said, “Investment in news gathering is becoming less and less... News costs used to be about 50 per cent (of the total); now it has come down to as low as 15 per cent. It would not be averaging more than 20-25 per cent (overall).” He said India’s cable industry continued to be medieval, and called for viewers and the industry to spread the direct subscription (pay channel) model.

Shankar said, “Worldwide, wherever cable TV has thrived, it has done so on subscription... It allows the broadcaster to understand what kind of content people will pay for.” He said that going forward the financial health of the business will decide the quality of investments and talent it attracts, and the content it generates. Shankar said advertisers were not necessarily interested in pushing great content but replicating and spreading more and more of some popular programmes. “So, the content is of the lowest common denominator.” He said there are a lot of broadcasters who are active in cable distribution as well. “So, the whole under-declaration of cable income... While they are losing money as broadcasters, they are making that money as cable operators. So, their interests are conflicted.” He said cable operators were not interested in growing into big companies and hence did not invest in developing networks and markets or introducing new technologies. “Money is not coming up for investment... That is why the quality of cable is so poor in the country that other than 20-25 channels, (all) are grainy... The cable operator is not interested in investing in digital technology,” Shankar added. On the possibility of industry coming together to resolve these issues, Shankar said the first-generation cable TV entrepreneurs are still very active. “They bring in their own baggage — their own prejudices, their own personal relationships, their own biases, and that has prevented an industry wide consensus.”

- Business Standard