MUMBAI: A silent crisis has been brewing in the residential segment of TV viewing sector. Even as its viewership increased during the Covid-induced lockdown, sectoral revenues took a severe hit. While Covid was termed an act of god, TV’s current state appears to be a man-made disaster. TV is an integral part of media, the fourth pillar of democracy. Therefore, it is crucial to respect and preserve it.
TV accounts for over 40 per cent of the Indian media and entertainment ecosystem’s revenues, making it the sector’s largest contributor. As per pre-pandemic estimates, the M&E industry was slated to grow at 10 per cent CAGR to touch $34 billion by 2022. Covid’s impact has slowed down that march, particularly because advertisement revenues have shrunk, production of new entertainment programs remained suspended and the addition of new subscribers, by direct marketing, has become difficult. The alternative lies in adopting a subscription-led model.
Broadcasters source content from content producers and manage its distribution over electronic media for viewer consumption. There are costs involved in this management such as content editing, server storage, opex for uplinking, transponder rentals and taxes. Broadcasters rely on meeting these expenses through advertisements inserted into and cheek by jowl with content.
Besides these, distribution platform operators (DPOs) charge broadcasters a fee to carry programs and their placement in their electronic program guides (EPGs). TV players have to pay this fee even for channels which are free for viewers. Advertisement revenue covers approximately 60 per cent of such costs. The DPOs, in turn charge subscribers for connectivity and pay content charges besides taxes.
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Since the nineties, business models were skewed in favour of ad-driven revenues because the amount of video content to be distributed over the networks exceeded network capacity. Further, business practices were not transparent as broadcasters were unable to verify how many subscribers were watching their channels.
2011 onwards, the TV digitisation process was supposed to usher in transparency and help overcome capacity constraints by relaying encoded and encrypted program streams from broadcasters to consumers via approximately 1,500 MSOs and over 60,000 cable operators. Digitisation improves picture and sound quality and allows more content to be transmitted using the same resources, thus enhancing consumer choice. Coupled with encryption, this system is called the digital addressable system (DAS), which means the facility to enable or disable program viewing selectively and remotely. Encrypted broadcasting signals can only be decoded via a set top box (STB) programmed uniquely for each consumer as per their indicated choice. Consequently, consumers can access and watch only those programs that they have chosen and pay accordingly. Empowering consumers to exercise choice was the intended first step to enable a subscription-led industry model.
While the government claims that the entire digitisation process was over in March 2017, the truth is otherwise. MIB tracked DAS implementation using only the number of STBs reportedly shipped out of headend service providers’ warehouses. It did not consider if these STBs had been programmed to show only those channels that viewers had opted for. The STBs, therefore, functioned only as digital to analog converters that enabled viewers to watch all programs in the network’s stream. The task force to oversee DAS implementation did not seek proof to verify that ‘addressability’ had actually been implemented in the subscriber management system, which was the very essence of DAS implementation. Thus, a lot of TV subscribers do not have STBs which allow them to watch only those programs that they opt for.
In 2017, TRAI issued a tariff order that supposedly aligns regulations with the new digital regime. However, the explanatory memorandum of the tariff order is full of contradictions, attributable to limited knowledge of ground realities.
One possible infirmity, in TRAI’s demonstrated inability, could be that their staff consists of bureaucrats and professionals from the IT enabled services sector. Telecom generically facilitates one-to-one communication without any concern for the content it carries. The charges too cover fixed and variable levies based on usage time. With such a background, TRAI has been entrusted with regulation of broadcast, which is based on content that is intended for mass consumption. Since 2004, they have not been able to acquire information about how broadcasters price their content.
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In the explanatory memorandum to the tariff order from March 2017, TRAI says that content pricing is a dynamic process, best understood by broadcasters. At the same time, it restricts them from deciding the price of pay programs included in bouquets. A commercial approach to determine prices requires an understanding of the expected channel viewership, and the cost of producing or acquiring content. Addressing ground realities is important to gather accurate data on channel viewership.
One must understand that most subscribers use cable operators’ networks, which are local monopolies. Such operators get STBs issued in bulk without requisite programming and pairing them with subscriber details. These STBs enable access to all programs contained in the stream net casted from the MSO, since they are not individually programmed to cater to consumer choice. The cable operators then started charging subscribers a fixed monthly sum without any bill or receipt.
To address this situation, multiple suggestions were made to TRAI. An important one was to incorporate broadcast expertise, which differs from telecom, into regulation. This is especially important for content handling to ensure that the deployed distribution networks meet desired addressability and content security norms. This author too has suggested that an eminent person, with broadcast video distribution experience, should conduct a demonstrative audit for all empaneled auditors. However, TRAI remains reluctant to change its telco-oriented mindset, where the concern for content has never factored in. The most glaring example is the regulator’s latest list of auditors to audit the digitalization process. Almost all of them are charted accountants with no experience in broadcast audit. The regulations prescribe the employment of a graduate engineer in the empaneled auditors’ teams, without even mentioning his/her educational background. Finding suitable talent is also challenging, as broadcast engineering, in general, and wired line broadcasting, in particular, are yet to find a place in Indian academia. To sum up, one can’t get the TV business right without getting the number of consumers right.
TRAI will therefore do well to pay attention to the safe and secure delivery of content, rather than economic regulation that is confined to subscription fund flow audits. As it is, the regulator’s misadventure since March 2019, has resulted in a loss of estimated 26 million subscribers, besides reported closing down of multiple video broadcast programs. It can’t and shouldn’t create a situation where more programs are forced to go off air.
(The author of the article is Lt. Col. V C Khare, a cable TV expert. The views are personal and Indiantelevision.com may not subscribe to them)
