The ARPU dilemma

GOA: Cable TV networks need not focus on charging higher subscription rates from consumers in the early period of digitisation but revenue upswing during this period will come from the second and third TV sets, according to Den Networks CEO S N Sharma.

“There is sufficient scope to charge more from subscribers but we need to be patient. We are already burdening the consumer with a hardware (set-top box) price. For the first 6-9 months of digitisation, we (MSOs) will see additional income coming from the second and third TV sets (which is normally an income that the MSOs do not get in analogue cable). ARPUs (average revenue per user) have stagnated for over two decades and we don’t see any immediate change in this,” Sharma added.

The scramble for pushing all the channels on the basic package of cable networks will not help ARPUS move up. “How will they see any rise if the broadcasters want to place all their channels on the basic tier? ARPU is the most significant four-letter word and will have to move up,” said Media Network & Distribution (India) Ltd. managing director and CEO Yogesh Radhakrishnan.

ARPUs is in the hands of the MSOs. “Packaging is very, very key,” Radhakrishnan added.

Videocon d2h deputy CEO Rohit Jain believes that tiering of channel packages that are sold to subscribers would help lift ARPUs. “While DTH had these packages, cable never had them. With digitisation of cable TV, both will now have packages. Once that happens, we will see ARPUs change,” he said.

Broadcasters should also realise that they can’t have the same strategy towards advertising while insisting that subscription revenues should see substantial jump in a digitised distribution environment. “If they want to place most of their channels on the
basic tier because they want reach to protect their advertising interests, then ARPUs will never go up,” Jain explained.

According to IndiaCast Media Distribution Group CEO Anuj Gandhi, there is an anomaly in the existing system. “Let’s face it, the bulk of the revenues will still come from advertising. As a content aggregator, you segment your channels in some way. Mass channels will want to be on the basic tier. Some channels like kids and news will always be on the borderline; these will fight for either placing them on a base or on a lower pack. It will vary between deal to deal,” he said.
 
Agrees Media Pro Enterprise India COO Gurjeev Singh Kapoor. “The bulk of the strong channels will be on the basic tier,” he said.

The growth of HD channels will boost ARPUs, “We are getting ARPUs of $6-8 from these homes, double that of the SD channels. The break-even cycle for these is one and a half years. But it is just a 2012 phenomena and the base is very small to make any difference in the marketplace at this stage,” said Jain.

Hinduja Ventures president Tony D’Silva said that the battle at this stage shouldn’t be on upping ARPUs. “The success of digitisation will depend on what kind of content the consumer is getting and at what price. Let us roll out digitisation first. We shouldn’t start getting resistance from consumers on pricing issues at this stage,” he warned.