Abhishek Kumar and Shipra Mathur
As per a recent FICCI-EY report, TV industry in India was valued at ₹78,800cr ($10.4bn) in 2019 with ₹32,000cr ($4.2bn) as advertising and ₹46,800cr ($6.2bn) as subscription revenue. Ironically, the industry is mired in struggle, thanks to the deeply-entrenched political economy and a regulatory framework that leaves much to be desired.
COVID-19 has only made matters worse for television in India, which is hugely dependent on advertisement revenues.
During the nationwide lockdown in India, TV viewership surged dramatically by about 40%. But advertisement revenues came down by almost 50%. These figures suggest a high degree of revenue volatility for the sector.
Consider this, as of February 2020, markets were fairly optimistic about overall increase in Ad spends – a fact evident from a report by GroupM, a renowned media agency. The report suggested substantive increase in advertisement revenue, particularly in digital space and a marginal decrease for TV segment. This was despite the prevailing economic slowdown.
Fast forward a few months, and GroupM comes up with a revised forecast in the shadow of pandemic. As per the new estimates, Ad spends in India are expected to see more than 20% decline. In the earlier assessment, they were expected to touch over ₹90,000cr ($11.9bn) this year.
This raises serious questions on the well-being of the TV sector in India, which is the most accessible source of entertainment and news for people, and hence a critical component of a democracy.
The question, therefore, is what can be done to salvage the situation especially when the GDP growth is likely to remain low.
The answer lies in a multi-pronged approach – one that should focus not just on sustained revenue sources but also systemic regulatory approach that can improve the television sector’s overall health and prospects.
First, there is a need to get the exact number of subscribers. Surprisingly, no accurate figure is available for the number of TV subscribers in India, particularly in the cable TV sector. The Digital Addressable System or DAS – a process that the Government claims to have been completed as of March 31st, 2017 was supposed to ensure this.
Consisting of Conditional Access System (CAS) and Subscriber Management System (SMS), implementation of DAS was supposed to ensure encryption of content in the digital form enabling enhanced channel capacity and choice while improving the viewing quality and delivery of secure content to the ‘authorised consumer’. Experts suggest that DAS in the cable TV segment is only about 20% implemented while in the DTH space it is slightly upwards of 70%.
There are several reasons for this. For instance, there is prevalence of sub-standard CAS and SMS system in the television market. These systems are to be deployed by distributors of TV channels, also known as Distribution Platform Owners or DPOs, to ensure transparency in service and accounting. Incidentally, there is no strict accountability on DPOs to abide by due standards of CAS/SMS.
The result is under-declaration of subscriber count and piracy. There are reports, as recent as 2019, which suggest that piracy by local cable operators has gone up by 300%! Needless to say, this results in loss of revenue across the value chain, the entertainment industry in India, at large, and also for the exchequer.
How to Revive the TV Sector in India
More importantly, it leaves consumers unaware of their choices. Pertinent to mention here is the fact that digitalisation under DAS was to expand channel capacity to carry more programmes per channel, thus enhancing consumer choice. To put it simply, the entire system was to respond after the consumer had explicitly expressed his/her choice in a mandated form, also called the ‘Consumer Application Form’ or CAF. This is rarely done.
Second, the Cable TV Network Act does not distinguish between ‘content and carriage’. It is important to note that components of content are very different from that of carriage, which is essentially a physical infrastructure. Lack of differentiation between content and carriage, therefore, leads to a pricing regime that is frequently contested. Moreover, in the absence of accurate subscriber count and choice, any attempt to determine pricing will be quite off the target on one hand while on the other hand, it distorts marketing spend. The least that can be done by the regulator to ensure transparency is to explain the method for arriving at different fee structures and tariffs.
Flowing from the above is the third important point related to ‘Interconnect Regulations’ – one of the three comprehensive regulations that were put in place by the Telecom Regulatory Authority of India (TRAI) to extend full benefits of digitalisation. ‘Quality of Service’ regulation and ‘Tariff Order’ were the other two. A large part of the problem related to sub-standard CAS/SMS, inaccurate subscriber count and piracy results from the generic nature of these regulations and hence there is a need to prescribe more specific technical and process solutions including deterrent penalties on erring parties.
Fourth, it needs to be understood that regulations don’t work on the ground because structures on the ground don’t allow so, and this usually happens when rewards and risks are not proportionately distributed. It is therefore important to convene all stakeholder discussions in a routine manner and help them revisit the expectations from each other. Doing a Regulatory Impact Assessment in true spirit may be a good way to move forward for any prospective regulation.
Fifth, digital payments must be promoted as much as possible for TV consumers. This can result in better collections for the cable operators while also reducing transaction cost, and perhaps will also help to identify the ‘actual’ consumers to a certain extent.
Lastly, it needs to be remembered that these steps are not exhaustive but crucial for the health of the TV sector in India. The endeavour should be to provide a level playing field so that the sector can develop necessary resilience. An enabling regulatory framework will be critical for this.