Come April and the fee that TV channels pay to independent cable operators and the multi-system operators (MSOs) is set to go up by 40-50 per cent.
While there is no audited figure for the carriage fee market, media industry experts peg it at Rs 1,000 crore (Rs 10 billion).
"The minimum increase cable operators are demanding is about 50 per cent and there is no rationale behind the hike," says Atul Gupta, a cable distribution consultant who has set up distribution networks for several religious and news channels.
Not many television channel heads contacted by Business Standard wished to spell out their exact carriage fee expenses "as negotiations are currently on and the cable industry will benchmark its demands according to what we say," said a source in a Hindi news channel.
TV Today, that owns Aaj Tak, did not respond to Business Standard's queries on the subject but company insiders say that the television network is expected to shell out Rs 55 crore (Rs 550 billion) in carriage fee for all its channels opposed to the Rs 35 crore (Rs 350 billion) to Rs 40 crore (Rs 400 million) it had spent last year.
Atul Gupta is unfazed by the figure. "I set up the distribution network for a Hindi news channel six months ago for Rs 23 crore (Rs 230 million). Today, the same company will have to shell out Rs 30 crore (Rs 300 million) for its general entertainment channel. That's the level of escalation in six months," he says.
Clearly, it is not just the news channels alone that are being made to fork out more money. Media industry sources say that the two new Hindi general entertainment channel -- INX and NDTV Imagine -- invested between Rs 50 crore (Rs 500 million) to 60 crore (Rs 600 million) each in just getting their channels into cable TV homes. The channel executives could not be reached for comments despite repeated attempts. It's easy to see why carriage fee has acquired formidable weight.
A plethora of new TV channels have been launched and are jostling for space on the already choked analogue cable pipe. Nearly 330 channels are chasing bandwidth that can accommodate barely 80 channels. The "prime band", with barely 11 frequencies, and the "colour band" with about 6 frequencies command the highest premium. This is followed by the 19 frequencies in the "S" band.
"I can't see why such a big deal is being made out of a simple demand and supply issue. Why are companies launching TV channels knowing fully well that there is no bandwidth available?" asks Anuj Gandhi, CEO Digital
Entertainment Network (DEN), the new cable company set up by Sameer Manchanda and Raghav Bahl of the Network 18 group.
To be sure, in some markets, the new cable companies are also seen as being responsible for the sudden and steep hike in distribution charges. DEN has captured nearly 70 per cent of the UP market while DigiCable has consolidated its position in Punjab.
"If a channel was spending Rs 16 lakh between Kanpur and Lucknow, UP's most significant markets, it is now expected to shell out nearly Rs 60 lakh," says Gupta. Gandhi refuses to comment on the figure but re-iterates that the only logic for the current hikes is the demand-supply gap between frequencies available and the number of channels.
"It is really like an auction," admits Jagjit Singh Kohli, head of DigiCable. Channel owners are willing to pay any amount to swap places with channels in the prime and colour bands, they claim.
Surprisingly, even the direct-to-home (DTH) operators like Dish TV and Tata Sky have jumped into the carriage fee fray. The two companies are now asking for substantial carriage fee -- between Rs 3 crore (Rs 30 million) and Rs 5 crore (Rs 50 million).
While the Tata Sky spokesperson refused to comment on the company's "commercial agreements" with its clients, Dish TV head honcho Jawahar Goel admitted that Dish is demanding carriage fee. "It may be an opportunity cost for the cable operators, for me it is a technical cost. We spend money on satellite transponders and running the call centres," says Goel justifying his move. Media experts, however, say that the current DTH operators are also constrained for space as no new transponders are immediately available for their expansion.
Needless to say, the distribution cost of the broadcast media is going haywire. "It is almost a menace now," says Anurradha Prasad, promoter of BAG Films that launched the Hindi news channel NEWS24.
"Today, carriage fee is the second highest cost after the manpower cost in a channel portfolio. For some, it could account for between 40 and 50 per cent of the total cost of operating a channel," she adds.
Broadcast media consultant Sanjay Salil, who has set up TV channels like Channel 7 (now IBN 7) and Manorama News in Kerala, believes that the soaring distribution cost is affecting both profitability and the quality of the channels. "News channels are cutting corners on programming cost," he says.
Often, the TV viewership monitoring agency TAM's Connectivity Report is blamed for the increasing distribution costs of channels. The report indicates the presence of a channel in a particular market as well as the bands in which it is available.
"But all the figures are in percentages. Besides, if the Indian Broadcasting Federation thinks that this is affecting their distribution costs, we are open to discontinuing the report," says TAM CEO LV Krishnan. Media experts say that the problem begins when channel owners try and interpret or "crack" the report and figure out which market carries what weightage in the TAM people metre system. Post-analysis, they set out to woo the cable operators in such important areas to push them to put their channels in the primary bands.
Clearly, the new broadcasters are jumping into the business with their eyes open. "If a new channel is spending Rs 60 crore (Rs 600 million) on cable distribution, it is eyeing Rs 300 crore (Rs 3 billion) from advertising by getting seen in cable homes in the prime band," says DEN's Gandhi.
Even the government has not intervened in the carriage fee matter and Trai, in its consultation paper, observed that it cannot regulate the "carriage fee" as spectrum is scarce and market forces apply.
"The government then must at least push CAS (conditional access system) which will help quicken the digitisation process," says Anurradha Prasad. But digitisation, which may lead to a rationalisation in carriage fee since enough bandwidth will then be available through compression, seems a long way off. Of the 75 million cable and satellite homes, digital cable is available only in two million homes!
Steep hike
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The carriage fee market is pegged at Rs1,000 crore
- Nearly 330 channels are chasing bandwidth that can accommodate 80 channels
- New cable companies are also responsible for the sudden hike in distribution charges
- Even direct-to-home operators like Dish TV and Tata Sky have jumped into the carriage fee fray
- Trai observes that it cannot regulate the carriage fee as spectrum is scarce
