Saturday, May 14, 2016

Broadcasters to Distributors - Changing Interconnect Regulations

In Indian media, TV interconnection regulations between broadcasters anddistributors are under review to keep pace with digitisation. These areunderlined by the need for interconnect to be non-discriminatory and common in framework across distributors. As per the recent TDSAT ruling, reference interconnect offer (RIO) has been made the starting point for deals and the regulator TRAI has a consultation process for fresh comprehensive guidelines. The two parallel processes of TRAI and TDSAT have caused broadcasters and distributors to defer new content deals,impacting near-term subscription revenues of broadcasters. However,long-term increased transparency will be a positiv.

TDSAT ruling compelled TRAI’s comprehensive review
The recent Telecom Disputes Settlement Tribunal (TDSAT) ruling (in case of NSTPL vs Media Pro) has made it mandatory for RIO to be the starting point for negotiations from 1 April 2016. In a move to increase transparency, TDSAT has also asked broadcasters to clearly state all bulk discount schemes on offer in their RIO and have asked broadcasters to issue new RIOs by 1 May 2016. TDSAT has also asked TRAI to issue a comprehensive code for thebroadcasting sector, and TRAI has come out with a consultation paper on key issues surrounding interconnect agreements. Broadcasters have also made available new RIOs, which clearly specify the basis for discounts which could go up to as much as 70-80%. In the wake of these developments, stakeholders have put the signing of new interconnect agreements including the ones for phase 3 digitisation on hold,which is impacting near-term subscription revenues of leading broadcasters.

Beyond digitisation, interconnect agreements hold the key to subscriber billing tariffs and ARPU.The key reason for delayed ARPU uptick in digitisation phase 1 and 2 was delays in finalisation of interconnect agreements between MSOs (multi-service operators) and broadcasters and between MSOs and LCOs (local cable operators).Increased transparency in interconnect agreements in medium to long term will add upsides to Zee Entertainment’s subscription revenue forecasts.

Thursday, April 14, 2016

TRAI on Reference Interconnect Offers

Mr. RS Sharma, the Chairman of TRAI, highlighted that the broad principles on which TRAI’s orders are based are: (1) transparency and non-discrimination for all stakeholders, (2) consumer protection and (3) ensuring growth of the sector. He said that in Telecom, the principle of net neutrality is broadly defined as ‘pipes being agnostic to content’. In this context, the TRAI asked all stakeholders to ponder if a similar principle could be applied to the Media sector where ‘content could be made agnostic to the pipe’.

Broadcasters want price forbearance at the wholesale level; however, genre-based price caps are acceptable to them. They refuted that discounts on RIO rates are to the extent of ~90% and highlighted that weighted average discount is far lower. Most of the broadcasters want carriage/placement charges to be regulated/abolished or subsumed within the RIO. Broadcasters do not want HD and niche channel pricing to be regulated. They wanted TRAI to mandate prepaid billing at the consumer level.

MSOs are against price forbearance at the wholesale level as they believe that consumer interests will be impacted. MSOs highlighted that HD channels are priced at multiple times that of SD pricing and this has to be regulated. They favour ‘integrated model’ of pricing of content under which the broadcaster can declare the retail pricing of its channels and the MSO declares the price for distribution services. MSOs believe that the existing carriage regulation is working well and should be left unaltered. MSOs also urged TRAI to mandate compulsory prepaid billing at the consumer level.

Tuesday, March 15, 2016

Hathway Cable & Datacom - Maximize Digital Gains

After rolling out prepaid billing and packing for its primary subscribers, Hathway has now launched packaging for its secondary subscribers under “Hathway connect”. The company has launched 2 commercial packs (INR330 – all channels except English bouquet and INR425 for all channels). Currently, it is at pilot phase and only launched in Bangalore. The company awaits feedback on the packs, post which it will roll out the packs in entire Phase I and II markets. As compared to Den Networks, Hathway has higher primary subscriber base, well entrenched broadband operations and has seeded the highest number of boxes amongst MSOs. 

Hathway is the best placed MSO to capitalise on the digitisation opportunity. Currently, the company’s digital subscriber base stands at 9.6mn. Also, we like the company’s strategy of increasing investment in the high-margin broadband business, which has started to yield returns.

Sunday, March 06, 2016

DTH Business Report healthy Numbers - Airtel / Videocon

Both Videocon DTH and Airtel DTH reported healthy quarterly numbers over the last couple of days. We look at the metrics and some read-through for Indian cable/satellite space, including Dish.

VDTH added 0.43m subs in the December quarter, increasing net subs by ~15% yoy. The comparable number for Airtel DTH was 0.53m subs, increasing net subs by ~13% yoy. While both VDTH and Airtel
DTH also benefited by sequentially lower churn, underlying momentum in the market remains strong - we expect Dish to add 0.40m subscribers in the quarter.

The trend on ARPUs remains healthy (VDTH: ~8% yoy, Airtel DTH: ~7% yoy) - this is a result of price
hikes taken in the recent past, HD adoption (trends do vary from quarter to quarter though) and increasing value added services. For Dish TV, we model in ~5% increase in ARPUs for FY16 yoy.

With attractive content deals and operating leverage continuing to play, the sector continues to deliver good EBITDA margin expansion. Both VDTH (~390 bps yoy) and Airtel DTH (~600 bps yoy) reported healthy margin expansion resulting in EBITDA growing ~42%/45% yoy respectively.

Tuesday, February 23, 2016

Sun TV Vs Regional Channels Ratings

A quick update on ratings of Sun TV Vs other Regional Channels

Tamil. Sun TV’s ratings have come off by about 10% over the past 3 weeks and it is at about 4.5-5X that of Star Vijay as against 5.5-6X earlier. That said, on an average, Sun TV's ratings are ~5X that of Star’s Vijay TV under BARC as against 3X TAM. The Movie channel KTV's ratings have also improved under BARC.

Telugu. Gemini TV has been pushed to a distant #4 position under BARC from #2 under TAM. Further, the quality of ratings is weaker, both in terms of urban/rural mix and composition (movies/non-movies). Gemini TV’s viewership share in the top four Telugu GECs has come down to 19% in the past two weeks as against an average of 21.4% since mid Oct 2015.

Kannada. Udaya TV has been pushed to #2-4 position under BARC from strong #1 under TAM. Colors Kannada is a clear #1 in a 4-player Kannada general entertainment genre. Further, the quality of ratings is weak both in terms of urban/rural mix and composition (movies/non-movies). Udaya TV’s viewership share in the top four Kannada GECs has come down to 17% in the past two weeks as against an average of 20% since mid Oct 2015.

Malayalam. Surya TV's position has dropped to #4 position in the four-player Malayalam GEC market dominated by Asianet. Flowers TV, a new GEC launched in 2015 has consistently surpassed Surya TV to settle at #3 spot. Surya TV’s share is down to single digits in the top four Malayalam GECs.