Hathway Packaging Star Channels like DTH

Post the move by market leader Star TV to offer channels a-la-carte and at wholesale rates, Hathway has responded by coming out with five packages in its key digital markets (we note that it is only via packaging that cable operators can improve ARPUs and pass on the increase in content costs to subscribers, and it is only via packaging Multi System Operators (MSOs) that it can use the multiple incentives offered by Star TV). The company is following up with aggressive marketing (ads across mediums likely to spread over a couple of months).

There is strong case for cable TV operators to hike tariffs, particularly after the move by Star TV to offer content at wholesale rates. Key reasons which support tariff hike include,
Churn - local cable TV operators could see churn in case they fail to match content at par with Direct-to-Home (DTH) operators.

Increase in content costs - The move by Star TV has resulted in increased costs for cable TV players. We have seen in other sectors, such as telecom, that an increase in input costs has resulted in increase in voice tariffs. We understand only Hathway has started the packaging initiative as of now. That said, if Hathway sees a robust sign-up by existing subscribers, others are likely to follow suit (in addition, we expect other big broadcasters to replicate the move by Star TV once big MSOs implement packaging).