MxMIndia

Tag: ARPU

  • While the conventional MVAS services are still dominant, emerging MVAS services are also rapidly gaining popularity with mobile users

    IAMAI- IMRB report: MVAS grows at 28 per cent; surge in modern MVAS in India

    By A Correspondent

     

    The Indian mobile value-added services (MVAS) market is expected to become a Rs26,000 crore market by the end of 2012, growing at the rate of 32 per cent. MVAS is estimated to further grow to a whopping Rs33,280 crore market by 2013, a growth of 28 per cent. While the conventional MVAS services are still dominant, emerging MVAS services are also rapidly gaining popularity with mobile users. These are some of the findings from the latest IAMAI – IMRB report on Mobile VAS in India.

     

     

    According to the IAMAI-IMRB report, MVAS can be divided into two categories – conventional MVAS which has a market share of 63 per cent and the emerging or modern MVAS which contributes a market share of 37 per cent. While the conventional MVAS services consist mainly of CRBT and SMS-based applications, the emerging or modern MVAS mainly consist of mobile apps and games.

     

    Speaking to MxMIndia on the factors that would drive the MVAS revenues in the long run, Rajiv Hiranandani, Co-founder and Executive Director, Altruist- Mobile2win said: “I am a firm believer that the true growth of mobile VAS is going to come from the rural India. You will see more of services that will help the rural or the small town Indian utilizing the services. In that respect, I believe Interactive voice response (IVR) based services and SMS-based services are going to be big drivers of Mobile VAS. These services could range from basic things like finding the price of vegetables or some information over SMS or finding friends over IVR or IVR-based social networking. These are services that will catch on and will drive revenues in India over the years to come. So for VAS revenues to explode in the country, you need to appeal to the lowest common denominator which primarily resides in the rural India.”

     

     

    In the last three years, the average MVAS spent per month has risen by Rs9 to stand at Rs24 per month in 2012. The percentage share of per user spend on MVAS in Average revenue per user (ARPU) has been increasing gradually. Even though the ARPU has declined over the years, per user spend on MVAS has gone up by 28 per cent in the last one year. It is now 27 per cent of the ARPU pie. The dependency on voice services is reducing and to increase the ARPU, the emphasis must be put on data services such as MVAS.

     

     

  • With the growing scope of monetizing multimedia content, IndiaCast is poised for interesting times

    We want to be in the forefront when new media merges with traditional: Anuj Gandhi

     

     

    The writing was on the wall the day Anuj Gandhi joined Network 18 in March this year to oversee the group’s distribution and new business development. And the reason for this was the all-new relationship between Network 18-TV 18 and Reliance Industries forged a few months before his joining.

     

    Other than the providing of the much-needed funds and the consequent stake in one of India’s largest (and more powerful) media conglomerates, Reliance was also looking at making full use of the content produced and owned by the various Network18 and Television18 arms, especially for the Reliance 4G services.

     

    Also, in the post-digitization era, distribution becomes a key driver in the revenues of a broadcaster, especially for niche channels. And with various mobile devices becoming popular and wireless technology progressing rapidly from 2G to 4G even in India, the monetization potential for multimedia content leapfrogs.

     

    Enter IndiaCast, a joint venture of TV18 and Viacom18 to create India’s first multi-platform ‘Content Asset Monetization’ entity.

     

    IndiaCast Group CEO Anuj Gandhi is a veteran in the distribution and the affiliate sales front. An MBA from the SP Jain Insitute of Management, he has worked with Discovery Communications as Director – Affiliate Sales (1997-2002),  as President of SET Discovery (2002-07) and CEO of DEN Networks (2007-2010) and worked as an independent consultant for a little over a year. He has also worked with IndusInd Media in distribution (way back in 1994) and prior to that with Ranbaxy. Clearly, being an early leader in every aspect of the distribution business, Mr Gandhi is well-poised to monetize the wide variety of content that IndiaCast has in its basket.

     

    Hours after announcing IndiaCast, Anuj Gandhi spoke with MxMIndia, his first and until the time of publishing only detailed interview on the shape of things to come.

     

    So we see the the birth of a laaarge distribution company…

    IndiaCast is much larger than other traditional distribution companies because it entails monetizing content assets of all the groups – right now TV18 and Viacom18, and post-acquisition of Eenadu, but for all rights. It’s effectively all non ad-sales kind of monetization businesses. It will be online, traditional brick-and-mortar distribution businesses at a global level. So it is pretty huge.

     

    It’s just the beginning. My sense is that most people will do it because the lines are diffusing between various rights that people use in the market. It has already happened in the international market where a DTH guy blocks Over The Top (OTT) or IPTV rights from you and vice versa. So you will have technologies where OTT rights will sit on a box so the cable guy will come and tell you that I not only want to do cable rights but I also want OTT rights. Thus, with the passage of time, new media will get merged with traditional media and we want to be at the forefront of the revolution which will happen in the next few months/years.

     

     

    Any international tie-ups in the offing?

    We already have international updations in the US, UK and Dubai. Colors is being distributed there and going forward, we want to expand our portfolio. We plan to distribute more and more channels internationally. So it’s work-in-progress on that front.

     

    So what happens to Sun18 now that IndiaCast has been formed?

    Sun18 was an alliance that worked very well and will continue to do well. The deal at Sun18 was that we will distribute Sun and Disney channels in Hindi-Speaking Markets  (HSM) and they will distribute us in the South. So, the only change in the whole alliance is that instead of distributing in the whole of South, they will only do Tamil Nadu now. Otherwise everything stays the same, we still distribute them in the North and also Disney which is part of their network. With this, Sun18 North has kind of folded into IndiaCast.

     

    Is it a coincidence that IndiaCast happened days before the scheduled digitization in the metros or was it on the cards for a while?

    No it was in the pipeline and we were talking about it for a while now and we knew that we needed to get all our pieces in order.

     

    Any major challenges you see coming up in the future?

    I think the major challenge would be to get the deal right for digitization. Whether it happens in 25 or 90 days (as digitization in the four metros is likely to get delayed by a few months), this is a chance where the industry needs to correct itself; we all need to work in getting the ARPU situation right in this country. So the challenges are basically at the industry level. Also, on the global front, the challenge is to be able to do more channel launches in international markets and be seen as a serious player. Also, one more challenge will be about how new media unfolds in the country.

     

    With viewers being able to subscribe to channels a la carte, do you anticipate reach/visibility of channels to take a beating… for instance, what if a person just takes one or two channels a la carte?

    While there will be some percentage of the market that will opt for it because by law you have to offer it. Like when CAS started, everyone talked about a la carte and people taking only one or two channels, but it just doesn’t happen. It doesn’t happen anywhere in the world and it won’t happen inIndiatoo. There may be a few people who would want that but that would be a single-digit percentage for me. So I am not too worried about it. But what will happen is, as they say, the time spent on niche channels will go up with digitization as everybody will be getting the same quality of channels. But if you start picking and chasing packages, some channels will start suffering. Not everybody is going to take all Hindi news channels, for example. So if they are in the same package, then people may pick them but if they are placed differently then it may not be the case. So some impact will happen, but not in the short term.

     

    We see that IndiaCast will also represent Sun and Disney in HSMs. Any others on the anvil? Since UTV channels are now part of Disney, will they move too?

    Nothing right now, I think we already have too much on our table right now. If something happens tomorrow, we do not know but we are not looking at adding anything new as yet.

     

    As part of Network 18/Television 18 agreement with the Reliance Industries Ltd’s Independent Media Trust stake, there was also a plan of all Network 18/Television 18 content being syndicated to Reliance 4G? Will it be done via IndiaCast?

    I won’t be able to comment on this but as is known, all content monetization businesses lies with IndiaCast so the same businesses will be done with any 4G networks whether it is from Reliance or any other telco from the business.

     

    So going back to the earlier discussion, the arrangement with Sun18 stays…

    Yes, we have just changed the definition in terms of the three states in the south. Otherwise it remains where it was. So Sun18 continues to exist and holds up in IndiaCast. It won’t be called Sun18 anymore. There is no shareholding changing – Sun18 North is just folding up into IndiaCast.

     

    Do you see consolidation gaining prominence as we move ahead?

    I think it will happen for some time. What way and form – will now change as technology is becoming a critical part of our business. The traditional mergers may not happen as much but there has been a lot of M&A happening on the platform side which will also have an impact on broadcasting.

     

    With digitization happening, do you anticipate the revenue from non-advertising sources will actually be more than what comes from advertising?

    I cannot generalise it and will depend on channel to channel. But will certainly grow; I feel that it could be 50-50 at the network level. So niche channels will benefit more from subscription than ad sales but mass channels will still earn revenues from ad sales.

     

    So just as it holds true for the sales folk these days, do you see the distribution team also have much say in content in the future?

    I wish my bosses here say that distribution guy must have a say in content (laughs). But it’s not that now. Until now the interaction with the consumer was through various means and the stakeholders were too many in the value chain. Going forward, because it will be a box and be kind of a direct deal – so if I am going to an MSO, he can probably tell me area specific complaints – it will reach back to the content owners much faster and in much clearer terms than what is happening today. That is what is happening in international markets and it will start happening inIndiatoo. But we are a couple of years away from that.

     

    So we’ll soon have distribution heads becoming CEOs of networks…

    Touche.

     

  • With just 44 days to go for the Big Switch in 4 metros, Ashish Pherwani & Devendra Parulekar of Ernst & Young address the key business questions

    So will Digitization mean more Revenues?

     

    By Ashish Pherwani & Devendra Parulekar

     

    It is estimated that India has 127 million C&S television homes, out of which around 32 million are DTH, 7 million digital cable and the balance 88 million analogue cable homes.  The first phase of digitization of analog TV broadcast, which covers the four metro cities – Delhi, Mumbai, Kolkata and Chennai – is mandated to be completed by June 2012, while the entire country is to be digitized by December 31, 2014 when analogue signals will be finally switched off completely.

     

    It is expected that the industry will need to invest around Rs75 billion in the process, and Phase I alone will need around Rs11 billion. This is based on the assumption that the cost of digitization per subscriber will be Rs1,500, out of which around Rs600 will be borne by the customer.

     

    The following present some of the key aspects of digitization:

     

    How does digital cable compare with DTH, the current digital distribution leader?

    Digital cable has the capacity to carry 1,000 Standard Definition (SD) channels and surpasses DTH, which can only carry 250-300 SD channels at present due to limited transponder availability. In terms of technology, digital cable is capable of having a “return path”, which is not possible in the case of DTH. This limits the latter’s scope to provide value-added services and dual play. Digital cable is able to provide a larger number of regional channels, and given the growth of the Indian media sector – fueled largely by regional content – this could be a significant advantage for it.

     

    However, in terms of customer connect, management capabilities and readiness, DTH players have a definite advantage, since while they have had B2C from the beginning, most Indian MSOs still have B2B. DTH players already have in place customer-centric systems and processes, including multi-lingual call centres and field engineer forces.  They understand the implications of running a B2C business, having already implemented subscriber management systems, customer relationship management systems, and so on.  Moreover, DTH players have already invested heavily on building their brands, using ambassadors such as Saif Ali Khan, Aamir Khan, Shah Rukh Khan and Abhishek Bacchan, thereby making DTH an aspirationally more desirable product.

     

    Due to the factors mentioned above, it is expected that there will be a churn of subscribers from cable operators to DTH, particularly in Phase I. While certain MSOs peg this churn at 15 per cent in favour of DTH, DTH players are more optimistic and expect to gain up to 40 per cent of MSOs’ customers. This churn will, however, largely depend up the readiness of MSOs to meet digitization deadlines and also take advantage of the marketing and sales efforts of MSO and DTH players.

     

    Another factor that needs to be considered is Headend in the Sky (HITS).  HITS operators may find it advantageous to assimilate smaller LCOs by becoming their technology service providers and providing them with content as well as SMS, CRM and billing services.  However, this could pose issues for MSOs, who are counting on aligning themselves with such LCOs.

     

    Evolution of the distribution system

    The distribution system comprises four key segments:

    • DTH companies
    • Large national multi-service operators (MSOs) – 5-6 players
    • Small MSOs with a regional presence – around 25 players
    • Small LCOs (local cable operators) – around 40,000 players

     

    Currently, national MSOs have interests in several smaller MSOs and LCOs. This is either in the form of investments or JV agreements.

     

    Going forward, the distribution system is expected to evolve, based on the ability of small players to scale up their operations. Today, the main role of an MSO is to buy content from broadcasters, decrypt it and distribute it to LCOs for last-mile distribution to customers. All customer-facing operations are performed by LCOs, which include billing, collection, repairs and maintenance.

     

    Once digital addressable systems are set up, some of the smaller MSOs or more competent LCOs may decide to provide all services to customers themselves. In this event, they may break away from their parent MSOs, and assisted by funding and systems setups, be in a position to manage their customer bases on their own, and thereby gain a large share of the total subscription revenue generated.

     

    Therefore, we expect that broadcasters may not only be dealing with the big 5 MSOs, but the big 50 MSOs as well in a short time, which would be a definite advantage for them.

    The depth of relationships of MSOs with their JV partners and the LCO community will be critical for a successful national roll-out.  It will determine which and how many LCOs team up with each MSO, as well as the share of revenue an MSO can expect to receive from LCOs.

     

    The entry of pure-play global cable operators such as Liberty and Comcast could result in consolidation of the industry.  The proposed change in FDI limits for all cable distribution to 74 per cent, and the sheer size of the Indian TV market, is sure to interest such global players. PE players have shown a significant interest as well, but appear to have taken a watch-and-wait approach to determine how phase I of the digitization process plays out before deciding on whom and how much they will fund.

     

    How will ARPUs move?

    Given the past as a benchmark, one likely scenario is that the base pack of free to air (FTA) channels is priced at around Rs100 plus taxes.  Earlier indications from TRAI indicated a rate of around Rs83 plus taxes, but given that several channels are expected to opt for FTA in the digital arena, this will probably increase.  The cost of this base pack is, therefore, expected to increase at an inflationary rate of around 8per cent every year.

     

    High growth rates of 10-15per cent are likely to be seen in tier 1 and tier 2 packages, which will comprise most of the popular pay channels, e.g., the GEC and sports channels, and be priced between Rs150 and Rs250 plus taxes.  Premium packages, priced at Rs300-500, and including packages that have a large number of niche and HD channels, will probably grow at 15-20per cent per annum.

     

    Compared to the current ARPU of Rs140 per subscriber, we expect that within two years, the average family cost per TV set will increase to Rs250, inclusive of taxes.  The important factor to note is that households with two or more TV sets (according to estimates as high as 20per cent or more in the four metros) are likely to opt for addressable digital systems, and thereby, increase the size of the industry significantly.

     

    Application of a price cap, either at per channel level or a package level, could prove detrimental to the roll-out of digitization.  The equilibrium brought about by market forces would ensure optimal price points from a customer perspective.

     

    The tax impact could be significant as well.  The so far largely untaxed 88 million analog subscribers will now be subject to taxation, and this is likely to result in an increased cost of Rs25-45 per subscriber per month.  In all probability, this cost (around Rs4,000 crore a year) will be transferred to customers by the industry, and therefore, ability to increase ARPUs may be impacted in the short term.  Therefore, the efficiency of the value chain will be critical in determining the actual incidence of taxes levied on LCOs, MSOs and broadcasters.  The cost incurred to digitize networks also needs to be considered in terms of a one-time write-off or by spreading its impact over several years.

     

    How will ARPUs be shared?

    Honestly, we don’t know.  Today, many LCOs retain up to 85per cent of the revenues they collect from their end customers due to under-declarations made by subscribers, and the balance is split between MSOs and broadcasters in a ratio of 1:2.

     

    Different MSOs are proposing different splits.  Some envisage an equal split between the broadcaster, MSO and LCOs.  Some expect LCOs to retain 50 per cent of the collection, even two or three years down the line (given that it would be difficult for them to give up their revenue share).  According to a recent news article, TRAI is considering a regulation whereby LCOs will retain 70 per cent of the collections.  Some sources indicated that MSOs may guarantee revenues for certain LCOs at their current take-home levels for a year or two.

     

    Eventually, once addressability sets in, the share of revenues is expected to be driven by services provided to the customer.  Broadcasters will get a share for the content they provide; MSOs for their buying efficiency and the technology support they provide;  LCOs a share that is proportionate to the last- mile and customer-facing activities they provide.  If we compare this to the telecom sector, 60-70 per cent of the revenues are retained by telcom, as compared to 90 per cent by MSOs and LCOs.  This percentage needs to come down to global levels, where less than 50 per cent is the share of the distributors.  But this will take time.

     

    How carriage fees are likely to move

    Every business has a cost of distribution, and media is no different.  The cost of carriage will remain, one way or the other, whether as a per subscriber technology, a provisioning cost, a fee to place a channel in a package or as one to position a channel within a genre.

     

    There is likely to be some reduction in carriage fees, since digitization will result in eradication of the artificial scarcity caused by the analogue infrastructure.  However, in the long term, carriage fees are expected to continue in one form or the other .

     

    In all probability, strong channels (and those that are included in much-demanded broadcaster bouquets) will end up paying a reduced carriage fee, and weaker ones will pay a higher amount.

     

    The role of TAM

    TAM is expected to continue being the leading provider of viewership measurement services inIndia, since no method or technology is currently planned in any large-scale STB implementation program or any other system to find out which person in a household is watching which part of which program.  It may be possible to determine how many subscribers have subscribed to a channel by aggregating data from leading MSOs, but that is not a measure of actual viewership.

     

    Alternative business models

    Broadcasters and distributors can now think about implementing channels by using innovative methods to share risks and rewards.  Some such methods could be:

    • Broadcasters selling channels to distributors to exploit these in the form of ad sales and subscription revenues
    • Re-packaging existing channels for local audiences of MSOs and larger LCOs
    • Creating channels based on dubbed content from popular channels, to be rolled out as regional language channels across larger MSOs
    • Broadcasters, etc., distributing specially packaged film or music channels on a revenue-sharing basis

     

    The recent recommendation made by TRAI to limit the total advertising time on pay channels to 6 minutes per hour and FTA channels to 12 minutes per hour could also have a significant impact on the number of channels that continue to “go pay,” should such recommendations become the law.  Such a rule would boost transparency in TV distribution, and given that advertisers would not be willing to pay twice for the same audience reach, would also push up per-channel prices significantly.

     

    Moreover, in addition to regular revenue streams, new ones would emerge for MSOs.  For example, Hathway has demonstrated that it can generate 10-15 per cent of its revenues through broadband, and this could become a service other operators can also begin providing. Video on demand, gaming and niche content could also be provided at local levels.

     

    In summary, although the timeline for digitization is aggressive, the ordinance is a concrete step toward enabling systematic growth in the industry and more equitable distribution of revenue across the distribution value chain. All stakeholders are expected to benefit from the digitization process – transparency generally ensures this. It is, therefore, in the best interest of the industry that all stakeholders ensure that this initiative is implemented in as speedy a manner as possible, and make sure that no political, regulatory or any other road-blocks interfere in the process.

     

    Ashish Pherwani is Associate Director, Ernst & Young & Devendra Parulekar is Partner, Ernst & Young