Carriage fees business may decline 20% this year

For probably the first time in 15 years of cable television, the business of paying carriage fees to cable companies by broadcasters for a prominent channel placement is expected to come down by 15-20 per cent (to under Rs 1,000 crore) this financial year, compared to last year.

While this may be good news for existing and new broadcasters, it is bad news for Multi Service Operators (MSOs), as it will impact their revenue streams.

Carriage fees or placement fees are part of a commercial agreement between broadcasters and MSOs or large cable companies for, typically, one to two years. The broadcasters agree to pay a large amount to MSOs, who in turn ensure the channels (for which the money is paid) are placed prominently on the cable platform (mostly analogue), so that viewers could access them with ease.

According to cable industry estimates, carriage fee payment was Rs 1,200-1,500 crore last year and said to be growing in double-digit percentages. This was mainly due to the launch of Hindi entertainment channels like Colors, NDTV Imagine, 9X and Real, among others, who may have together paid over Rs 200 crore in carriage fees last year.

However, faster digitalisation, growth of regional channels and an overall economic slowdown have contributed to the decline in carriage fees. Now, instead of 60-70 channels carried by the ordinary cable, digitalisation and optical fibres have increased the carrying capacity to nearly 200 channels, thereby contributing to the decline of carriage fee payouts, say sector experts.

“Yes, the carriage fees have declined for us. Broadcasters that paid last year have drastically reduced their budgets for carriage fees this year,” says Vikky Choudhary, head of Home Cables, a leading independent MSO in South Delhi.

Also, around three dozen regional channels have been launched in the past two years. Since they carry regional content, they do not have to pay carriage fees to be seen all across the country like the Hindi channels. This has also led to an overall decline in the carriage fees market, says an industry analyst.

Distributors of content agree, too. Says Dinesh Jain, CEO, Zee Turner: “Scarcity of funds and a realistic assessment of business plans, coupled with an overall slowdown in the economy, may have contributed to a decline in carriage fees this year. From our perspective, this will now bring back the focus on the importance of subscription revenue, that had been replaced by carriage fees by a number of MSOs.” Zee Turner distributes 35 channels, including all the Zee group channels.

But, others disagree. According to DEN, the new MSO that currently has nearly 10 million cable homes of the 85 million in the country, the overall carriage fees business hasn’t declined but has become stagnant this year. “There has been a redistribution of carriage money after new players like us or some others entered the business and grew. So, from the handful of MSOs that earlier cornered a large chunk of the carriage fees, the business has come to new players,” says Anuj Gandhi, CEO, DEN Networks. DEN, in partnership with STAR India, distributes all the STAR TV channels in India.

Will carriage fees stay on? Yes, says Vikas Bali, president, digital, DEN. “Even after digitalisation, there will be broadcasters who would want, say, a particular channel number on the electronic programme guide. They will pay a premium for that and you may call it carriage fees or anything else, but it will continue to exist even in the future,” says Bali.

A clear example of growing carriage business is the Direct-to-Home (DTH) business. Sources say around two dozen channels are currently paying anywhere between Rs 1 crore and 5 crore in carriage fees to DTH players for carrying their channels. “Two years ago, DTH had virtually no carriage fees. Now, between all DTH operators, a minimum of around Rs 50 crore of carriage fees is generated,” says a source working for a leading DTH operator.