The $1-billion NDS Group sits at an interesting point in the global pay-TV business. It creates technologies and applications that help pay-TV operators push digital content to set-top boxes, DVRs (digital video recorders), PCs, mobiles and other multimedia devices. Thanks to an ordinance issued in October, the Indian pay-TV industry is now legally bound to ensure full digitisation of India's 142 million TV homes by 2014. Executive Chairman Abraham Peled talks to Vanita Kohli-Khandekar about their plan. Edited excerpts:
How will the latest regulatory changes impact your India business? Are you ready to meet any surge in demand?
We have been preparing for this since 2003 when the conditional access system mandate happened. It went on and off for a while. The big multi-system operators have been aggressive; for them we were ready. There are smaller players sitting on the sidelines.
The biggest things in rolling out quickly is the chips and the STBs (set-top-boxes), which we don't make. We are talking to companies that do and reserving chips and STBs for the potential rise of demand in India. There will be a surge on the cable side. We are not sure of the DTH (direct-to-home) side. The acquisition costs are very high and DTH is showing signs of a slowdown.
How difficult has it been to be a vendor in India?
We planned for boxes in 1998 on C-band (the cable transmission in India is on C-Band, DTH is on KU-Band). Then the market, the consumer and the economy, nothing was ready to appreciate the benefits of digital.
Now high definition (HD)and personal video recorders will drive penetration (of digital STBs). For example in Germany, the market did not move to digital cable till HD took off. It was an analog market. Now the FTA (free-to-air channels) are also on HD and pay.
How do you view the whole shift of TV audiences to online and the pressure it has put on pay-TV revenues in the US?
Online viewing is the most exaggerated number. It is still minute in proportion to broadcast. All pay TV operators are now starting to offer online. It is really an additive, just one number. Every broadcaster we work with has a hybrid box. He will offer programming on broadband and other pipes once broadband is in place. So, what they are doing right now is buying library rights.
What has your experience been in a market where cable has been a strong incumbent, like in India?
We haven't seen mandates for digitisation in other countries, except for China. In most countries, say the US or UK, they just decided to stop analog transmission and kept a deadline. The real catalyst for cable digitisation is triple play. The US, for example, was a strong analog cable market. It moved very slowly toward digital cable. DTH operators hit 15 million subscribers before cable moved. And then the telcos jumped in.
India, the regulatory environment has to ensure right-of way and a license for over one year, only then will the money come in.
Do content markets take off after full digitisation or does the lack of content push markets to digitise?
It is like asking if the chicken came first or the egg. But the fact is that subscription TV offers a more stable base for content. HBO started doing movies without a break only after it had subscribers. It takes risks on original series such as The Sopranos. The content game is different with advertising. There you have to guess what people want.