Campaign India Team
Jan 21, 2013

With digitisation, will GECs rethink distribution strategy?

Will some channels reduce subscription rates or go free to air to increase viewer base? Will others leverage loyal viewership to boost subscription revenue?

With digitisation, will GECs rethink distribution strategy?

With digitisation gaining momentum in India, pricing and distribution strategies for TV channels, particularly GECs, have become a talking point. Campaign India caught up with players across media, agencies and clients for their take.

Vikram Sakhuja, global chief executive officer, Maxus, is of the opinion that digitisation will negatively impact channels’ reach as consumers will have to eventually make the choice and pick channels they are willing to pay for. He explained, “For channels that offer premium content, consumers don’t mind even paying a premium price. But general entertainment (channels) will be more successful if they play the ‘undifferentiated reach game’ and focus on advertising as their sole revenue model.”
 
Ashish Bhasin, chairman India and chief executive officer, South East Asia, Aegis Media, begs to differ. He noted, “GECs can’t rely on advertising as a sole revenue model. What they can instead do, is reduce their subscription rate for higher volumes.”
 
He added, “The industry is already so much skewed towards advertising as the revenue model; one must look at balancing this. And what better opportunity than now, when we’re in the transition phase, from analog to digital?”
 
“If the content is good, they should charge the price. There is no need for GECs to go FTA (free to air). Today, people pay to watch Colors, Sony, Zee and Star. So why change the strategy?” asserts Ashish Pherwani, associate director, advisory services, Ernst & Young.
 
Paritosh Joshi, strategist, India TV, points out that in the short and even medium term, major GECs will carry over their sizable audiences from analog cable to digital platforms. He explained, “DTH has been with us for over six years and the pecking order in DTH homes is not materially different from the broad population. In the same vein, the mandatorily digitised metro markets do not reveal any significant pre-post diversions. There is, therefore, no immediate compulsion for GECs to re-evaluate their business model. Also, GECs have enough consumer pull and distribution platforms cannot afford to drop them. You will find them (GECs) nestling comfortably in the base tier of almost every subscription.”
 
Anisha Motwani, director and chief marketing officer, Max New York Life Insurance, is of the view that revenue leakages that happen with analog distribution will now be curbed, which will subsequently result into better topline performance for broadcasters. She observed, “Broadcasters will realise the potential of strong content and will cater to the diversified needs of viewers. It will also lead to segmentation of channels and programming. Net-net, GECs will be able to master better content in the long run, which will have a stronger viewer pull towards the channel and help them mark a clear USP for themselves.”
 
Substantiating her view on FTA versus pay model for GECs, she said, “FTA goes against the concept of the brand and charging for it. The international model too, in the broadcasting space, does not allow scope for FTA in most countries. TRAI initially gave an option to all channels either to go pay or FTA. It provided a window of one year to GECs to be FTA and then convert into a pay channel. Almost none of the GECs opted for the same. Becoming a FTA channel is not a sustainable model if they wish to better their content, do acquisitions, and grow their loyal viewer base.”
 
On whether GECs are failing to differentiate in terms of content offering, Joshi, noted, “It is presumptuous to suggest that the scope for differentiation in GECs is minimal. Every GEC will, over time, define its core audience more sharply and its entertainment proposition to that audience. Age, gender, geography, socioeconomic circumstances, emotional orientation and a host of other differentiating variables will find play in future evolution and GECs will morph into SECs (specialist entertainment channels).”
 
He adds that no channel would go free to air unless its business model reveals a significant upside on revenues, and that a purely advertising-driven model would increase risk.
 
Pherwani surmised, “Additional income generated in subscription can be re-invested into creating even better content. For channels who are not market leaders, there is a possibility of them going FTA. But, the strategy can backfire. If consumers are paying for the top three channels, then a fifth or sixth FTA channel doesn't make sense. And in any case, the decision to go FTA will only be taken once there is enough data to suggest that consumers have actually opted out a few top channels post digitisation.”
Source:
Campaign India