Tamil Nadu's cable war

Last Updated: Thu, Sep 08, 2011 21:01 hrs

Jayalalithaa’s rejuvenation of Arasu Cable is directed at bringing Kalanithi Maran’s Sun TV to its knees, but may lead to surprising consequences.

For the last eighteen years, Sumangali Cable Vision owned by Kalanithi Maran enjoyed a near monopoly in cable distribution services in Tamil Nadu. The main beneficiary of this monopoly? Sun TV, India’s most successful television network with twenty television channels, and revenues of 2,013 crore—also owned by Maran. With a lock over content and distribution, Maran and his Sun empire enjoyed an unchallenged reign over the media landscape South India.

The state’s new chief minister, Jayalalithaa plans to change all of that. In June, during a discussion on the Governor's address in the state assembly, Jayalalithaa said the former Chief Minister and DMK Supremo M Karunanidhi's family members, including Marans and Azhagiri's have amassed around Rs 20,000 crore over the last five years, thanks to the then DMK Government's free colour TV distribution scheme. “The money came to the DMK family members as cable connection charges collected from the recipient of the TVs,” she said. “One family (she was referring to DMK's chief family) involved in the Cable TV operations had enjoyed a monopoly and charged exorbitant rates.”

In what could be a dramatic reversal of fortunes for Maran and Sun TV, the Jayalalithaa government launched Arasu Cable Corporation on September 2, 2011 (excluding Chennai) declaring it the official cable distributor in the state. On September 2, services of Arasu went live, but without the top four Tamil channels (in terms of viewership) Sun TV, KTV, Vijay and Raj TV, which are all subscription based. According to an industry official “Overall TAM data for Tamil Nadu shows average GRP for Sun was 1500 to 1600, while Vijay TV and Karunanidhi family owned Kalignar TV enjoys 200 points each, while Raj TV's has a GRP is around 110-120 and Jaya TV is around 100”.

For a subscription of Rs 70, Arasu Cable will offer 70 free channels and necessary steps will be taken up to add pay channels which will take the total channels offered to 90, said the Chief Minister. In Tamil Nadu, there are about 40,000 Cable TV operators and out of this, 34,344 have already enrolled with Arasu Cable, according to Information Technology Department's Policy note. This means, 94 per cent of the cable operators won’t be able to telecast the pay channels.

Here’s how the cable business works. At the base of the pyramid are Local Cable Operators (LCOs) who collect fees from customers. After taking Rs 40 per customer out of a theoretical Rs 100 per month collection, they pass the remainder on to Multi Service Providers (MSOs) who are the recipient of the signal from the broadcasters. MSOs pockets Rs 10 as a general fee, another Rs 10 as administration costs and then spreads the rest, around Rs 35-40 amongst Pay TV channels in its kitty. Consequently, Kalanithi’s empire was essentially able to make close to Rs 2,000 crores from Sun TV’s operations as well as an undisclosed amount from revenues from Sumangali Cable’s operations. The Arasu effect will impact both businesses.

It is hard to imagine Tamil Nadu without Sun TV, since Kalanithi’s network contains some of the most watched channels in the state that host Tamil serials, dramas as well as other national channels such as Sony, Star Plus and various sports channels. Says Gomathi Narayanan, a Tirunelveli-based cable operator, who switched over to Arasu: “We already raised the issue with the management, if the pay channels are not going to be part of the offering it will be difficult to sustain. The pressure is more from the ladies, as they are missing their TV serials.”

Cable operators in TN today sit between a rock and a hard place. They can’t afford to antagonise Jayalalithaa, but they don’t stand much chance of making a living without Sun Network’s channels. A cable operator turned broadcaster P V Kalyanasundaram, chairman & Managing Director, Polimer Media said that “it will be very difficult for cable operators to survive without pay channels. Already in the last three days customers have started asking for them.”

What if the government relents and decides to add pay channels? Then broadcasters will be paid a subsidised amount, less than what they currently get from cable operators, and it is unlikely that these channels, especially the dominant player, will be compensated by the Corporation,” said a senior executive from one of the top three Tamil channels. “Today the top broadcaster's bouquet of offerings alone costs the cable operators little over Rs 80,” he notes. “Why would a broadcaster be ready to take a cut for Arasu? It is unlikely”.

The brighter side of the story is that Tamil Nadu is classified into three different markets for advertisement revenue, and Chennai accounts for a large portion of the pie, where consumers get Pay channels for free according to the conditional Access System (CAS) governing the four major metros. Chennai basically mitigates the hit caused by a loss in revenue on account of the rest of the state not showing Sun. So, instead of no business at all, they could potentially see only a 50% drop in revenues.

Still, there could be another ironic reversal in this game of brinkmanship. With cable parched of Pay TV channels, customers could flock in droves to the next best option—Direct-to-Home television (DTH) which involves buying a dish. No prizes for guessing who the biggest player in the industry in the south is. If you said Sun, you guessed right. By paying Rs 149 a month, to Sun’s DTH operation, a customer will get his favourite Tamil channels, besides a 24 hour Tamil Movie channel, which will not have any advertisement break. “Either the Government will be forced to offer pay channels, in response to customers’ feedback, or DTH will gain momentum, in which all the channels are already a part,” said a senior official of a Tamil pay channel. At present DTH penetration is around ten per cent in the state.

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