April 17, 2008

Should there be pay channels ?

I have always wanted to ask this to our broadcast regulators. Unfortunately, there was no response when I put this question up in the feedback section of TRAI's website.

Lets talk economics (actually, arithmatics). Take one channel Neo Sports for example. This channel has been in the news for quite sometime what with it being off-air to most viewers because it charges a mind boggling Rs 37 / subscriber /month. If my cable operator has 5000 connections, he portrays only 3000 to Neo . Thats about 60%. Or maybe we should look at it another way. India's population is 100 crore. There might be about 4 persons per connection(family) on an average. So lets say 25 crore family units. About 10 crore might not be interested in Neo Sports altogether. So, basically, Neo has about 15 crore families watching cricket matches. Due to the extreme pricing policy, about 5 crore families might not be receiving Neo Sports, or are using DTH. Leaves us with a maximum 10 crore families. As I mentioned earlier, cable operator discloses only 60% of his clientele to the channel. So effectively, Neo provides signal to 6crore TV sets. At Rs 37, it nets in a cool 222crore per month by way of channel subscription.

Now that means that if Neo can earn 222 crore rupees a month in some other way, it can effectively make its channel free-to-air.

From unofficial sources, it has come to my understanding that Neo's ad rates are approximately Rs 30,000/second. For major matches, it can go upto even Rs 50,000/second, which are because quite some revenue goes to DD. At the premium rate, if Neo has to earn 222 crore extra, it has to show advertisements for 44,000 seconds or 740 mins or 12 hours. That means an approx 30 mins a day on match days, considering that all days are not match days. That would mean 20 seconds extra in between each over in a test match, or 10 between overs for a ODI or T20. Plus extra advertising during pre and post match shows.

If Neo becomes a free-to-air channel, its viewership might go up from 6 crore TV sets to atleast 10 crore, if not 15 crore. Thats a cool 150% hike. Ad revenues might also go up to Rs 50,000 and Rs75,000 for the base/premium rates. That means they have to advertise for 490 extra minutes only over a period of a month. 17 minutes a day maximum. This can not only be achieved by advertisements between overs and sessions, during pre and post-match shows, but also in-between-balls-flash ads. In fact, Neo can earn much more just because the ad rates for the existing ads would also increase due to higher penetration of the channel.

If Neo becomes available to every cable home in the country, then advertisers would move from DD to Neo, which can also help Neo generate more moolah. DD might then let go of its feed sharing clause if all TV homes get to see the channel.

A similar analogy can be used for all mass-viewing channels and even news channels. This may not be applicable to a lot of niche channels like Discovery, History, NGC, etc , as production costs of most programmes itself is quite high.

So, why are the channels not going free ?


Cinderella. said...

Amazing arithmetic there !

Even though had to read it thrice to get the calculation right..lol !

Really...I hope those guys are listening.

Vrij said...

Oye.. not bad at all.. someone sees this within a few minutes of posting!

And well.. the calculations are all approximate. Not perfect at all.

And yes.. I'm waiting for the channel guys to listen!

Pri said...

ahh i wish this post would reach them :(
wonder how many times they would have to read it before they are forced to accept that ur right :D

btw ur TAGGED!!

Vrij said...

Pri.. yep.. how I wish!