Stocks of these companies are heading North. Not only that, some of them have high hopes of attracting huge amount of FDI and FII to go ahead in the digital race. May be the government intended to do this to attract foreign investments so that our dying economy may get a drop in the ocean. Companies like DEN, Hathway, Tata Sky, Dish TV and WWIL could not have managed such fantastic results in the last fiscal when practically digitisation has taken place only for the name sake. No doubt, we have seeded millions of STBs but transparency, consumer choice and value additions are still a far cry even after sev en months of first phase closing down.
Emergence of Aggregators
Zee Turner - 76:24 partnership - came into existence on 02 Dec 2002 to distribute TV channels of Zee group, Turner and some others in India, Nepal & Bhutan
Star Den - A 50:50 JV of Star India and DEN MSO. Came into existence in May 2008. Exclusive JV for all pay channels of Star India and other broadcasters. Came in to existence when CAS was implemented and MSOs were barred by the Supreme Court to be exclusive distributors of TV channels.
Media Pro - Star DEN + Zee Turmer - 50:50, operations started in July 2011 just before Digitisation.
Objective: To transform content distribution in India by creating efficiencies in distribution arena, promoting transparency, and spurring digitisation.
The One Alliance - JV between Multi Screen Media Pvt Ltd and Discovery Communications India. Started operation in April 2002 Aim to cater to all distribution platforms.
Sun 18 Media Services - JV of Network 18 Group & Sun Networks - Strategic Alliance for distributing channels Existing in 13 July 2010.
All these companies have one common factor for their success, they have the super channel aggregator Media Pro supplying them the content. After all Media Pro is a creation of all these companies and has the largest influence in the market for making or breaking any TV distribution platform. So, it makes me think that our Ministry was well aware of this and so planned the whole operation of digitisation with the help of these giants right to the finish line otherwise we would have other long existing MSOs like Digi Cable, In Cable and many independent MSOs also announcing such encouraging financials and attracting FDI.
Surprisingly the government has decided to curb monopolies in the media sector in its second attempt asking TRAI to give it the solution. TRAI has done it in 2008 too but the exercise remained on papers. Even now TRAI is putting up a great show holding a record five Open House Discussion sessions in different cities (Delhi, Ahmedabad, Hyderabad, Bhuvaneshwar and Indore) and getting the inputs fr0m stake holders. As expected, in every session, TRAI faced maximum anguish fr0m cable operators against one entity and that is Media Pro.
Media Pro is a channel aggregator formed with the joint efforts of Star, Zee, Turner and MSO DEN and controls the supply of 80 odd 'pay' channels out of the existing 180 to all MSOs, cable operators, DTH, HITS and IPTV platforms. Under such circumstances who can stop these media houses creating their monopolies in the market because major content is in their control, distribution platforms are under their control and they rule the entertainment committees of FICCI, ASSOCHAM, CII etc. who act as lobbies for the industry? Not only Media Pro, we have another two or three aggregators who work in unison because their parent companies work under the umbrella of IBF.
It is very important to understand the problem created by Pay Channel aggregators to know how monopolies are being created in TV distribution. Majority of the hindrances to progress of the industry, be it Digitalisation or increasing ARPUs and improving the infrastructure have been created by these channel aggregators.
These aggregators are more or less cartels of various broadcast groups, many of them may be arch rivals.
They exclusively sell TV channels on behalf of their group broadcasters and thus have fixed loyalties. They have vested interests of selling all Pay TV channels in their kitty and thus they force MSOs/Cable Operators to buy all channels in bouquets where one or two channels are popular ones and other have hardly any demand in the market. The MSOs have to sell the channels in the bouquets to consumers by force and even if consumers don't want it, MSOs are made to pay for them.
To compensate their losses MSOs demand higher carriage fees, mostly fr0m free to air channels and niche channels since pay channels have their own large cartels including their group MSOs and DTH companies for distribution and can blackmail MSOs by not providing their content on some pretext or the other.
The aggregators once were a part of Major Broadcast groups as their distribution departments and were created as joint ventures and cartels of many Pay TV broadcasters so that all genres are represented in their bundles. The manpower and the infrastructure came fr0m the founder partners who already enjoy a large presence in the market having their DTH platform and MSO networks for distribution of channels.
Business and size of aggregators changed after the Supreme Court Judgement of 2007 where exclusive distribution of channels of a broadcaster through an MSO in a city was banned.
In 2007 The Supreme Court came to the rescue of the cable operators and in the case of Star India Ltd Vs Sea TV network gave a ruling that no MSO could be distributor of content to its competing MSOs or cable operator. Supreme Court order was not against Hathway or Star TV. The court's focus was to curb monopolies through channel distributors and stop discrimination of independent MSOs and cable operators. Crux of the judgement was that no pay broadcaster should have any interest in a distribution platform. Extract of the judgement dated 03 April 2007 is given below:
“Under the said Agreement there was a recital. Under that recital Star India Pvt. Ltd. had stated that it was an authorized distributor of the Satellite T.V. channels namely Star Plus, Star Movies, Star World, Star News, Star Gold etc. collectively referred to as New Channels Bouquet”
“The object of Interconnection Regulation is to eliminate monopoly. If Sea T.V. respondent No.1 carries on business in competition with Moon Network Pvt. Ltd. and if it is to depend on the Feed provided by its competitor and if the quality of the signals available through that Feed is poorer than the quality of the signals available through Decoders, then the Tribunal is right in holding that the above arrangement is per se discriminatory.
although a broadcaster is free to appoint its agent under the proviso to clause 3.3 such an agent cannot be a competitor or part of the network, particularly when under the contract between the broadcaster and the designated agent-cum-distributor exclusivity is provided for in the sense that the signals of the broadcaster shall go through the cable network owned and operated by such an agent-cum-distributor which in the present case happens to be Moon Network Pvt. Ltd.”
Once the regulatory process had started under TRAI in 2006-07 and CAS tariff orders and interconnection agreements were drafted Pay Broadcasters came under heavy pressure again. A-la-carte was made mandatory and rates of pay channels came under Tariff Orders. There were two options left with the broadcasters after that. One was take TRAI regulations to the Court and let the implementation get delayed further. In the mean time the second option of making their aggregation business much stronger and bigger would allow them to create monopoly in the distribution market. What their distributor MSOs were doing in local markets the aggregators started doing at national level.
TRAI's twin conditions for pricing of pay channels as given below were also the reason for Pay Broadcasters to create super distribution agencies like Media Pro so that MSOs could be pressurised to take all channels in the form of bouquets and at the price they wished to sell.
The sum of the a-la-carte channel rates cannot exceed 1.5 times the price of bouquet of same channels.
Also, the A-la-carte rate of any channel shall not exceed 3 times the average channel rate of the bouquet.
To circumvent the Supreme Court judgement and TRAI regulations, Star India created STAR DEN, a pay channel distribution company in May 2008. It is a 50:50 JV with DEN networks, a large MSO. Thus all networks of DEN got a preferential deal fr0m Star and all others were discriminated.
Super Distributors Made
Just when the Digital Cable Laws were being framed, two of the biggest rival media groups of the country created another channel aggregator Media Pro in May 2011 out of their existing aggregator companies. It is a 50:50 JV between Star DEN and Zee Turner, the biggest cartel of pay broadcasters distributing about 80 channels out of the 180 pay channels existing in India.
The other large distribution cartel is of SUN Network and Network 18 which also include Eenadu channels. This cartel dominates the market in the South through Sumangali Cable MSO and Sun Direct DTH.
The modus operandi aggregator uses is that it buys all the pay TV channels exclusively under a minimum guarantee amount and sells the channels in bouquets or a-la-carte making heavy profit, fr0m the market particularly independent MSOs or large MSOs who are not part of the broadcast group that owns the aggregator.
These Aggregators work as authorised distribution agencies of pay broadcasters as defined in the Cable TV Act. There is no clear cut definition and role given to authorised agencies. So Pay broadcasters used aggregators in this role and became super broadcasters with many pay channels and dominated the markets.
However, this could be done in the analogue era when there was no addressability and broadcasters were only dependent on their TAM ratings based on a few thousand people meters fixed in a few big cities. The more the TAM rating, the more ad revenue could be demanded and also MSOs could be asked to pay higher minimum guarantee (MG) fee to the broadcasters.
In the present scenario of digital cable and DTH where all subscribers are accounted for because they are using set-top-boxes, aggregators have no role to play.
The SMS system of MSOs can provide all the information about number of subscribers subscribing to the pay channels. Also MSOs are getting the payment fr0m Subscribers according to the content they have selected thus broadcasters can directly be paid according to the SMS summary of an MSO.
No Role for Aggregators in Digital scenario
The aggregators have no role to play in a transparent digital system. Their presence also weans away a part of the revenue in the value chain of pay TV Broadcasting, putting more burdens on the subscribers.
1. It is very important to keep aggregators out of the value chain for cost cutting to consumers. Broadcaster can dismantle all aggregators absorbing them in their own companies as distribution departments.
2. Channel Aggregators/Agents/ Agencies can assist the broadcasters in signing deals with the MSOs/ Cable Operators but all agreements must be on individual basis and not signed on behalf of a group of pay TV channels.
3. MRP of pay channels for the consumers must be displayed on the broadcaster's own website and also advertised in TV/ Print medium so that a consumer knows how much he has to pay to the MSO to get a-la-carte choice. Ticker ad giving MRP Rates of pay channels should be run on TV channels by the Broadcasters.
4. The rates declared by Pay TV Broadcasters and commissions of LCOs and MSOs must be worked out within this rate as a percentage which should also be displayed by the broadcaster on his website. Channel Aggregators/Agent/ Agency should not be there at all.
5. Broadcasters may pay to aggregators for their services fr0m their own funds like they were paying salaries and other expenses to their distribution staff before aggregators were formed.
6. All Disputes should be settled between Broadcasters & MSOs and not with channel Aggregator.
7. An MSO may ask a Broadcaster directly for the content if he is not satisfied with the broadcaster's agent. TRAI should fix a time period for broadcaster to respond in such cases or else make them liable to pay a penalty.
8. An LCO may also approach the broadcaster directly for demand of a Channel on the basis of consumer demand in his area if he finds that the MSO concerned is not responding. It should be the duty of the Broadcaster to ensure the channel is provided without any discrimination.
Thus one of the major actions to be taken for getting the industry rid of growing monopolies is to get rid of aggregators of Pay channels so that consumers have more power to decide what content they should consume rather than a cartel of pay channels deciding that. Also the regulator must define the 'Authorised agent of a Broadcaster' and lay down its role and limitations so that there are less chances of exploiting the masses and smaller stake holders.