Aroon Purie, Chairman and Editor-in-Chief of the India Today Group at FICCI Frames highlighted the lack of digitization of the distribution system as the root of most – if not all – evil in the TV business. Lack of digitization means that the number of channels a pipe carries are limited, audience measurement is poor, and there is incentive to maintain this status quo.

On being asked a question, Poorie also spoke about the Internet: “The situation right now is that we’re spending dollars to chase cents. But in the west, you can see the future. In India, we have a lot of breathing space because the Internet distribution is not in place.”

Excerpts from his talk on the need for digitization of Television and the broadcast mess:

“What is the mess in broadcast? There are 3 areas – first and foremost is our distribution system. It is completely out of date, despite what anyone tells you. It’s like one of those great Indian traffic jams. You can only move forward at the expense of somebody else, and nobody is going by the rules. We have a humdinger of an industry, worth $4.5 billion, but we have no transparency about how these revenues are shared, and that is the other issue. Third is our inadequate audience measurement system.

The distribution is the mother of all problems. In India we have many gods, and this is the supergod. Some figures – 84 million cable homes, 90% are analog. Among digital 6 million are DTH, 2 million are CAS. There are 350 channels and counting, with 150 waiting for approval. Analog cannot carry all the channels. Broadcasters are fighting against each other – paying carriage fees to displace other channels. The distribution cost has gone up in the last year by almost 50% – it’s the largest cost in your P&L.

A cable operator does not look at what kind of channel you are – he charges what the market will pay. It costs Rs. 25-30 crores to just get national distribution, which makes a lot of channels unviable. When it launched, Aaj Taks distribution cost was zero when we launched,and we used to charge cable operators for boxes. The financial meltdown has stopped spreadsheet capitalism – with PE players coming in funding new players, bidding for spaces, and old channels getting displaced. The cable operators are laughing all the way to the bank. The TV media companies listed on the NSE – their valuation has fallen by almost 65% in the last year. Overall carriage fees overall is around Rs. 1500 crores. There are no benchmarks, and broadcasters are not sharing carriage information. The cable operator is not incentivised to digitize. This is where the government should step in and make it mandatory to digitize… Broadcasters should start a digitization fund. The Government has made a very feeble attempt at digitization – it’s only succeeded in Chennai. CAS will not be able to spread to 55 cities in 2010. 

Digitization is the only way to go. The consumer must pay for what he wants, and the broadcaster must get a fair share. Right now, it’s a state of war: broadcasters are figthing with each other, with MSOs, MSOs are figthing with cable operators. 

Everybody agrees that digitization is a good thing, but nobody is willing to address this in a timebound manner. I think this is wrong. This is the only government in the world that thinks that having a cheap cable connection is a fundamental right. It hasn’t spent a rupee in distribution etc. They should let the market decide. They should lay down standards. Distribution has become so profitable now, that state politicians have started buying cable operators, which gives content regulation a whole new color.

Since 1994, the government has made piecemeal legislations. Exclusivity is intrinsic to DTH, but the government made DTH a clone of cable, just a bundle of channels; they’re just a cable operator in the sky. Now, even DTH is charging carriage.

Audience Measurement – TAM covers over 1 lakh towns. This means that the advertiser is not paying for 55% of the market. 7000 households is too small a sample – English news channels showed a TAM rating of 0 in Ahemadabad in January. That’s impossible. With digitization, this issue can be resolved.

The financial meltdown has highlighted the vulnerability of the broadcasting business. I also think our media is too cheap. Broadcasters of India, please unite. You have nothing to lose but your losses.