MUMBAI: Spreadsheet capitalism is over and no more is it viable for media companies to chase valuations but to build models that are profitable.

The broadcasting industry has sunk into losses as it gets Rs 40 billion of pay revenues while the payout towards carriage fees is Rs 180 billion.

“It is a lopsided equation,” said India Today Group chairman and Editor-in-Chief Aroon Purie. “The media and entertainment industry reaps a revenue of Rs 320 billion, out of which Rs 120 billion is advertising income. While the cable subscription revenue is Rs 200 billion, the broadcasters get a meagre 20 per cent share. This is destroying the whole economics of the broadcasting industry.”

The medicine to this ailing industry is digitisation. “The government should mandate digitisation. There is no other way that the industry can turn profitable,” said Purie, while delivering the keynote at the 12th edition of Ficci-Frames, the annual convention on the business of entertainment.

Purie backs his logic with pure statistics. “The average cable bill in the US is $100 per month. Even if you take the purchasing parity into account, India‘s cable bill is one-third that of the US. It is the cheapest in the world,” said Purie.

Stating that so far government has been “deaf, dumb and blind,” Poorie demanded that it should at least now make digitisation mandatory.

“Digitisation will bring addressability and it will become viable for all to do business. It will make the content king again. Advertisers also undervalue the medium. On top of that, we have a perverse business model,” Purie said.

Purie, in his strongly worded address, said that the broadcasters have created a mess in broadcasting and sadly, the fundamental of the “mess” has not been changed.
With valuations evaporating, the need of the hour is to look at profitability. “There are only a handful of channels in every genre that are profitable. On the whole, the industry is losing money,” Purie said.

He said that before talking about unlocking profitability, it is important to look at what is locking profitability. There are four locks that affect profitability.

These are:

Cable Clogging: The distribution scenario in India is similar to that of traffic jams in metros.

There are over 550 channels, out of which 400 are active. Analogue cable can support only 106 channels. After a must carry clause for the Doordarshan channels, there are 400 channels fighting for space on cable networks which can accommodate 100 channels.

“It is a skewed demand-supply equation. There are four channels fighting for one bandwidth. Worse, there are 300 more channels waiting for licence,” said Purie.

Cheating broadcasters: The business model for broadcasters is distorted, said purie. “The industry pays around Rs 180 billion as carriage fee. The broadcasters, however, capture only 20 per cent of the total cable TV subscription pie.”

Broadcasters need to rely heavily on advertising revenue, but the value is not increasing in proportion to the reach of homes.

“Fortunately, because of meltdown, the “foolish money which was coming in has dried up,” Purie said.

Government is deaf, dumb and blind: Purie was critical of the government, stating that piece meal solutions couldn‘t be the answer to the ails of the industry. The government has failed in its duty of being a facilitator and has, instead, acted as a stumbling block.

Government has no right to decide the price of the channel. Price fixing has killed niche channels. On the DTH front, the ‘must carry‘ clause has made every player a clone of the other,” he said.

Industry itself is the biggest enemy: Purie said that the first step is to unite and bring clarity to the business. He said that within the industry there is a lot of competition, rivalry and no unity.

“The government should do what is right for the industry and not bend down before lobbies. The answer is simple and the government can easily learn from the developed markets. Give the industry the profitability that it deserves,” said Purie.

Should there be an independent regulator to clear the mess that the broadcasting industry is in today? “A regulator like Ofcom can only look into issues such as monopolies. For digitisation, you don‘t need a regulator but a government mandate. Only that can salvage the industry from sinking into losses,” said Purie.