...Or why your uncle may now be able to start his own gully cricket channel

(The article below is the first article in our newly launched section -'Knowledge Cafe'. We are extremely grateful to Sreeram for helping us kick off this section in his own inimitable style.)

I started off with the idea of finding a strong angle or a topic and presenting an in-depth analysis of it. This thought I rapidly dismissed because a) It sounded like a lot of work and b) I really wanted to dismiss it. I chose instead to adopt a broad based approach to inspire laziness creativity, where we meander along the world of sports broadcasting, waltz through general insights and facts and see if we just discover a strong angle to take along the way. If you find that you already know most of the stuff being discussed here, we’ve put in a Navjot Sidhu joke at the end, so this piece will at least not seem like a complete waste of time.

A television channel typically has two revenue streams – advertising and distribution i.e. revenue from cable and DTH operators. The split at the moment, though it varies depending on the context, is broadly 70-30% in favour of the former. This explains several evils present among us today, such as the existence of DLF maximums and Karbonn Kamal catches – seeing as how the pressure on recovering the enormous investment made in acquiring broadcast rights is almost squarely on advertising revenue.

But this, and many other aspects of the sports broadcasting universe in the country, is likely to change thanks to digitization (where you move from your regular, analog cable to set-top boxes/ DTH providers. The switch has now become mandatory and no analog cable is supposed to exist post 30^TH June in the four metros, and anywhere in the country by 2014)

We seem to have hit upon the strong angle this article is supposed to take - digitization. Let’s look at a few ways in which it is going to affect the business, and therefore affect you, the sports viewer, who claims Test cricket is the real thing but watches every ball of the IPL and is a closet-fan of the super-over.

The first thing it does is allows sports channels to reach out to a larger audience. An analog i.e. a regular cable set-up has limited bandwith, which means two things. A) Only limited channels can be carried at a time, which is why you often don’t get more than one or two sports channels simultaneously and B) To be carried on a good frequency, channels have to pay heavy ‘carriage fees’ (which you can vaguely compare to concept of a capitation fee. It would be a completely inaccurate comparison, but you can draw the parallel anyway, just to see what it is like) Sports channels, especially ones not broadcasting live cricket, would find it a bad business proposition to invest in such expenditure.

A DTH set up or a set top box has no bandwidth limitation, which means all channels get carried. So not only does it provide greater sampling opportunities and therefore expands the universe (ok, expands the pie, if you really like using jargon, or pies), it also means the capital required to have a half-decent chance of survival in the sports market goes down.

The other big business implication of this is that the sports broadcasting business shifts from being an entirely advertising driven market to being an advertising + purchase i.e. distribution revenue driven business. Subscription revenues are low because operators under-report the number of subscribers they have – the standard ratio (if there can be a standard ratio for such things) is 3:10 i.e. for every 10 houses that an operator gets money from, he reports only 3 back to the channel. That ratio improves significantly with digital connections coming into play.

Apart from opening up a new revenue stream (well, significantly improving an existing one), it introduces a significant change in consumer culture – you are now paying for each channel (or a bouquet of channels), and are therefore making choices to actually purchase content. A TV channel becomes a product you buy like a book, soap or a pair of jeans. The TV industry becomes fragmented, opening up niche audiences. This explains the launch of channels like Sony Six, which is not a dumping ground for waste from the American sports industry as most people think, but instead actually a channel that stands to make money. Niche content is a lot cheaper to acquire than live cricket, and with people willing to pay for it, it doesn’t need the critical mass TV ratings would make it profitable.

This means your life-long dream of someone starting a channel exclusively for book-cricket and tiddlywinks may now actually happen.

If you are still looking for the Navjot Sidhu joke, you clearly have a bad case of severe addiction to utter nonsense, and someone needs to take the responsibility of weaning you off your supply. We’ll manfully take up the task and not publish any Navjot Sidhu jokes whatsoever.

-Sreeram Ramachandran

(Sreeram Ramachandran is a bit of paradox, which is polite for confused. A writer who made a drastic shift from the slipppers-and-shorts world of advertising to ISB, only to realize that people wore shorts to lectures there too. He now works with Star TV, and his parents are proud that he wears trousers and shirts to work.)

Sreeram Ramachandran

Understanding the sports broadcasting business in India...