Akey lesson hammered into us during graduate studies was that distribution is the key to marketing success. We were asked to pore over copious case studies where companies with strong distribution networks lorded it over the market place. The more I interact with people in the media industry, particularly electronic, the more I am getting convinced about the importance of distribution. Quite simply, if you do not have the D-muscle, you will simply not survive the brutal competition, no matter how slick and smart your content, packaging and anchors are. TV industry in India is littered with examples of great projects dying unsung because distribution became a weakness than strength.
There are at least 500+ channels competing for eyeballs in India. If you really want to be ‘seen’ and not be invisible, you will have to be in at least the priority list of the top 100 channels of cable operators who still control more than 80% of access to households with TV sets. In a majority of Indian households, the most number of channels that can be seen on the set rarely exceeds. That gives a lot of clout to the cable operators and even the DTH operators who can show much more than 100 channels. Since this is simple demand and supply economics, owners and promoters of TV channels have to pay more and more money to cable and DTH operators. This is known as carriage fees, which has become the most worrisome cost element for TV channels. The absolute minimum that you need to spend a year to stay visible is upwards of Rs 20 crore. Many channels that want a genuine pan Indian footprint often have to set aside about Rs 50 crore a year. This has completely unhinged the economics of the TV industry in India. Firstly, you have to have very deep pockets without any guarantee of returns. Secondly, you have to have a ‘bouquet’ of channels so that you have at least some bargaining power with MSOs, cable and DTH operators. Not many can do that and hence, you have a peculiar situation in India where the number of channels keep mushrooming even as the industry moves towards consolidation, mergers, takeovers and failures. At a recent Zee Turner-Star Den JV announcement, Puneet Goenka stated that the Zee-Star distribution fight cost the industry more than $10 billion! For a stand-alone TV channel, it is extremely difficult to solve the distribution dilemma. The other problem then is that TV channels – both in the entertainment and news genre – have much less money to invest in better programmes and quality content. In fact, many seniors in the business with whom I interact say that news channels simply do not have the money to invest in great current affairs programmes because most of it has been sucked away as carriage fees.
Will the arrival of convergence make a drastic change to this unhappy and unsustainable scenario? I am afraid, not in the immediate future!.
