Digitisation has been called as the new hope for the television and broadcasting industry. As the digitisation process is on its way, we analyse what the process has in the pipeline, how is it going to revive the industry and how these transformations are going to work.
What is digitisation?
In December 2011, the government passed a bill to convert the existing analogue cable services to digital services in phases till 2013. Currently, the signal is aired through cable and digitisation means that all cable TV households would receive digital signals through a set top box. The picture quality and clarity of channels will get better and customers can also pick and choose the channels of own choice.
Why is the TV cable, DTH and broadcasting industry excited?
Digitisation is a win-win situation for the whole industry -- the content provider, the broadcaster, the service provider and the Government.
TV Broadcasters
One of the key benefits to the broadcasters is that now they will able to crack down on the under-reporting of cable connections. Thus, companies will witness an increase in subscription income.
Digitisation will also get rid of the capacity and frequency bottlenecks, thereby minimising placement and carriage payouts for the broadcasters.
The cable (Multi system operator MSOs)
For digitisation to happen, the technology providers are collaborating with the local cable operators and widening their reach. With this, the average revenue per unit ARPU could also escalate.
As of now, the digitisation process has a one-way communication via cable, which is considered as one of the biggest shortcomings of DTH satellite connections but once proper technology comes into place, the two-way communication will be possible through cable.
The two-way communication will give a huge scope for value added services such as high definition viewing and recording. The main attraction is the broadband service which would be possible along with TV connections.
According to Indiverse Broadband Private Ltd, the broadband internet penetration is very low in India -- 2 per cent of the total population. The service providers can leverage upon these opportunities and widen their margins.
DTH service providers
DTH is a scalable business and service providers will increase their subscriber base from the transition as the deadlines for compulsory digitisation will cross amongst different cities. In the past few years, satellite cost too, has come down significantly.
Local cable operators
Local cable operators (LCOs) are the ones who will be on the losing ground as they will now have to fully integrate their system with the MSOs for the technical upgradations. The LCOs will be merged or taken up by the MSOs with time.
Government
The government has been rooting for digitisation for long due to excessive under-reporting of connections. With digitisation in place, the government will witness a significant rise in the service and entertainment tax collections.
Concerns
Competition is bound to increase among the cable operators and DTH providers. Also, the MSOs will be competing with telecom operators once they enter the broadband arena. Huge capital expenditure is also required to set up the back-end and digital platform.
Our verdict
There has been a lot of hype created by industry reports and the media about how the introduction of digitisation will change the fortunes of the cable and DTH companies. However, a closer look at some of these companies shows that most of them are struggling and profit-deprived. High cost of depreciation seems to be the main cause that is eating away profits. The other expenses that these DTH companies have to deal with are reaching out to the consumer on a massive scale and adapting to dynamic technology over time. Obviously, over the years, companies will gain out of it and further push up revenues but the constantly rising expenditure seems to be the major concern.
It's still too early to judge the fortunes of these companies and make an investment decision as they are yet to transform their revenue into earnings. However, keep tracking the performance of cable and DTH companies as digitisation will be implemented over the period. Take a call only if performance is reflected in the financials of a company and not simply because of the hype created. 
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