Softbank shows the way in quantifying telecom M&A synergies

As a follower of the TMTE sector firms, I happened to browse through the Japanese telco Softbank offering presentation for its 70% acquisition for the USA wireless telecom operator Sprint. It had interesting facts on the USA market like AT&T/Verizon duopoly wrt subscribers and EBITDA(67% subscribers and 82% EBITDA), low mobile data speeds of 1Mbps vs markets like UK/Australia, high postpaid base etc. The comparison of USA/UK/Japan with BRIC was an eye opener. Read the entire presentation at http://www.sec.gov/Archives/edgar/data/101830/000119312513228092/d541834d425.htm

However, what really caught my attention were these two graphs breaking down estimated deal synergies. Many talk about synergies but few walk the talk while publicly stating it.


What is really stunning is the estimated opex synergies of $2bn from 2014-2017, and then $3bn beyond. of this, they estimate nearly 40% from device procurement-really I would not have thought devices margins are so high.Another 49% rests from their knowledge transfer on network opex, churn and customer care-all performance drivers of telecom. IT is probably non incremental since vendors are quite efficient there unlike for other components.

For capex, purchasing synergies again constitute 42% of estimated synergies, while knowledge management of traffic and core building would give another 42%.

Here, they have built on their core strengths of networks and smart management while deriving the synergies. The next time a telecom CEO wants to defend that pricy acquisition, then such graphs are a good start,

Why DISH TV is still a speculative bet-negative equity, cash burn..

Earlier, I blogged about the irrational exuberance in the valuations of Dish TV as reflected by high EV/subscriber, which even exceeded the replacement cost (http://financeandcapitalmarkets.blogspot.in/2012/02/each-dishtv-subscriber-worth-rs-8000.html). Given that nea

Some points to note from the Sep-12 earnings release(http://www.dishtv.in/Library/Images/EarningsReleasefortheQuarterEndedSeptember30,2012.pdf) are

1. They are STILL playing the subsidy game(not passing on cost increase due to rupee depreciation etc to the subscriber)-increase in SAC from Rs 2145 in earlier quarter to Rs 2273 now. 
2. New adds may be of lower quality yet not be recognized as churn. As announced recently, all new subscribers will get 70 FTA(free to air) channels for 4years IF they recharge for minimum Rs 200 in period of 6months. Given the SAC of Rs 2300 odd now, the minimum revenue they will get in 4years is Rs 200*8=Rs 1600, that too after entertainment tax/content cost etc would be max Rs 1000 or so. Breakeven will not happen if subscribers cotton on to this...
3. Distribution network is 1480 distributors, 114000 dealers, 8567 towns supported by 4 call centres/1600 agents/11 languages. This network is somewhat hard to replicate, and an ingredient of the valuation given to them. But is it worth even 800 crores??
4. MD&A(http://www.dishtv.in/Library/Images/AnualReport2011-12/ManagementDiscussionandAnalysis.pdf)  and investor presentation(http://www.dishtv.in/Library/Images/CompanyPresentation_Oct2012.pdf) both focus on irrelevant metrics and gloss over the earlier aggressive accounting(till FY13, STB was depreciated over 5years but the upfront payment was amortized over 3yrs) and mounting losses. 

On an active base of 10MM subscribers(gross subscribers 13.9MM), the company is valued at an EV of Rs 9600 crores(Rs 1600crs debt consolidated FY12 + 8000crores odd equity). That amounts to Rs 9600/active subscriber or Rs 6900/gross subscriber. Given that the SAC is itself just Rs 2273, and ARPU Rs 159/month(of which hardly 40% accrues to company after content costs etc), this is really irrational valuation.

There are solid academic research like that of Ashwath Damodaran(http://people.stern.nyu.edu/adamodar/pdfiles/Seminars/AIMR3.pdf) on valuing companies in distress/loss making companies. But it is still hard to support such valuation levels. Maybe investors are in for a hard landing.

Understanding telecom retail in India-some pointers

At the outset, let me clarify that I do not consider myself an expert on telecom(or on anything else for that matter :P). This blog post is only based on certain observations/analyses and inferences during personal visits to telecom stores in Mumbai and Bangalore. For modern trade(malls etc), this may not apply due to space issues and also as they often do not carry the entire product range.

1. Commoditized SIMs/data cards: Thanks to the relatively low margins that retailers make on SIM activations, the poor SIM salespersons are given a stall outside the main store(!) with a packet of forms etc. So it is abundantly clear about their pecking order in the hierarchy of things!
2. Single brand versus multi brand stores:- All the operators be it Airtel, Idea, Vodafone, Reliance, Aircel all have exclusive outlets, which seem to focus on the consumer experience and awareness. That is why in the outlets I've seen, the focus is more on 1-1 selling and wider display of products/schemes, rather than the claustrophobic multi product strores I've seen(like The Mobile Store), that focus on max yield per square foot
3. Recharges not always sold in telecom outlets:-As that involves manual effort and all, many don't find it profitable to sell these recharges..indeed its mostly the kirana stores and other non exclusive outlets that sell these. 
4. Handset demos often not given:- Shops are aware that customers often check out the devices in the shops and then shop for it online. This problem is for books also, but there one cannot avoid showing the book itself unless its plastic shrinkwrapped(which may bring down sales though..). So often only the expensive/fancy phones are displayed but not the entry level handsets below Rs 10,000. And demos are given only for displayed products, few retailers will open the box and show you. 
5. Multi brand recharges/devices/data market:- Most retailers give a wide bouquet of all the popular operators, so there is no brand loyalty at the retailer level. So often the same retailer will have nameboards showing his name from all the main operators! 

Anyways, given that around 90%+ of Indian voice market is prepaid(and from early indications the data market seems going the same way), the front end is resembling a FMCG set-up. For fixed line, a DSA setup seems to work due to the unique economics of that business. 

Telecom industry economics 101-a primer

Telecom pricing has always seemed opaque, random and complex. But there is logic behind the seeming madness, which I try to explain below

1. Fair usage policy which restricts the user speed for 'unlimited speed' beyond certain limits, attempts to invert the Pareto principle on its head. After all, the specious logic used for fair usage policy is that a few users by their huge usage lower the overall experience for everyone else. Agreed, but that is what the Pareto principle is all about. By trying to avoid that, this is a novel experiment to avoid that here(i.e socialize the usage in a way). However, it does seem a success-logically and financially
2. Call termination charges are levied by the destination network, and impose a lower ceiling on calls tariffs between operators. But for intra-operator calls, this is not applicable(except within circles where due to separate license norms, they are subject to separate P&L and transfer pricing), and so operators can offer it at near zero prices(like say 2paise for a minute!). There, the pricing would probably factor in opportunity cost of using the spectrum(since that is a finite resource) and other network effects, but not out of pocket costs.
3. Like Dominos, Subway and Starbucks which sell a base and try to earn superprofits on the top-ups/upsize options, those economics/rationales apply more so to telecom, with its low incremental costs per minute. So lessons from the F&B industry can be profitably applied here
4. The cost structure from the operational side is largely fixed(spectrum, network) except for companies like Airtel which have a per-time slot cost structure thanks to innovative deals with their service providers. From the marketing side, channel partners get a fixed fee for customer acquisition, and therefore churn is very expensive for telcos which cannot recoup that fee(that is why an upfront fee/activation charge/registration fee is usually charged, that generally goes to recoup these upfront costs).
5. Telecom is intimately linked to customer behaviour(how they talk, listen to music, surf data) and so like food, it is VERY local. That is why tariff plans are also localized, and increasingly with the special offers/'best plan suggestion'; telcos are trying to refine their price discrimination by targeting offers to the n=1 target segment.

Will try to explain more later, but this is all for now. 

Each DishTV subscriber worth Rs 8000-irrational exuberance?

A picture speaks a thousand words, as in the above case. I had blogged earlier about the seemingly long breakeven point for Dish TV DTH subscribers(http://financeandcapitalmarkets.blogspot.com/2011/12/20months-cash-cost-breakeven-dangers-of.html), and then I decided to analyze whether the equity markets shared my views or not. Taking a short term view does not work in market valuations, so I decided to analyze the trend for the past 5yrs(Mar07 till date), using data released by the company and the market cap data from BSE. Some interesting points

1. The company hypes up gross subscriber base, but also reports a net subscriber base. The difference between the two presumably(because I could not find any company definition) is the dormant subscriber base who have a Set Top Box, but who do not subscribe from Dish TV. Since investors may still assign a value to gross subscriber base in hope of returning customers, I decided to calculate the EV metric separately for both
2. After the slide in Mar09(in EV/subscriber terms), it dramatically rose till Mar11, perhaps driven by the explosive growth in subscriber base. However, that was not accompanied by a commensurate rise in ARPU/decline in subscriber acquisition costs. Hence, the market punished the stock with a stagnant share price since then despite the continuing subscriber addition, and the Digitization Bill 2011. 

Despite the slide in valuations, paying even Rs 6650-8133 per subscriber(on gross/net basis respectively) seems too rich for the following reasons.

1. given that the Dish TV's own Freedom card(at just Rs 750) permits even other operator's Set Top Boxes to be compatible with Dish TV. If other operators can copy that technology, then they can cannibalize each other's base without incurring the customer acquisition cost of around Rs 2200+ which they incur currently. In fact, the minor dealer's commission will be offset by the cost of the card viz Rs 750.
2. As Dish TV is competing against Airtel with 7.1 active subscribers and counting, it would soon be  a war of attrition, as smaller operators try to cannibalize the installed base on price basis. Of course, MNP and low voice tariffs fizzled out, but even if that happens for DTH, the adjustments period may take 1-2yrs which would drain cash. 
3. Reliance is the dark horse in this, as its 4G ambitions would impact the DTH market in some way, and given their historic cost competitiveness strategy, other operators would do well to heed the threat and scramble to reengineer their costs. And cost cutting does not seem the strength of the Essel Group, more so Dish TV.

Point (1) could be an upside IF Dish TV manages to acquire customers cheaply using its Freedom Card. But without further information, one cannot factor this into the valuation.
Conclusion:-AVOID the stock. If LEAPs were available, they would have been perfect to short the stock, but in the short 3 month horizons available, that is too narrow to use options.

Analyzing telecom stocks? Keep these pointers in mind

Telecom is a sector which is technically complex(to understand), and full of regulatory quicksand. But for those brave investors willing to risk investing in these stocks, there is still money to be made given the digital divide bridging agenda of the Central Government. So without much ado, here are my pointers

1. Effective Subscriber base:-Thanks to the lifetime prepaid validity schemes, dual sim phones and other aspects, many subscribers have multiple SIMs, many of which are not in use. So before crediting an operator for its subscriber growth, be careful about the effective subscriber base, as opposed to absolute connections. For example, out of the total  884.37 Million subscribers,  635.39 Million were active on the date of Peak VLR for the month of November 2011 viz 72%.. TRAI gives the overall % broken down by operator and circle, which ranges from 25% for Etisalat to 83% for Vodafone(http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/859/Press_Release_Nov-11.pdf). Do read this to get the market power in perspective.
2. Teledensity:-While TRAI and others calculate this simplistically as the subscriber base divided by total population, this does NOT consider the effective subscribers. Hence, the actual teledensity for India's 1.2bn population, is closer to 50%(IF we can assume that kids should not use mobile phones(!), then the figure would be higher). Before using this figure anywhere, be aware of the key assumptions behind it.
3. Adjusted Gross Revenue:-The statutory license fee is calculated on a different revenue base than adopted for financial reporting(the difference being excluding revenue from certain rural areas/essential services). If AGR is significantly different from Gross Revenue, it could mean fudging the records of anyone/both, as was the accusation by Kotak against Reliance Communications about 2yrs ago.
4. Minutes of Usage-see outgoing only!:-While reading the TRAI quarterly statistics for June-Sep quarter here(http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/860/Quarterly-Press-Release-final.pdf), it struck me that even TRAI adds up both incoming and outgoing MOU for counting the total-though it does split them up. Given that incoming calls are generally free in India(barring roaming), the better metric for investors would be outgoing calls MOU(or even better, revenue earning MOU since not all minutes may be charged). 
5. Understand the value chain:-There are many people vying for the telecom rupee, such as handset makers, VAS providers like Onmobile, patent owners like Qualcomm, service providers like IBM, DTH providers like Tata Sky/Dish TV and so on. Take a big picture look at the profits and revenues across the value chain-I know that needs lots of digging into data and consultancy reports, but the results would astound you as they did me. For example, I did not know that VAS owners get on an average only around 30%-50% of their end user payment, while the operator takes the rest! Also, telecom equipment is the next boom independent of what happens in the voice/data market. While plugging in variables for that valuation/DCF model, such insights are must.
6. Rerating as becoming responsible by compulsion! TRAI has significantly revamped the regulations on customer service/experience using measures like MNP/stopping spam etc, and recently announced that telecom operators must measure and reduce their carbon footprint by 2020, and improve their energy efficiency. These measures would earn the stocks brownie points when implemented, hopefully aiding their inclusion on certain indices, and thereby broaden the addressable investor base. Of course, this is a quite long term aspect
7. EV/subscriber not comparable:-While some lazy analysts may compare other emerging market telcos, be aware that the data revenues of Indian telecos are quite low, and also the business model difference(more outsourcing). So, understand the main revenue split/growth drivers of the comparables before resorting to such peer comps. Of course, this warning applies to all companies not only telecom, but the deceptive simplicity of telecom may seduce investors to compare apples and oranges. 

 The above was more a general overview than any stocks specific analysis. Depending on response, I'll delve into some specific stocks later

Qualcomm's perspective on patent wars

At times, reading annual reports is like hunting for a needle in a haystack. I experienced this while reading FY11 10K(annual report) of the CDMA technology owner Qualcomm(http://sec.gov/Archives/edgar/data/804328/000123445211000360/qcom10-k2011.htm). While most of the risk factors were boilerplate, one particular risk factor made interesting reading while QCOM complained that some of its customers were resorting to measures to avoid paying fair royalties. While the strategic use of patents has been detailed in the popular press(patent wars, patent bubble, patent trolls etc), few companies have been so forthright in their financial reports, and hence it warrants a read. Also, while patent challenges are the most common tool reported in the media, there are other ways to finesse patent challenges by using competition law, standard setting, contractual challenges, open source etc to achieve the same end. That is precisely what Strategic Management of Intellectual Property Rights(SMIPR) aims to achieve, and as such these strategies are a classic case. Below are relevant extracts of the risk factor(emphasis supplied by me).  Keep in mind that QCOM is not objective, but it does reflect the rights owner's perspective.

A small number of companies, in the past, have initiated various strategies in an attempt to renegotiate, mitigate and/or eliminate their need to pay royalties to us for the use of our intellectual property in order to negatively affect our business model and that of our other licensees. These strategies have included

(i) litigation, often alleging infringement of patents held by such companies, patent misuse, patent exhaustion and patent and license unenforceability, or some form of unfair competition,

(ii) taking positions contrary to our understanding of their contracts with us

(iii) appeals to governmental authorities

(iv) collective action, including working with wireless operators, standards bodies, other like-minded companies and other organizations, on both formal and informal bases, to adopt intellectual property policies and practices that could have the effect of limiting returns on intellectual property innovations and

(v) lobbying with governmental regulators and elected officials ..seeking the imposition of some form of compulsory licensing and/or to weaken a patent holder’s ability to enforce its rights or obtain a fair return for such rights.

Zynga and Google-more simillar than different?

Many of you would heard of Farmville/Cityville. The company which produced those games('Zynga') recently had an IPO at a $10bn valuation, riding the dotcom bubble. To be fair, the company has been making profits though. At first blush, nothing seems to link Zynga and Google except that Google was a pre IPO investor in Zynga, and has been linked to takeover attempts/bids. But on a closer reading of the Zynga prospectus(http://sec.gov/Archives/edgar/data/1439404/000119312511341923/d198836ds1a.htm), quite a few similarities pop out. The small text is a direct quote from the Zynga prospectus, and the text in normal font is my remarks.

1. Free:-All of our games are free to play, and we generate revenue through the in-game sale of virtual goods and advertising. Even Google does the same, with only enterprise applications being priced, and that too selectively.
2. Network Effects:-Because the opportunity for social interactions increases as the number of players increases, we believe that maintaining and growing our overall number of players, including the number of players who may not purchase virtual goods, is important to the success of our business. Google search results are 'intelligent' and improve from each search. Also for applications like Gmail, the network externalities are good. 
3. Data driven:-gather daily, metrics-based player feedback that enables us to continually enhance our games by adding new content and features.We continually analyze game data to optimize our games. We believe that combining data analytics with creative game design enables us to create a superior player experience. Google is also a famous analytics fan, which it uses to inform decisions.
4. Dual Class voting shares:-Zynga has a triple class voting share, which gives the founder around 36% voting power post IPO(1 share of his Class C shares=70 votes of Class A shares). This structure was held by Google as well.
5. Cloud Computing Dependence:-Zynga uses Amazon Web Services, while Google is all about cloud computing especially for Google Docs
6. Hiring through acquisitions: We have historically hired a number of key personnel through acquisitions, and as competition with several other game companies increases, we may incur significant expenses in continuing this practice. It is a lesser known fact that many popular Google applications like Orkut, Picasa and the like were acquired through early M&As. 
7. Letter from founder in IPO document:- Actually this is more like what Amazon did! But since Google tomtoms its principle especially 'Do No Evil', I thought there was a similarity there.

Still, one should not stretch the analogy too far. Google has survived multiple crisises and competitors, which Zynga brokeven only in FY10, and has yet to survive  extreme competition. But one must admire the essential freemium similarity in the business model. 

20months cash cost breakeven-the dangers of DishTVs strategy

Now, none of us would like to be classed as 'average', and I'm the first one to admit that there are quite a few pitfalls in that. Still, for the purpose of analyzing aggregate data, that would serve fine. To further appreciate the rest of the this post, read the DishTV presentation(http://www.dishtv.in/Library/Images/DishTVInvestorPresentationOct.2011.pdf) and my brief primer that follows

• As one knows, DTH companies spend heavily to get the customer to buy their set top box
• DishTV defines subscriber acquisition cost as, set top box subsidy+commission to dealer who sells/installs it + 80% of marketing spend! Now, one may argue that 80% of marketing spend is nothing but arbitary overheads allocation. Even if that maybe, the fact is the spend would be taken with that outcome in mind, so if the company expects 80% to earn sales, so be it. SAC is between Rs 2100-2300 at present.
• ARPU(average revenue per user) is internally split by DTV into amount attributable to service charges+FTA channels(presently Rs 100) and the balance for pay channels. ARPU around Rs 150 levels, expected to touch Rs 160 due to more HDTV etc. 

Now, all busineses have marketing costs and I daresay if FMCG/ITES sector calculated their Customer Acquisition Cost as conservatively as imputing 80% of marketing spend, then those figures would seem high as well. But going with what we have, the trend I noticed is even at improved ARPUs, the breakeven period at gross ARPUs of Rs 152(net Rs 114 after content costs) will be 20months to recover the subscriber costs of Rs 2232.

 

Of course, DishTV expects their ARPUs to grow exponentially due to HDTV revenues. But this graph(should not be much different for other plays) shows that DishTV is playing a numbers game to retain their 30% market share.  

But the danger in that, is DishTV themselves introduced a device card to make any STB of other operators, compatible to receive signals from DishTV. While DishTV packages this as Dish Freedom(http://www.dishtv.in/dish-freedom.aspx), this equivalent of mobile number portability for STBs may unleash an industry war, with players deciding to compete on content. After all, if DishTV can attack the installed base of other players, so can they. But like how MNP failed for mobile phones, DIshTV can only hope that subscribers will stick to the incumbent. But if the competitor comes and offers this device for free to hook DishTV subscribers, then it is a whole different ball game.

So what does the market think about this? Dish TV has gained 42% in the past one year, spurred no doubt by growing ARPUs and dominance. And its market cap of nearly 6500 crores(versus debt of just 1200 crores odd) for a 13million STB base, speaks of an implied valuation of Rs 5000 per STB, which is nearly twice the acquisition cost! Can this eyeballs game continue for ever? As CAs, MBAs and other professionals maybe we should think about the prudence of this approach for our clients.

Idea Cellular's non standard industry metrics-genius or facade?

As a quite profitable operator, Idea Cellular exemplifies the best in the Aditya Birla group-disciplined expansion targeting growth without sacrificing profits. And with their famous ad campaigns(tree, Abhishek Bacchan), quality & market share, the stock market is now paying special attention to Idea. To even maintain profits at 2007 levels seems a dream for most telcos, but Airtel and Idea have managed it quite well.

Obviously, Idea broke quite a few rules to get where they are today. But to openly disclaim industry standard metrics(as their new MD did in the FY11 concall) is surprising. He reiterated that in the 1Q'12 call stating that In the last earning call I had mentioned Idea as a company, had upgraded its competitive  ability by challenging the standard telecom market review parameters like subscriber count, ARPU and ARR. We instead, have focused on five critical internal parameters namely absolute gross revenue, cash profit and EBITDA, active subscribers, total minutes of use and mobile number portability.

Below is an analysis of these parameters, and comparing them against the ones they replaced

1. absolute gross revenue:- This metric was supposed to replace ARPU(scaled up). It does focus the attention on volume as opposed to pro rate metric, but can't see the difference really
2. Cash profit;-Telcos use FCF, but Idea seems to prefer cash profit. Again, little difference
3. EBITDA :- This is one measure used by all and sundry to dress up profits, and Idea is no exception.
4. Active subscribers:- Here, Idea does a good thing of ignoring idle subscribers, and focussing on actual users. But here, definitions are key. Reliance considers even 1 use/months as 'active use', whereas Idea's definition is unknown to me. 
5. Total minutes of use:- Again, this seems inferior to metrics like 'Paid Minutes of Use' as RCOM uses. And then, AGR/Total Minutes of use=ARPU. Why trash a metric whose numerator AND denominator you are anyway using
6. MNP:- Erosion/Addition of net subscribers is a good measure of competitive standing and quality perception, and Idea does well to focus on this metric.But then, so does every one else.

I see just one genuine new metric-active subscribers-which other players do not play up. This is certainly not throwing out the old metrics. 

The economics of pirated ebooks

Whether I download pirated ebooks or not, is immaterial to this post. I do not take a stance on the ethics, legalities and justifications for that. This post merely details that though this seems an altruistic effort by benevolent people who find ebooks/scan physical books, and then upload them, it is rarely the case. Instead, everyone involved in the process gains something.

Take for instance a 400 page fiction book. In PDF/LIT/epub format, it may be about 3-4MB(max). On Amazon or on legitimate sites, it may cost $5+(median range would be around $10-$15 per ebook). People may spend $30 on coffee but would hesitate to spend part of that on ebooks, especially if it is available free. So as I understand, legitimate ebooks are purchased once, unlocked and then shared. But someone must compensate the original uploader for his ebook purchase costs/time. That is where file hosting sites come into place(like megaupload/filesonic/rapidshare etc). They host for free, the ebooks/other digital content. The uploaders are paid per click, depending on the country of residence of their downloaders, file size  etc. The file hosting site makes money from advertisements and from subscriptions. The free service is degraded so much(slow downloads, single downloads only, file restrictions etc) that for downloading a large number of ebooks, it does make economic sense to take a subscription, stockpile all those links and download them in a single sitting. Even if you save 20hrs for a $9 monthly subscription, it does seem worth it.  
 
In this, the platform(file hosting service) makes the maximum money.The uploaders earn a bit with zero marginal investment, and recover(if lucky) the cost of getting those ebooks. And the downloaders get ebooks quickly and cheaply(cost may be as low as 1 cent/ebook excluding download costs). In all this, the publisher and author lose out, but the thing to consider is that people often do not read ebooks(estimates put the number of ebooks purchased but not read at 30%, this would be higher for pirated ebooks), also that not all can afford those many ebooks.

This does hit legitimate Eastern Economy editions in countries like India, but then like how bands have slowly accepted live performances as their main revenue source shifting from music royalties, authors may need to accept consulting assignments, script writing projects etc as their main source. This of course, works more for non fiction authors than for those who write fiction.

Why the end of 'free content' looms ahead_and what consumers can do.

Barely an year ago(during my preparation for CAT), there was plenty of good quality legally free content online in terms of the NYT.WSJ/FT.com etc, which all permitted unlimited online access. And for those inclined to bend the rules, there were efficient filesharing websites(masalaboard, Avax etc) and filehosting portals(megaupload/ifileit etc), which permitted downloading(illegally) all sorts of content from ebooks to music to movies. Of course, the content was 'free' for the consumer but not the provider. Newspapers used online ad revenue or offline revenue to cover their incremental cost of hosting the content(as same content used as generated for offline version). Those uploading files used to earn with each download made using their links. But come to 2011, and the picture is starkly gloomy for those used to getting free reading material.

1. The good newspapers have mostly put of firewalls with a ridiculously low 'free articles' limit before the paywall message hits you. For example, FT/Economist/WSJ
2. And file hosters have shifted to hosting files on sites like uploading.com/filesonic which themselves have 'premium' subcriber accounts, that make free access virtually unfeasible.
3. New ebooks are being released in audio book form(about .8-1.5GB) against other formats which are hardly 1-10MB. Along with the braodband fair usage restrictions abroad(and in India) which degrade the speeds of heavy users, this would lead to less piracy.
4. Also, in EU/USA, industry is lobbying for stricter anti piracy laws to remove the internet access rights of frequent IPR infringers
5. Lastly, with the net neutrality pendulum swinging towards ISPs, we can expect content costs to go up as more media houses try to get their content to load faster and better. 

I guess the users can shift towards reading blogs, podcasts etc which are still free.,like Seeking alpha/FT/Economist blogs. Also, sometime we will need to get used to paying for content..for example a Singapore newspaper is SGD1(Rs 35) while good economic papers here are hardly 1/10th of it. Guess the price for development/IPR laws would be high..but hopefully worth it

How today's companies are getting paid for their digital content

While few of us would steal even an apple('tangible good'), there is little shame attached to stealing digital goods like information, music, software('intangible'). Actually, even 'stealing' is a misnomer because using copies without paying deprives the owner of his dues but does not reduce the content available to others(long run effects apart). Anyway, this post is not a rant for/against piracy but as the title suggests gives examples of how media companies are monetizing their content online

1. Give space to sponsors:- Taking a cue from the in-film product placements done by cinema chains, book publishers(www.bookboon.com) and broadcasters(NDTV 18 clips/ Hulu.com) are embedding advertisements in their books/video clips respectively. And as it is difficult to ignore these commercials, the pay per view may even be more here.
2. Have a sponsor who will subsidize the content:- The Economist is currently free on the Ipad, and the Wall Street Journal Future Leadership program(under which they give a daily pdf of WSJ Asia) is free to students of top Bschools. Both are courtesy sponsors who get brand recognition

I'll add to this list as I encounter more examples on the internet but the bottomline is that 'Content need not be free even in the era of near-zero 'marginal cost to the creator'

Onmobile plans an Apple-setting up a VAS platform for developers.

ODN(Onmobile developer network) is a platform to allow small VAS companies to take their product live to all Onmobile accessible customers. This of course entails investment by the operator but is a win-win for the developer who does not spend any upfront distribution costs. Such an approach may seem benevolent but as explained by the CEO during the ConCall,

we believe that if VAS is to realize its full potential of growing to 50,000 crores by 2015...it’s not going to happen with innovation coming out of OnMobile on its own. So this is going to have to involve a whole bunch of small companies innovating with a whole bunch of small products whether it is a local product that works very well only in a particular region of India or whether  it’s a vertical product in a specific area and banking or telemedicine where somebody
can bring innovation that the OnMobile R&D team, which is working on so many different things just can’t get to. So our unique position in the market, given our cross operator presence, is to actually create a platform to allow these small companies to take a jumpstart and get that product live, that’s it is in the interest of the industry the reason why we’re doing it.

Takeaway:- This move if successful will will help the industry, to say nothing of the Apple like power Onmobile will have . Apple demands 25% revenues from developers selling apps on Ipad. Imagine what can happen if Onmobile can replicate this in India. And then the profits will flow.