Television production houses and Bollywood producers are likely to be hit by the conditional access system, which comes into effect on July 14.
Broadcasters have warned their production and film distribution partners that their production and promotional budgets could go down by 50 per cent if CAS is not implemented properly and channels are blacked out in many parts of the metros.
STAR TV has already sounded out television production houses and filmmakers on this.
"The rollout needs to be done systematically. Cable operators may not be able to provide enough set-top boxes to their subscribers by July 14.
"If that happens, the reach of our channels will drop in the metros, constituting 6.4 million households. This will lead to a fall in viewership and consequently a fall in revenue.
"Therefore, we will not be able to support the budget agreements that we have signed with television producers," said Sameer Nair, chief operating officer, STAR India.
"We have, therefore, decided to inform our production partners in advance that if CAS is not implemented properly, we will be cutting their budgets. We don't want any litigation on account of this after July 14," he added.
The television advertising pie is currently pegged at around Rs 4,000 crore (Rs 40 billion). The four metros -- Delhi, Mumbai, Chennai and Kolkata -- account for over 60 per cent of the advertising and subscription revenue of broadcasters.
According to Nair, advertising revenue to the STAR TV network could drop by as much as 50 per cent.
Some media planners said post-July 14, they would like to hedge advertising spends. They would also not commit their advertisement spend after July 15.
Sony Entertainment Television India officials were not available for comment on this issue.
Apurva Purohit, president, Zee Telefilms said: "We have not told our producers anything. In fact, we have always been operating under proper production budgets. We have supported CAS from the beginning and feel that it will be implemented smoothly."
Ajay Patadia, company secretary at Balaji Telefilms, one of the main suppliers of television software to STAR TV said: "We do not see a negative impact. There is still a lot of confusion on the CAS issue and nobody knows how it is going to be implemented. In case it is implemented only in Chennai, I do not see any negative impact on us."
It is understood that the broadcasters have also explained to Bollywood producers and distributors that film acquisition deals are going to be less lucrative in a poorly implemented CAS environment.
"Rs 5 crore (Rs 50 million) as rights to telecast a movie is going to be a thing of the past if CAS is not implemented properly. Deals could be priced as low as 10 per cent of what it used to be earlier," said a broadcast executive.