The media regulator has is- sued draft tariff guidelines that will be applicable from April 2017 onwards. Key highlights include: Broadcaster sneed to declare a minimum retail price (MRP) for every channel, and this can vary across regions. The regulator has defined a ceiling on the MRP for each genre. Pay channels of a broadcast- ing network can be packaged into a bouquet of free and pay channels, yet the bouquet’s MRPcannot be lesst han85% of the sum of MRPs of the ala carte pay channels forming part of the bouquet. Pay and free-to-air channels cannot be clubbed together. The price of high-definition channels is to be priced at 3x the MRP of a SD channel. Separately, on the distribu- tor side, the regulator has suggested they provide all channels on a la carte basis and has proposed a minimum subscription fee of `130 per month per set top box.
Distributors can charge an extra`20 for channels beyond the basic tier channels. Further, broadcasters will pro- vide a 20% distribution fee to TV distributors for collecting and remitting pay channel revenues. Maintain reduce with unchanged DCF-based TP of `436.We view draft pricing guidelines as negative for Zee as this may impact growth in subscription and advertising revenues, as well as increase marketing spends. Key upside risks include the regulator allowing broadcasters to sell bouquets and a significant delay in the implementation of the new regulatory regime.