A look at the implications of TRAI’s New Tariff Order 2.0
Leading broadcasters have revised the prices of their television channels in line with the regulations mandated by the Telecom Regulatory Authority of India (TRAI) in the New Tariff Order (NTO) 2.0. Industry executives estimate that the hike in prices could result in a 30-40% increase in cable bills for viewers.
NTO 2.0 caps discounts that can be offered on bouquet pricing to 33% (of the total a-la-carte prices of channels) from the existing average discount of 40-54%. Further, it says, the prices of channels in a bouquet should be capped at an a-la-carte price of Rs 12. Under NTO 1.0, the MRP of channels forming a part of a bouquet had to be capped at Rs 19. Previously, there was no such limit on the discount for bouquet prices.
Pruning the bouquet
To comply with NTO 2.0 norms, broadcasters have increased the prices of flagship channels and left them out of the bouquets. For instance, Sony Pictures Networks India has priced SET, Sony Sab, Sony Ten 1 and Sony Six at Rs 24, Rs 23, Rs 20, and Rs 15 per month, respectively. These prices will be effective from December 1, 2021.
Star India has priced 12 of its 62 TV channels at over Rs 12 across Hindi, regional and sports genres. Four of Zee Network’s channels are outside the bouquet — Zee TV (Rs 22), Zee Marathi (Rs 25), Zee Kannada (Rs 22) and Zee Bangla (Rs 25).
Shailesh Kapoor, founder and CEO, Ormax Media, says this is a bold decision by broadcasters. “TRAI was hoping that NTO 2.0 would reduce costs for consumers, but the decision of the broadcasters will result in a spike in costs, defeating TRAI’s original agenda.”
In 2020, the Indian Broadcasting and Digital Foundation estimated that the implementation of NTO 1.0 resulted in an overall loss of 12-15 million subscribers. With people rationalising their channel choices, this could result in a further dip.
Shibu Chacko, senior VP – distribution, IN10 Media Network, says that the spike in cable TV bills could benefit OTT streaming platforms and DD Free Dish.
Revenue from users choosing channels on an a-la-carte basis accounts for 7% of TV distribution revenue today. “This could grow to 15-17% in the medium term,” observes Karan Taurani, senior VP, Elara Capital.
The plot thickens
Analysts do not expect revenue from subscriptions to decline significantly, as the dip in subscriber base is likely to be offset by the rise in channel prices. In genres such as sports where broadcasters have kept channels out of bouquets and hiked MRPs, the average revenue per user is likely to increase as people are unlikely to opt out of sports channels.
Competition among channels is likely to get fierce. “Market leaders across genres could emerge even bigger in terms of subscriber revenue share. This will impact both viewership and advertising revenue positively for these players,” says Taurani.
The implementation of NTO 1.0 in 2019 hit niche channels hard, especially English entertainment and movie channels, with viewers opting out. SPN discontinued AXN and AXN HD last year; Lifestyle channels FYI TV18 and FYI TV18 HD too went off air. Star India is likely to phase out Star World, Star World HD and Star World Premiere HD.
The implementation of NTO 2.0 could put more pressure on niche channels that have already been losing viewers to OTT streaming platforms. “If it is untenable to keep the price of niche channels low and include them in bouquets, it is better to make them free-to-air or shut them down, because it is apparent that in the TV game, one needs to have scale,” notes Jehil Thakkar, partner, Deloitte India.