Why the license fee structure is hindering the growth of the DTH industry

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Updated: Dec 23, 2020 6:25 PM

According to regulatory filings, the license payable by three large DTH operators namely DishTV, Airtel DTH and TataSky is Rs 4,758.9 crore in FY20

DTH License Fee, Indian DTH IndustryDTH players are mandated to pay 10% of their gross revenue in terms of annual license fee.

At a time when the entertainment industry is going through an evolution, it seems the direct-to-home (DTH) industry is trapped in a time loop. The industry still has to pay a license fee to the government which it claims to have hindered the growth when compared to other mechanisms of entertainment. According to regulatory filings sourced by business information platform Tofler, the license payable by three large DTH operators namely DishTV, Airtel DTH and TataSky is Rs 4,758.9 crore in FY20. This is an 11% increase when compared to FY19, wherein the three companies total paid license fee of Rs 4,280 crore. “With the rise in video streaming platforms and the new tariff order (NTO2.0) — DTH now faces stiff competition from two set of players including broadcasters. Therefore to create a level playing field it is important to revisit the regulation especially related to license fee and resolve the matter at the earliest,” said a senior official of a DTH firm, on condition of anonymity.

DTH players are mandated to pay 10% of their gross revenue in terms of annual license fee. In 2008, the government had said that the licence fee for DTH operators will be charged at 6% of the gross revenue. However, the Telecom Regulatory Authority of India (TRAI) on July 23, 2014, recommended that the licence fee payable should be 8% of the adjusted gross revenue (AGR), which will be calculated by excluding service tax, entertainment tax and sales tax /VAT actually paid to the government.

Regulatory filings reveal that the current outstanding on account of DishTV is Rs 3,575 crore, while Airtel DTH filings’ show Rs 298.4 crore (FY20) and Tata Sky at Rs 885.5 crore (FY20). According to industry analysts the impending payout from the license fee will affect the cash flow of DTH operators. Not to mention, post the roll out of the new tariff order (NTO2.0), DTH operators are no longer allowed to retail channels. “Earlier post buying a channel from a broadcaster a DTH operator could decide on the maximum retail price based on the regulation issued by TRAI. However, now they aren’t allowed to do that post, NTO2.0 and they are forced to sell the channel at the same price as a cable operator does –thereby adversely impacting margins,” said a senior analyst. Add to that the stiff competition from video streaming platforms. Further, broadcasters are selling the rights of their content to OTT platforms – which is being streamed for free online.

It should be noted that the DTH License Fee litigation before the High Courts of Kerala where petitions had been filed by Sun Direct, Videocon D2H, Reliance (now Independent TV) and Bharti Airtel has been transferred to the Supreme Court. The challenge before the J&K Court by Dish TV continues to remain before the High Court. The Company has filed a transfer petition for transfer of cases pending before TDSAT.

Read Also: Within the M&E industry, the pandemic took its biggest toll on the film exhibition segment: ICRA

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