The Telecom Regulatory Authority of India’s (Trai) amendment to the new tariff order (NTO), which tampered with channel pricing, has met with a huge uproar from television broadcasters through their not-for-profit representative body, the Indian Broadcasting Foundation (IBF). So riled are the broadcasters by the revisions that the IBF has hinted at moving court against Trai.

Two major disruptions have hit the broadcasters in less than a year. First, when Trai first implemented NTO and asked broadcasters to price their channels individually in February 2019 and second on 1 January 2020, when it amended its earlier order and changed the caps on prices of channels. The first order disrupted India’s TV broadcasting sector with niche channels losing their reach, advertisers remaining confused about their spends, as consumers picked channels, eventually shelling out more for like-to-like entertainment.

Trai received so much flak for its move that it floated another consultation paper to make amends. Now, through a revised order, it seems to have fixed prices at a lower rate for the end consumer. It has reduced the cap on the MRP of individual channels that are part of a bouquet. Earlier the MRP of a channel in a bouquet was 19. That’s been lowered to 12. Besides, discounts on bouquets offered by broadcasters have also been capped at 33%.

According to Icra, the tariff changes could lower the DTH and cable bills of subscribers by up to 14% from the present levels “and encourage subscribers to exercise their right to choose and opt for à la carte channels". In a note, Abneesh Roy, senior vice president (research) at Edelweiss Securities, said the amendments proposed by the regulator are definitely customer-centric and focus on stemming the spike in cable/DTH bills. “The new guidelines will reduce end-consumer ARPUs (average revenue per user) as bouquet discount has been capped at 33%. As a result, the flagship channel prices may come down," he added.

However, the revised order may hurt the broadcasting industry financially. It could lead to a slowdown in subscription revenue growth for TV channels. Roy said the move will likely be negative for broadcasters as ad revenue growth has been sluggish and resumption looks challenging. Trai’s order comes at a time TV channels are facing competition from video streaming services and suffering lower growth in advertising because of muted consumer sentiment and tepid consumption. Media buyers estimated television advertising to have grown not more than 8% in 2019 as companies remained tightfisted on ad budgets.

Besides, the discount cap on bouquets could lead to either a few tail channels getting dropped from fat bouquets or an increase in MRPs of the bouquets. However, given the rise in the end-consumer ARPUs in the new regime, the likelihood of reduction in channels is high, Roy added. This means that broadcasters will have to rethink the future of their less popular channels.

Media consultant Chintamani Rao said such micromanagement of the broadcasting sector can only be detrimental for the industry. “If I can’t even fix the prices of my channels, I have lost control," he said. Interestingly, although the broadcast sector is regulated in all countries, in markets such as the UK, the US, Japan, Australia, Canada, Indonesia and Singapore, neither are the channel prices fixed by the regulator nor is there any rule against bundling.

In its note, IBF has made it clear that the “amendments will severely impair broadcasters’ ability to compete with other unregulated platforms and adversely affect the viability of the pay TV industry". Trai, in its wisdom, has also mandated a Network Capacity Fee (NCF) of 160 that can be charged by the distribution platform owners (DPOs) for 200 free-to-air channels, up from 130 for 100 (standard definition) channels it had mandated earlier. This move may tempt broadcasters to make several of their pay TV channels go free-to-air given that they won’t be able to price them at the rate they wish to.

At least, being in the FTA may guarantee a better reach and, hence, increased ad revenue. However, advertising growth rates will only slow down, said experts. In most mature TV markets, broadcasters move from ad-driven models to subscription-driven businesses, they added. Excessive dependence on ads will again increase the propensity of channels to rely on popular content catering to the lowest common denominator. In such a scenario, niche or special-interest channels may find it difficult to survive.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff

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