NTO 2.0: Broadcasters' price hike leaves DPOs jittery

Following the amendment of the new tariff order (NTO) by the Telecom Regulatory Authority of India (TRAI) last month, broadcasters like ZEEL, Sun TV, Discovery Communication India, Disney Star India, Viacom18 and Culver Max Entertainment have revised their pricing and filed their RIOs on December 16. The new pricing will be effective February 1, 2023.

In the amended NTO, the regulator restored the Rs 19 MRP cap for the inclusion of TV channels in a bouquet and also allowed broadcasters to offer a maximum discount of 45% while pricing its bouquet of pay channels over the sum of MRPs of all of the pay channels in that bouquet.

The decision was welcomed by the broadcasters when TRAI announced an amended NTO. Indian Broadcasting and Digital Foundation (IBDF) President and Disney Star Country Manager & President K Madhavan praised TRAI Chairman PD Vaghela for taking the collaborative route to deal with the NTO 2.0-related issues.

He said, “NTO 2.0 is the outcome of the strong collaboration between industry and TRAI under the leadership of Dr Vaghela. Rather than pursue a litigative approach to address pending demands, our approach of engaging in constructive dialogue has allowed us to make strong progress in creating a more conducive environment for the industry on the pricing front. We remain confident of moving to an environment of regulatory forbearance."

In the revised pricing, broadcasters have increased pricing by 10-15% for some bouquets. For instance, Zee Entertainment Enterprises LTD (ZEEL)’s Zee Family Pack Hindi SD priced at Rs 43 had 25 channels but in the revised rates the same MRP broadcaster is offering only 15 channels. Similarly, Zee Family Pack Marathi SD priced at Rs 49 offers 15 channels which were earlier priced at Rs 45 offering 20 channels.

Similarly, Happy India Marathi bouquet by Culver Max Entertainment was priced at Rs 44 and is now priced at Rs 46, though they are offering the same number of channels. Viacom18 will discontinue over 30 bouquets effective February 1, 2023.

According to Karan Taurani, SVP of Elara Capital, the prices of bouquets have been revised upwards by 10% on average (slightly ahead of their estimates of 8% price hike). “This is bound to have a positive impact of 4-5% on revenue estimates for FY24 for broadcasters,” he said.

He mentioned that the broadcasters have also rolled back ala carte pricing towards Rs 19 for their marquee channels (from Rs 12 earlier / due to uncertainty over NTO 2.0); however, this rollback won’t have any impact on ARPUs, as the shift from Rs 19 to 12 was only notional in nature as by RIOs (Reference Interconnect Offers) submitted last year post-NTO 2.0 norms

“NTO 3.0, does not have any material difference vs NTO 1.0, except the fact that the discount percentage for the sum of a la carte vs the same channels in the bouquet should be capped at 45%. Price hikes are positive for broadcasters and may drive upgrades in the range of 3-5%, in case of no cord cutting/shaving trends due to price hikes.”

However, distribution platform operators (DPOs) have raised their concerns over this. According to several cable operators, NTO 3.0 will drive consumers away from pay TV and toward DD FreeDish and over-the-top (OTT) platforms.

"If NTO 3.0 is implemented, approximately two crore digital cable TV and DTH customers may migrate to unregulated OTT and FreeDish platforms," said the MD of a Cable TV company.

Speaking at the CII Big Picture Summit last month, the TRAI chairman stated that the regulator is open to tariff forbearance provided the stakeholders in the broadcasting value chain work in a cohesive manner. TRAI has not fixed any price caps for channels that are offered on a standalone basis or outside the bouquet.

In its amended policy, TRAI has stated that the discount offered as an incentive by a broadcaster on the MRP of a pay channel shall be based on the combined subscription of that channel both in a-la-carte as well as in bouquets. The distribution fee and discounts offered by a broadcaster to the DPO remain capped at 35% of the MRP of an a la carte channel or a bouquet.

A senior official with a major cable TV company previously told exchange4media that this clause will increase the regulatory burden on DPOs. He added that TRAI should now look into DPO demands such as removing the network capacity fee (NCF) cap, parity in offering discounts to customers at the retail level, and applying the 60% NCF discount to broadcasters for pay channel prices for Multi TV connections, among other things.

As earlier reported by e4m, the TRAI is expected to issue another consultation paper to address the concerns of DPOs and local cable operators (LCOs).

"Cable operators are concerned that this will have an impact on their subscriber base and end customers, but I believe it will be minimal. The price difference between OTT and TV is still very large, so an 8-10% price increase will have no effect on TV, according to an industry analyst. He also mentioned that consumer bills will also go up by 8-10%.