Trai's new tariff order: Broadcasters brace for subscription revenue dip

As broadcasters and the sector regulator clash over tariff amendments prescribed by the latter, experts and industry executives estimate a 10 per cent fall in subscription revenue because of this. At a time when advertising revenues are down because of the general economic slowdown, a hit in subscription revenue, say experts, hardly augurs well for the industry.

The Telecom Regulatory Authority of India (Trai) has suggested twin conditions on bouquet pricing – one is a 33 per cent discount cap and another is a ceiling on the maximum retail price (MRP) of any channel in the bouquet up to three times the average MRP of the bouquet. Analysts at SBICap Securities say apart from broadcasters, the average revenue per user (ARPU) for cable and direct-to-home (DTH) players could also take a hit under the new tariff order (NTO 2.0).

On Monday, the Indian Broadcasting Foundation (IBF) as well as individual members including Star-Disney, Sony, Zee and Viacom18 moved the Bombay High Court seeking a stay on the implementation of the tariff order. The next hearing is slated for January 22, when Trai is expected to give its response to the petitions made in court by the IBF and media companies. At a press conference on Friday, top broadcasters said micro-management of the industry by the regulator was unwarranted and would inhibit overall growth of the sector.

“Why is there a focus only on the broadcasters’ revenue? That, too, when it is the broadcaster who is creating content, investing in talent and capability. The amendments to the February 2019 tariff order are both arbitrary and discriminatory,” said N P Singh, managing director and chief executive officer, Sony Pictures Networks India. Singh is also the president of IBF.

Industry sources say that Discovery Communications, whose executives were also present during Friday’s press meet, might approach the Delhi High Court against the amendment. Discovery had moved the Delhi High Court last year, too, when the NTO was first implemented. It is unclear whether DTH players will go to court, though Tata Sky and Airtel DTH had moved the Delhi High Court against the tariff order last year.

Experts say a near 37 per cent drop in the individual price of a channel (from Rs 19 to Rs 12) will hit broadcasters hard since cost of content acquisition has been growing over the past few years.

Karan Taurani, vice president, research, Elara Capital, said lower ARPUs after the pricing amendments would mean a lower share of revenue for broadcasters, who were getting almost 50 per cent share after the February 2019 tariff order. "We expect the percentage share to remain the same (50 per cent), but the absolute distribution revenue would come down substantially following implementation of the pricing amendments,” he said.

Under the current channel pricing regime, subscription revenue has actually grown for companies. Listed media player Zee Entertainment, for instance, is expected to post a subscription revenue growth of about 19 per cent year-on-year (YoY) for the quarter ended December, led by domestic subscriptions, analysts said. Similarly, Sun TV is likely to report a 14 per cent YoY growth in subscription revenue for the October-December period.