TRAI started the New Year with a few major changes in the New Tariff Order for broadcasters with an announcement as early as on the 1st of January, 2020.
According to the amendments made to the NTO the sum of ala-carte channel pricing forming a part of bouquet can’t exceed one and a half times of the bouquet price. Now what this means for the broadcaster is that the discounting of ala-carte channel pricing vs bouquet channel pricing cannot exceed more than 34%. Currently the broadcasters are giving a discount of almost 60%-80% on their bouquets vs the a la carte pricing.
NTO 2.0 also states that channels priced above INR 12 cannot be part of a bouquet. This is the same norm which was mentioned in the NTO 1.0 too where in a channel which is above INR 19 could not be a part of the bouquet.Now broadcasters usually won’t charge more than INR 12 as 93% of the revenue is from bouquets and only 7% is ala- carte based.
DD channels will continue to be part of the BST (FTA pack) which is a must offer to consumers by the DPOs. NCF is the rental for channels paid by consumers for a combination of FTA and Pay channels. According to NTO 2.0 zero NCF charges for DD channels and it caps total NCF on all channel offers by DPO at INR 160. This has increasedthe number of channels in base NCF of INR 130 to 200 channels in revised regime which was INR 100 in the earlier regime.
So effectively there is a capping on the NCF fee to INR 160 and not a capping on the number of FTA channels; capping on NCF is negative for Distributors (MSO and DTH), however it does not have material impact on broadcasters.
TRAI has capped INR 4 lakh per month for the carriage fee for a particular channel.
This is set to mildly impact the broadcasters as there is a capping in terms of carriage fee being charged and hence broadcasters here are in a win-win situation as the rush for FTA is bound to increase for their smaller channels which are not a part of bouquet.
According to Klara Capital, the impact of NTO 2.0 will be the following.
NTO 2.0 will bring lower ARPUs for TV which had shot up by almost 60% at an average post the NTO 1.0 which would mean a lower share of revenue for the broadcasters (who were getting almost 50% share post NTO 1.0) – expecting the share to remain similar, but the absolute distribution revenue to move down substantially.
Enhanced movement towards selective viewing as few consumers may move towards a la carte due to price correction.
The size of bouquets will come down in terms of channels from about 8-10 channels to 3-4 channels which will lead to a big management problem for distributors.
Expect some of the key channels like Zee Anmol which were earlier FTA before NTO and then became a pay channel post NTO, hence lost viewership and ad revenue to again consider the FTA route.
Ad spends will see a negative impact for sure due to transition phase just like it did during NTO 1.0 – this will have a negative impact on TV ad growth in H1CY20. However it won’t be just as subdued as last time as this has only few changes.
Niche channels of all broadcasters will face big problems due to the capping on the FTA front; expect niche genre channels to move directly to OTT or take the digital route.
