Several broadcasters have begun releasing new prices for channels as well as bouquets in line with the Bombay High Court order that in June upheld the New Tariff Order (NTO), 2020.
Zee Entertainment, Sony Pictures Networks India (SPNI), Star India and Viacom18 have come out with new prices after the Telecom Regulatory Authority of India (TRAI) asked broadcasters for a compliance report on NTO 2.0.
The new prices are expected to kick in from December 2021, which analysts say can adversely impact subscription and advertising revenues.
Under the new order, there is no price cap on channels that are outside a bouquet and are sold only a la carte. NTO 2.0 also lowers the price cap on channels in a bouquet from Rs 19 a channel to Rs 12.
Zee's, Chief Revenue Officer–Affiliate Sales, Atul Das, said under the new pricing, premium English channels like Zee Cafe and &flix would continue to be available in as a separate bouquet.
"Each bouquet constitutes a mix of channels, including GEC (general entertainment channels (GEC), movies, news, music and lifestyle genres," Das said.
One of the network's most popular Hindi general entertainment channel (GEC) Zee TV is not part of a bouquet and has been priced at Rs 22.
Under the new tariff regime, broadcasters either have to bring down the price of channels to make them part of a bouquet or increase their prices by unbundling them. Many broadcasters have chosen to pull out their popular channels from the bouquet to offer them as standalone.
Sony has priced its Hindi GECs Sony Entertainment Television (SET) and Sony Sab at Rs 24 and Rs 23, respectively. Its sports channels like Sony Ten 1 and Sony Ten 2 have been priced at Rs 20.
Star India’s popular GEC and sports channels have been prices above Rs 19. Star Plus is at Rs 23, Star Jalsha at Rs 23 and Star Sports 1 and Star Sports Select 1 at Rs 23 each. Star Sports 1 Hindi has been prices at Rs 21 among others.
NTO 2.0 may not be good for broadcasters
With popular channels out of bouquets and being offered as standalone at higher prices, it will weigh on subscription as well as advertising revenues.
According to analyst Karan Taurani, Senior Vice-President, Elara Capital, the subscriber revenue growth, which is estimated to be in the range of 7-8 percent year-on-year, will move lower to 3-5 percent in the first year of NTO 2.0 implementation.
"Shift towards a la carte will negatively impact subscription revenue for niche channels of larger broadcasters and, this in turn, will impact advertising revenues, as most consumers moving towards a la carte may not subscribe to bouquets," he said.
Broadcasters get around 93 percent of their revenues from bouquet channels and only seven percent from a la carte channels.
The Indian Broadcasting and Digital Foundation (IBDF), the apex industry body, has also pointed out that almost 90 percent of the Indian TV homes get their dose of entertainment through bouquets.
But with popular channels unbundled, viewers may find the bouquets less attractive, which will impact the reach of a broadcaster.
Channels that are popular but don’t feature among the top ones may also take a hit as viewers would rather spend money on the most popular options.
Broadcasters are already under pressure
While broadcasters have released new pricing, the timing of NTO 2.0's implementation has been questioned time and again.
Talking to Moneycontrol earlier, N Chandramouli, CEO, TRA, a brand intelligence and data insights company, said the limitation in pricing from Rs 19 to Rs 12 was being seen as arbitrary by the broadcasters.
"This is odd because TV media is going through a huge amount of trouble. They are not in the best state in terms of revenues especially due to the impact on ad revenues," he said.
Advertising revenues, which were hit due to coronavirus impact, are yet to reach pre-COVID levels. It is expected that TV ad revenues will see a decline of around 7 to 8 percent year-on-year in Q2 FY22 against Q2 FY20.
Already reeling from COVID-19, broadcasters will have a tough time due to the implementation of NTO 2.0, say experts. During the implementation of NTO 1.0 in February 2019, advertisers had stayed away from TV.
In addition, broadcasters together spent over Rs 1,000 crore on creating awareness about NTO 1 but still lost 12-15 million subscribers, IBDF had said at that time.
NTO 2.0: Pros and cons
The opinion is divided on NTO 2.0, with some experts saying a la carte should get a push as consumers don't want a large bouquet. The others, however, say a la carte has not been a popular option in India and is unlikely to become so overnight.
"A la carte revenue is mere 7 percent of the TV distribution revenue today and we expect this to move up towards 15-17 percent in the medium term due to NTO 2.0 implementation," said Taurani.Yet, this does not bode well for the broadcasters as the positive impact of higher ARPUs will be offset by viewers of these channels moving away from TV to digital.