With advertising revenues plummeting 70 percent in the wake of the COVID-19 pandemic, broadcasters are frantically scrambling for subscription revenues. They are demanding that digital payments be made mandatory for last-mile cable service providers. A seemingly simple request to heed to, here’s why subscription revenues remain elusive.
Every stakeholder in India’s Rs 78,800-crore TV industry is staring at the edge of the cliff. And is hoping the other extends the rope.
For India’s 48 pay broadcasters, the pandemic has had a double-whammy effect. On the one hand, advertising revenues have fallen by 70 percent as the COVID-19 pandemic forced television shows to halt production, cancelled live sporting events and stalled advertising dues of over Rs 64 crore owed by the government to broadcasters. On the other, subscription revenues from Multi-System Operators (MSOs) have been severely affected. “We had zero subscription revenues in March and April. Our cash flows have dried up. On top of that, we are being asked for waivers on subscription fees,” said the legal head of a niche broadcaster, requesting anonymity.
Another senior broadcasting executive said his network received only 15-20 percent of subscription dues in March and April. While larger MSOs were disbursing payments piecemeal, smaller MSOs were struggling to make payments, he said, speaking on condition of anonymity.
According to KPMG’s Media and Entertainment Report 2019, India has 83 million cable subscribers and industry experts say nearly 70 percent pay their monthly cable bills in cash. This means Local Cable Operator (LCO) agents are required to visit as many as 58 million homes each month to collect payments. With the country under a strict lockdown, however, and housing societies banning all outside members, LCOs have been unable to collect cash dues from subscribers in March and April. According to the All India Digital Cable Federation (AIDCF), subscription collections have fallen by at least 80 percent since the pandemic began.
With revenues beginning to erode and the sector staring at an “existential crisis”, the Indian Broadcasting Federation (IBF) shot off a letter to Information and Broadcasting Minister Prakash Javadekar in April, putting forth a list of 18 demands. Among these was “mandating digital payments of subscription and advertising dues.” Large broadcasters including Star India, Times Network and NDTV also released several campaigns urging consumers to contact their local cable operators and pay their bills through digital means.
Efforts to reach the leadership team of the AIDCF and IBF did not elicit any response.
100 percent digital payments: The time is now
Broadcasters say it is imperative the Ministry of Information and Broadcasting (MIB) make digital payments mandatory during the COVID-19 pandemic, as it is in the larger public interest and will infuse much-needed capital to jump-start the sector.
“In the current scenario, collecting payments in cash present a huge risk to LCO agents and to the public at large. The MIB, being the licensor of DPOs, should issue an advisory to all registered cable operators and licensed DTH operators to accept only digital payments. This will allow the sector to kick-start its economic activities and resolve the cash crunch situation. The government’s efforts to promote a cashless economy can be greatly catalysed during the pandemic,” said the executive quoted earlier.
To make digital payments mandatory, the MIB would be required to amend the registration terms and conditions for all distribution platforms by adding an enabling clause to this effect. The clause would require registered cable operators or DTH, HITS or IPTV players to operate and maintain a digital application interface (API) as prescribed by the Central Board of Direct Taxes (CBDT) and ensure that payments from subscribers and to broadcasters are made only through RBI-approved payment systems.
Call for incentive schemes
Augmenting digital payments, however, would require incentivising all industry players and consumers. Broadcasters say the MIB’s advisory must include incentive schemes that allow DPOs to offer a higher discount on both, a-la-carte channels and bouquets, to subscribers who pay digitally. The advisory should also mandate all broadcasters to offer low-cost digital modes of paymentsto DPOs which include debit card powered by RuPay, Unified Payments Interface (BHIM-UPI) and Unified Payments Interface Quick Response Code (BHIM-UPI QR Code).DPOs that choose to pay broadcasters through digital modes should be offered higher discounts on individual channels and bouquets.
Some distribution platforms say they have already made significant strides on this front. In January, IndusInd Media (IMCL), part of the Hinduja Group, entered into a partnership with e-commerce payment gateway, Easebuzz. Easebuzz’s platform allows IMCL’s operators to collect subscription amounts from customers directly into their accounts through an SMS link. Vynsley Fernandes, CEO, IMCL said, “In March, as soon as the basic guidelines were issued to prevent the spread of COVID-19, we launched a campaign to explain how our LCO partners can on-board the Easebuzz platform. Till date, 80 percent of our partners have subscribed to it. This has helped us greatly stem the impact of the pandemic on our subscription revenues; we have seen only a single-digit dip since March.”
A different tale to tell
For cable operators, however, on-ground realities are far different. Arvind Prabhoo, president of the Maharashtra Cable Operators Foundation (MCOF) says India’s 60,000-strong LCO market is facing significant challenges in collecting payments because 60 percent of all connections belong to post-paid subscribers. These subscribers have defaulted on or deferred payments despite digital payment options being made available.
“Local operators began to offer digital payment modes in April, but the response was lukewarm. In April, LCOs collected 20-25 percent payments digitally. In May, the situation began to really hurt LCOs. Despite the introduction of new schemes, bank offers and campaigns urging consumers to pay their bills, only 50 percent of dues were collected,” said Prabhoo.
The issue, as industry experts including Prabhoo explain, is not the adoption of digital tools. Post the government’s demonetisation drive in November 2016, even small vendors successfully set up Paytm, GooglePay and PhonePe accounts. The core issue is that the pandemic has upended TV consumption, both in terms of the number of people watching it and their preferences.
Revenues from three categories of consumers have been significantly impacted – hotels, migrant workers and consumers in rural India with poor connectivity. The hotel industry has completely downed shutters and disconnected their connections and deferred/defaulted on payments. The exodus of migrant workers from cities to their native villages as well as students to their hometowns has brought connection renewals to a halt. Not to forget, the elderly population, which accounts for 20-25 percent of TV watchers, are unable to adapt to digital payment methods and are reliant on their age-old relationships with their local operators.
With new content production on hold, broadcasters have resorted to playing telecasts of popular old shows, prompting many customers to defer payments, downgrade packages or pull the cord completely and switch to OTT platforms. This has cascaded immense pressure onto broadcasters to revise their pay channel rates, even as they scramble for money to revive new content production.
In a letter to the IBF dated May 15, the MCOF made an appeal to broadcasters to offer deeply discounted tariffs for pay channels, if not waive it completely for four months. Pointing out that channels have been recycling programmes for close to two months and fresh programming is a while away, the letter argued that customers would discontinue highly priced channels. This would prompt LCOs to do the same as they are under immense pressure from MSOs to clear their dues even though subscribers are not paying up, reads the letter.
Prabhoo says the pressure from MSOs to clear their dues is proving detrimental to last-mile operators. “MSOs work on a prepaid model which means their payments for the months of March and April have been made by LCOs. Despite this, many MSOs have withheld payments to broadcasters citing lack of collections. On the other hand, on-ground collections have dried up but cost overheads for LCOs continue at 100 percent. There is little or no relief from MSOs – even the Rs 30-50 per subscriber collected on Free-to-Air channels has not been waived off,” lamented Prabhoo.
MSOs, on their part, say there is little room for relief given their own cash flow situation and liabilities but they have extended credit lines wherever possible. The chief of a large MSO who did not want to be named said: “We have assessed our cable partners’ capability to pay their dues and accordingly extended relief. In red zones, credit lines have been extended to operators. In orange and green zones, we have not modified the terms of payment. In some circles, the adoption of digital modes of payments has helped in payment collection. But large swathes of the cable market still remain unorganised and rely only on cash transactions - there payments have been stuck.”
“Ultimately we cannot overlook our own business model. Our revenues have suffered; there has been a 30-40 percent drop in subscriber revenues and broadcasters are also defaulting on placement fees. Despite this, in line with the government directive, we cannot disconnect the service to defaulting customers,” he added.
Post the nationwide lockdown announced by Prime Minister Narendra Modi on March 23, the Ministry of Home Affairs (MHA) issued a list of “essential services” that would remain open during the lockdown. To ensure essential information on the outbreak was disseminated through news channels in a timely and accurate manner, print and electronic media and broadcasting services were enlisted as essential services. As such, the entire broadcasting value chain - from broadcasters to distribution platforms to LCOs - has been operational. Neither stakeholder is permitted todisconnect service to the other even if payments are non-committal.
What will the future bring?
With the lockdown entering its fourth round now, the broadcasting and cable services industry is worried that the effects of this difficult situation will soon be exacerbated. “If the lockdown is extended further and the effect of large-scale job losses and pay cuts begin to roll off the broadcasting sector, the future of broadcasters and their partners will be severely jeopardised,” said the worried chief executive of an integrated Mumbai-based MSO.
As such, all stakeholders have made multiple representations to the MIB, seeking a wide array of interventions including regulatory moratorium for 18 months, lowering of TDS on subscription revenues from 10 percent to 2 percent, mandatory digital payments to changes in the GST tariff structure. Industry bodies say they are yet to hear back from the government.
An email sent to Javadekar on the way forward on digital payments did not elicit a response till the time of publication.