In February 2019, the Telecom Regulatory Authority of India (TRAI) came up with a New Tariff Order (NTO) which brought changes to the way pay channels were priced.
The new regulatory framework is popularly known as the MRP regime because after NTO came into effect, subscribers became aware of paying for what they were watching.
Despite apprehension about the magnitude of changes, the broadcasters supported NTO.
Prathyusha Agarwal, Chief Marketing Officer - ZEEL, in an earlier interview had also said TRAI is giving people the power to purchase channels they want to see, which is why every channel is priced individually.
However, the broadcasters are not agreeing this time with TRAI after it came up with amendments to the New Tariff Order and Interconnection Regulations for the Broadcast sector on January 1, 2020.
President of Indian Broadcasting Foundation (IBF), NP Singh pointed out that the collective cost to the broadcasters was around Rs 1,000 crore in communicating the changes to the consumers for NTO 1.
In addition, there was an overall loss of 12-15 million subscribers during the transition period.
This is why the broadcasting space is nervous regarding the new changes.
According to Sudhanshu Vats, Group CEO and MD, Viacom18 and Vice-President IBF, if changes are required in the media and entertainment space which is dynamic in nature, enough time should be given for implementation. Plus, changes shouldn't be suggested so frequently.
The apex body of broadcasters in India, IBF has said the amendments to NTO will have growth hampering ramifications for the broadcast sector. It could lead to shutting down of channels which will result in unemployment in the sector.
The amendments to NTO or NTO 2.0 will put more pressure on the broadcast industry which is recovering from the twin shocks of NTO in the first half of 2019 and the ad slowdown business.
What are the amendments suggested by TRAI?
Reduction of MRP cap from Rs 19 to Rs 12 for channels to be part of a bouquet
Last year in February, TRAI had notified a cap of Rs 19 per channel as the threshold for creating bouquets. Now, this has been reduced by 40 percent to Rs 12 per channel. The IBF pointed out that no logical rationale or consumer insight was provided by the regulator to back this change.
Restricting incentives only to a la carte
In NTO 1, TRAI allowed incentives on both bouquets and a la carte. But in NTO 2.0 TRAI has removed discounts on bouquets.
IBF argues that when major broadcasters including Sony, Star, Zee, Viacom introduced promotional schemes and offered their premier channels at an MRP of Rs 12 per channel for a limited period, the results showed no uptick in the a la carte offering in spite of the price reduction. This for them was a clear signal that the consumers prefer bouquets.
In this exercise, broadcasters suffered revenue losses.
Impact of Network Capacity Fee (NCF)
Under NTO 1, consumers have to pay Rs 130 each month which TRAI calls the Network Capacity Fee (NCF). A breakup of your cable bill will tell you that around 60 percent of the total bill amount goes to the distribution platforms, 15 percent towards taxes, and broadcasters get 25 percent.
IBF’s argument is that when TRAI is ensuring to offer content to consumers at more affordable rates then why NCF, which is the single largest component of end consumer price, is not being addressed.
Imposition of twin conditions on bouquet pricing
When the NTO was introduced last year, TRAI decided to do away with the twin condition formula for bouquets as the regulator advocated free pricing.
However, in NTO 2.0, TRAI has sought to reintroduce the twin conditions which will introduce cap on bouquet pricing.
According to many broadcasters, it would be difficult for them to combine a Rs 12 channel with Rs 0.50 or Rs 1 channels in the same bouquet with the twin conditions in place.
IBF also argues that twin conditions on bouquet pricing will limit the number of channels in the bouquet. Plus, premium offerings like HD channels will also see same price reduction.
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