Major broadcasters come out all guns blazing in the winter of discontent
Aroon Purie, Megha Tata, NP Singh, Punit Goenka, Sudhanshu Vats and Uday Shankar discuss why they are unhappy with TRAI's NTO 2.0
Jan 10, 2020 10:18:00 AM | Article | Raahil Chopra
Broadcasters got together in Mumbai to show their discontent with TRAI’s latest amendment to the new tariff order (NTO).
NP Singh, MD and CEO, Sony Pictures Networks and president, IBF, was the first to address the media gathering. He spoke about how the TRAI in the last 15 years of regulating the broadcast sector has issued 36 tariff orders, the latest of which sees the arbitrary reduction of MRP cap from Rs 19 to Rs 12 for channels to be a part of the bouquet. This has ensured the start of the year hasn’t been happy for broadcasters.
He added, “Channel pricing is related to the quality and cost of content being offered, which the regulator appears to consistently ignore. In a competitive and free market like broadcast, channel pricing caps should be determined through open market forces rather than through the arbitrary fixing of caps without any fundamental basis.”
Singh also touched upon three other key changes:
Imposition of twin conditions on bouquet pricing
When the NTO was introduced last year, TRAI took a conscious decision to do away with the twin condition formula for bouquets as the regulator advocated free pricing. Within a few months, in NTO 2.0, TRAI has sought to reintroduce the twin conditions, negatively impacting the pricing and packaging of bouquets. In order to offer wider choice to their consumers, through affordable bouquets which is the practice world over, the broadcasters will have to either price their premier channels very low, hampering the ability to provide quality content or increase the price of other channels just to fit in the maths but artificially increase the burden of consumers.
One more fall out the twin condition restrictions is that it limits the number of channels in the bouquet, which in-turn reduces the value delivered to consumers. Moreover, when SD and HD channels are clubbed together in a bouquet, the same price reduction is applicable to both despite HD being a premium offering.
Additionally, using regulation to limit the number of bouquets being offered to consumers is fundamentally restricting consumer choice, given the large variability in consumer preference across 200 million TV homes.
Restricting incentives only to a-la-carte
This is a completely arbitrary discrimination between a-la-carte and bouquet without a rationale. Just a few months ago, TRAI thought it was fit to allow incentives on both bouquets and a-la-carte and now it has changed its mind and removed discounts on bouquets. From the regulator looking at the interests of all stakeholders and the industry at large, we expect a market facing and non-discriminatory approach to regulation.
A few months ago, at the request of the regulator, the major broadcasters introduced promotional schemes and offered their premier channels at an MRP of Rs 12 for a limited period. But the results showed no uptick in the a-la-carte offering in spite of the price reduction, clearly highlighting the consumer’s preference for bouquets. In fact, our members suffered revenue losses in the whole exercise.
Impact of NCF (network capacity fee)
While the stated intent of the regulator is to allow consumers to get content at affordable rates, the fact that it’s the imposed NCF is the single largest component of end consumer price is not being addressed. In the current NTO, if a consumer is paying Rs 275 per month – 60 per cent goes to the distribution platforms, 15 per cent to the government and 25 per cent to pay broadcasters. This is when it’s the broadcasters who are creating all the content, investing in talent and capability, and taking all the risks related to content development. Why then is the focus only on the broadcaster’s component of revenue which is only 25 per cent?
Singh was followed by Megha Tata, MD, South Asia, Discovery Communications. She called for a light-touch approach from TRAI. “TRAI wants to micro manage the sector and that’s detrimental already. India is already the cheapest market in the broadcast space and the future of this sector is in jeopardy."
Aroon Purie, chairman and MD, TV Today Group, was of the opinion that TRAI has strangulated the industry. “The government has subsidised rates already. The regulator is now killing the Golden goose that lays the egg. It’s tying the broadcaster’s hands and legs and asking them to swim. I don’t think this move is good for the industry.”
Punit Goenka, managing director and CEO, Zee Entertainment Enterprises, added, “At Zee, we are here for the consumers. We have an obsession with them and want to create the best value for them. They’re settling to the last change and this further hampers them. We have implemented and created communication for the consumer. For a competitive market like ours, is a regulator needed to get into day-to-day management?”
Uday Shankar, president, The Walt Disney Company, Asia Pacific and chairman, Star and Disney India, added his concerns about the amendment to the NTO.
“We believe we have to create content and not become the content. In 2003, when TRAI came in it didn’t make any changes for very long. When the Supreme Court gave them an order, they reacted with two tariff orders in the last year. An amendment so soon after the first one makes one thing whether the first one wasn’t thought through enough. If TRAI wanted to bring the cost down for the consumer, then why do they have this NCF which can charge Rs 160 for free-to-air channels,” he said.
He also spoke about how this will challenge the existence of smaller and premium channels, with the former facing a struggle to exist.
Sudhanshu Vats, group CEO, Viacom18 Media, added, “The NTO passed in February 2019 was about giving choice to consumers. It was successful to the extent that 94 per cent of Indians were aware about this. People were making their choices. And there was churn too with people looking at different offerings each month. Now, with this amendment, aggregate prices have gone up and the highest percentage growth is for DPOs (distribution platform operators). Indians can buy shirts from the range of Rs 100 to more than Rs 10,000. So some can pay more than the others, so consistent pricing is not in the interest of anyone.”