Cable television distributors may gain as the telecom regulator’s final TV tariff order gives them the bargaining power to make broadcasters pay carriage fee for channels with low subscription, said a report by broking house Kotak Securities.
The top 30-50 channels may attract sizable consumer interest, but cable operators and direct-to-home (DTH) services providers may refuse to pay content cost and seek carriage fee for the remaining 300-500 channels carried on their platform, the report said.
A broadcaster would be compelled to yield in order to maintain the reach of its channels which is essential for protecting its advertising revenue stream. The extent of upside for distributors would be governed by the ability of weak broadcasters to pay.Kotak Securities Report
The Telecom Regulatory Authority of India’s (TRAI’s) order is the first such attempt to regulate tariffs in the television industry, which a KPMG-FICCI report said was worth Rs 54,000 crore in 2015.
Broadcasting networks with 3-4 channels are better placed to protect their subscription revenue but standalone channels may be the most impacted, according to the report Kotak Securities.
It sees a potential increase in Dish TV India Ltd.’s carriage revenue. Zee Entertainment Enterprises Ltd. may protect its net subscription revenue while Sun TV Network Ltd. may gain due to strong positioning of its channels, the report said, adding that it is difficult to predict the impact on cable players.
BloombergQuint’s emails to Dish TV, Zee and Sun TV seeking a comment did not elicit a response.
TRAI seeks to implement the tariff order in six months but a report by brokerage Edelweiss Securities said broadcasters may mount a legal challenge.
Uniform Pricing
According to the tariff order, the broadcaster needs to pay the distributor a minimum of 20 percent of the maximum retail price (MRP) charged as distribution fees. The broadcaster will also pay a carriage fee of a maximum 20 paise per standard definition (SD) channel per user per month and 40 paise for high definition (HD) channel. The carriage fee will reduce as subscription increases.
According to the final television tariff order and interconnect regulations released by the telecom regulator, distributors can discontinue a channel that is subscribed by less than 5 percent of their monthly average active users.
The order also mandates uniform pricing across all circles. A broadcaster will have to charge the same prices to customers in urban and rural markets. Which means, there is a high possibility that customers with low purchasing power may get less content and premium subscribers may be able to improve their subscription spends, the report said.
TRAI has also fixed the distribution network charges for subscribers. For the initial 100 SD channels, the consumer will pay Rs 130 a month. In addition, users will have to pay subscription fee for pay channels.
The slab rate of Rs 20 per month has been fixed for an additional 25 SD channels. One high definition channel will be considered as two SD channels.
The exact implication of these charges is not clear as this tariff order is the first such regulation. In the medium to long term, consumers may have to pay more, said Abneesh Roy, media analyst at brokerage Edelweiss Securities.
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