Are broadcasters and DPOs the big gainers of TRAI's New Tariff Order?

Many broadcasters and distribution platform operators have reported hike in subscription revenues after the implementation of NTO

by Moumita Bhattacharjee
Published - Sep 16, 2019 8:26 AM Updated: Sep 16, 2019 1:24 PM

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Telecom Regulatory Authority of India (TRAI) introduced the New Tariff Order (NTO) this year. Under the new regime, DTH providers can charge subscribers only a maximum of Rs 130 (excluding GST) for a set of 100 channels, while letting the customers to further opt and pay for the channels of their liking separately. The transition to the new rule took some time but the results have been favourable for the broadcasters and DPOs.

What numbers suggest

Many broadcasters and distribution platform operators, in their Q1 FY20 results, have posted a significant rise in the subscription numbers.

Zee Entertainment Enterprises Limited’s subscription revenue for the quarter was Rs 7,088 million, a growth of 36.7 per cent YoY. Domestic subscription revenue grew by 46.7 per cent YoY to Rs 6,240 million. International subscription revenue was Rs 848 million. As per Network18 Media and Investments Limited’s Q1 FY20 reports, improved subscription income and cost controls raised EBITDA by 40 per cent YoY.

Capitalising on the growth opportunity provided by NTO, SITI too recorded growth in revenue in Q1 FY20 while maintaining a strict control over the operational efficiencies. This manifested itself in Operating EBITDA margin expanding significantly by 471 bps YoY to 21.4 per cent and an increase in subscription revenue by more than 36 per cent YoY to Rs 2,932 million.

Sun TV Network also recorded a 16 per cent jump in revenues in the quarter ended June 30 at Rs 856.97 crore. The subscription revenue for the quarter was up by 28 per cent at Rs 396.94 crore as against Rs 311.27 crore for the corresponding quarter ended June 30, 2018.

As per KPMG report titled ‘India’s Digital Future: Mass of Niches’, advertising and subscription income for broadcasters grew at more than 12 per cent each, as broadcasters started to realise the benefits of NTO in the last quarter of FY19 by getting a higher share of the consumer-level subscription from DPOs.

 NTO gainers

According to Girish Menon, KPMG Partner and Head- Media & Entertainment, the fact that sharing of end subscriber revenues with the broadcasters by the DPOs is now regulated will definitely result in an increase of subscription revenues for the broadcasters, who will now get compensated based on the actual number of subscribers watching their channels rather than the fixed fee deals which were earlier in place.

“Further, with the introduction of the Network Capacity fee of a maximum of Rs 130+taxes across the board, distributors are also seeing an uptick in the ARPUs, especially in Phase 3 and 4 markets. ARPUs pre-NTO were Rs 100 or lower,” he explains.

Sony Pictures Network has seen not just an increase in subscriber base but there is also a hike in time spent. In an interview to exchange4media last week, N P Singh, Managing Director & Chief Executive Officer, SPN, had said, “We have seen roughly 20-25 per cent growth in some genres, while in others, it is close to 10 per cent. This is why we have seen an upsurge in ratings of our channels. SAB has the highest time spent across the industry. NTO has helped us getting our subscriber growth up and also the reach has started to build. The time spent on all the channels has gone up.”

A word of caution though

While the scenario looks good at the moment, things might change if suggestions sought by TRAI for the review of the new framework in the form of a consultation paper comes into effect.

A senior executive from a broadcast network shares that while there has been an upward growth of 15-20 per cent for key broadcasters, if any of the suggestions becomes law, it might create a dent.

“It will dent their revenues quite a lot. As per TRAI, they tried a few things which were not implemented properly. A lot of broadcasters have tied up with MSOs to promote their packages and a lot of marketing activities were carried out to sway the viewers to watch their channels. They are selling the least popular channels with the driver channel. It is difficult for the consumer to make a choice. Largely, most of the DTH companies are going ahead with it and have given control to the consumers. Broadcasters might have to rationalise their bouquet prices in the coming days.”

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