NTO 2.0: Some key channels may go back to being FTA, say experts
According to analysts, the fresh set of amendments to the TRAI tariff order is yet another disruptive move for broadcasters
TRAI has released a fresh set of amendments to the tariff order with continued focus towards consumer benefit, wherein opting for channels on a-la-carte basis has been given preference over purchase of channel bouquets.
But what do the amendments actually mean? How does it impact the industry?
While broadcasters are yet to decode the fine points of the amendment, experts are calling this NTO 2.0. According to them this is yet another disruptive move for broadcasters much like the implementation of NTO in February 2019 that massively impacted reach and ad sales.
According to the media and entertainment arm’s research report at Emkay Global Financial Services, TRAI’s intention to implement the tariff order was to bring down consumer payouts and provide more flexibility for consumers to subscribe to channels a-la-carte and not be forced to buy bouquets due to the significant pricing differential.
“Although the price difference between a-la-carte and bouquets offering has narrowed vs the earlier regime, it continues to remain high to discourage consumer to opt for channels. Further, broadcasters have been pushing non-driver channels along with mainstream channels in bouquets. We believe that the reduction in channel pricing cap will impact broadcasters only if a large proportion of subscribers shift to a-la-carte model and subscribe to fewer channels. Large broadcasters that have driver channels (featuring in top 3) across the genres will have limited impact or risk of revenue loss due to the shift to a-la-carte,” said the research.
However, the report also says that the impact could be in the form of lost advertisement and subscriber revenues due to non-subscription of non-driver channels. Capping of NCF and increasing the number of channels will not impact DPOs as average realization for most DPOs is lower than the NCF prescribed by TRAI. DPOs’ revenue share will get impacted if there is a big shift from bouquet subscription to a-la-carte, it further said. “We believe that India will remain a bouquet subscription market while increasing options of lower a-la-carte offering does pose risk for broadcasters amid rising acceptance of OTT platforms. The implementation timeline and any legal challenge by any stakeholder are key to watch out for,” the report said.
According to Karan Taurani, VP, Research Analyst (Media), Elara Capital, “NTO 2.0 which has now officially been released will lead to lower ARPUs for TV which has shot up by almost 60 per cent at an average post NTO 1.0. Lower ARPU will mean a lower share of revenue for the broadcasters (who were getting almost 50 per cent share post NTO 1.0), expecting the share to remain similar but the absolute distribution revenue to move down substantially.”
The move will also lead to enhanced movement towards selective viewing as few consumers may move towards a-la-carte due to price correction, says Taurani.
In an interesting observation, he added that the size of bouquet will come down in terms of channels from about 8-10 to 3-4. This will lead to a major management problem for distributors.
Most experts say that due to the amendments it is expected that some of the key channels, which were earlier FTA, pre-NTO and then became pay and lost viewership or ad revenue may again consider the FTA route.
“Ad spends will see a negative impact due to the transition phase just like it did during NTO 1.0. This will have a negative impact on TV ad growth in H1CY20. However, it won’t be just as subdued as last time as this has only few changes. Niche channels of broadcasters will face big problems due to the capping on the FTA front; expect niche genre channels to move directly to OTT/digital in that case,” the report by Elara said.
“DD channels will continue to be part of the BST (FTA pack) a must offer to consumers by DPOs,” Taurani added.For more updates, be socially connected with us on
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