Will distribution revenue serve as a buoy for TV business?

According to media experts, even though there could be a delay in payment of cable bills, broadcasters’ revenue is unlikely to be affected in this aspect as that share would eventually come in

e4m by exchange4media Staff
Updated: May 19, 2020 9:20 AM

At a time when the broadcast industry is trying to cope with the adverse impact of COVID-19 on advertising revenue, media experts have brought in focus the role of the distribution money that is now expected to come as the saviour for the industry.    

While advertising revenues account for 60 per cent of the total revenue for the TV industry, the rest comes via distribution. And now with experts pegging the ad revenue drop at 30 per cent, the question now is - has COVID affected distribution money too?

Well, it seems that COVID might not leave a negative impact on the distribution revenues as it has left on advertising. Even though unlike DTH, which is fully under digital payment, digital cable TV payment is only 20% and due to lockdown cable operators are unable to collect the payments from the subscribers. 

Although only 20 per cent of the cable TV payments happen digitally and a certain number of cable operators are unable to collect cash payments from subscribers, the impact on the distribution money is still low compared to what it has been on ad revenues, point out industry heads.

Karan Taurani, VP, Research Analyst (Media), Elara Capital, explains that in terms of the subscriber base, MSOs have a higher share versus DTH, whereas in terms of ARPUs, DTH holds a higher share in revenues shared. Even though there could be a delay in payments, the broadcaster's revenue is unlikely to be affected as payments would eventually come in.

“In terms of subscribers, the ratio is 65:35 between MSOs and DTH. While the DTH part won’t be impacted, in the case of cable subscribers, 85% payment is done in cash and the rest digitally. I believe this digital payment could grow up to 20%. Nearly 60% of the cable bill money comes on time and the balance because of a delay from the customer’s end should arrive over the period of 2-3 months. Operators have already received the money till March as this payment is done in advance. It's the payment for April and May that has been delayed. From the broadcasters end, there will be a delay in money. The good news is that NTO is not coming this year and the reach has gone up by 8-10%. There will be a delay but revenues will stay intact.”  

An industry veteran from a leading South-based network says, “In the South, the distribution revenues should not be affected. Predominantly, the C&S connectivity in the South is very good and the entire region is well connected. It is a little better organised than other parts of the country. The mentality is that certain things are basic needs and are accounted for in the monthly budget and part of that is cable money. Cable is not very expensive and is still at an affordable price-point for many people. Traditionally, TV consumption is very high in South India and viewership has seen a big spike during the COVID-19 crisis.”

A senior executive of a leading Television network, however, pointed out on the condition of anonymity that the distribution revenue has been affected partly because of the MSOs. Although TRAI has said that MSOs should go for digital payments, they still do cash transactions.”

The senior executive further shared that MSOs get a 30-day window to pay the broadcasters but some delay that payment. “The operators wrote to the ministry in March-end, seeking discounts from broadcasters. In such times, when advertising money is already low, how is this fair?” he asked. Some operators haven’t paid broadcasters for the month of March although they have already collected the payments from consumers, he further said. 

Sharing some more areas of concern, the industry leader said: “The government asked us to keep the services running as it falls under essential services. We are almost giving content for free to those who are paying back to us. We understand that due to the lockdown some sectors are not functioning hence the advertising is low but why can’t DPOs collect the money or ask subscribers to do a digital payment?”

Another area of concern for the broadcasters could be a shortage of liquidity. Also, due to the lack of original or fresh and sports content, some consumers have changed their packs from pay to FTA channels.    

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