NTO 2.0 implementation could have an impact of Rs 1500-2000 cr on TV segment revenues: Report
MUMBAI: The Telecom Regulatory Authority of India‘s (TRAI) new tariff order (NTO) 2.0, which is currently sub-judice, could have an impact of Rs 1500 to Rs 2000 crore on TV segment revenues in the event that demand does not increase, according to FICCI-EY 2020 report.
According to the report, applying a cap on the discounting of prices could result in the closure of weaker and niche channels and consequent loss of jobs. It further stated that reducing prices of channels that can form part of a bouquet could bring down end-customer bouquet prices and increase choice.
Further, the reduction of network capacity fee (NCF) in multiple TV homes is something that has already been implemented by some DPOs, though it can impact revenues by Rs 500 crore, as per EY estimate. However, it added that reduction in multiple TV NCF, bouquet prices, and longterm package discounts can bring back some of the lost TV subscriptions
According to NTO 2.0, the sum of the a-la-carte rates of the pay channels forming part of a bouquet shall in no case exceed one and half times the rate of the bouquet of which such pay channels are a part; and the a-la-carte rates of each pay channel, forming part of a bouquet, shall in no case exceed three times the average rate of a pay channel of the bouquet of which such pay channel is a part.
Further, the ceiling price of a pay channel for inclusion in the bouquet has been reduced from Rs 19 to Rs 12. The number of bouquets of pay channels not to be more than the number of pay channels offered by a broadcaster.
Increasing the number of SD channels that can be provided within the NCF of Rs 130 per month from 100 to 200 and capping the NCF for more than 200 SD channels at Rs 160 per month.
The report also estimated that active paid subscriptions reduced by 26 million in 2019. Total subscription paid for television in India by viewers increased by 7.5% in 2019, despite a fall in
active paid subscriptions, on account of higher ARPUs.
It expects the subscription base for traditional unidirectional television services (cable, DTH, HITS) to keep growing as penetration levels increase over the next few years.
The report noted that the strict implementation of the NTO 2.0 could result in an up to 4% fall in subscription income at end-customer prices in 2020; however, there would be a marginal growth of up to 2% in the event that bouquet size, pricing and channel mix change.
On the reduction in paid subscriptions, the report noted that Households with multiple television connections, which used to benefit from much lower rates for the second and third television sets, rationalised their subscriptions as the NCF was charged at full rates for their additional television sets. It estimates that this could have impacted up to three million connections.
Secondly, viewers – particularly English language viewers – may have been provided with the impetus to move to OTT platforms which became relatively more affordable post the NTO and provided the additional benefit of any time viewing without ads; we estimate this could have led to around 3-4 million subscribers.
The FreeDish has also grown at the expense of pay-TV platforms. FreeDish grew its user base as price-sensitive consumers activated paid subscriptions only during events or holidays, or watching key programs on low cost and free bundled OTT services. The report estimates that this could have been up to 5 million subscriptions.
The piracy of television feeds and the increase in end-customer prices could have given this a further boost, impacting up to 10 million pay subscriptions.
The report stated that there has been growth both at the top end and bottom of the television viewer pyramid. Substantial growth took place in smart television set sales due to price reductions; industry discussions indicate 4 to 5 million connected smart TVs in India, up from less than 2 million in 2018.
It expects connected smart TV sets to reach 14 million by 2022.
FreeDish, the report stated, continued to grow and has become a second set-top box within the home, used when there are no large events on television in some cases. “We estimate FreeDish to have grown to 38 million homes in 2019 End-customer prices increased.”
The end-customer prices grew by over 25% on average to cross Rs 225 net of taxes, the report stated. While packs were created by DPOs combining channels from different broadcasters, there was little scope for discounting, it added.
Industry discussions indicate that over 85% of subscribers opted for DPO designed packages, but slowly this number is reducing as subscribers start to opt for channels they require and let go of channels they do not watch. DPOs implemented different strategies for the NCF for additional TV subscriptions, with some charging it at full price while others provided a discounted rate.