Storm rages over cable TV bills as Trai, broadcasters square off on prices
Trai thinks that too many bouquets are being formed by broadcasters and the consumer is getting confused.
“As a regulator, Trai’s role should be to ensure orderly growth of the sector and all the stakeholders. What they did with the new tariff order (NTO) — though a monumental shift in business — was a good framework and a step in the right direction. But now what the regulator is apparently trying to do with the new consultation paper is clearly impinging on (amounting to) price control and unsettling the industry. First Trai should allow the industry to settle down,” he said.
For the uninitiated, the Telecom Regulatory Authority of India (Trai), on August 16, initiated a process to review the new regulatory framework for the broadcasting sector. It has issued a consultation paper seeking stakeholders’ responses on 30 questions covering different aspects related to the NTO that came into force from 1 February 2019.
While broadcast and distribution industry executives are worried and already looking at various options, including legal, some of them have started questioning Trai’s priorities.
“Why is it that the regulator wants consumers to watch a lesser number of channels?” asked another executive. “What do they want to achieve by disallowing bouquet formations, when it is a usual practice across the globe and not just in the TV saturated markets.” he said.
The three main issues that Trai has sought to address with the consultation papers are — whether channel bouquets should be allowed, should a cap on discounts within bouquets be reintroduced, and whether the ceiling price of channels in bouquets that’s Rs 19 at present, needs to be re-examined.
TV Bouquets VS À-la-carte
Trai is of the view that too many bouquets are being formed by the broadcasters/distributors and the consumer is getting confused and as a result forced to adopt some of the suggested packs of TV channels. This kills the freedom given to consumers to choose desired TV channels.
To this, a senior broadcaster noted that formation of bouquets is a global practice and works in the consumers’ favour.
Bharat Anand, professor of strategy at Harvard Business School has written an entire chapter on ‘why the à-la-carte pricing has not killed the cable bundle’ in his book, The Content Trap.
Anand writes that bundles not only increase revenues for cable operators, they also help viewers by “smoothening prices” across channels for viewers with different preferences. “Bundles provide more to watch, at low incremental cost,” he wrote.
TV executives in India argue that nowhere in the world do consumers only select à-la-carte channels. An insistence on a la carte might mean the price of popular channel could be too high and out of reach.
Also, on the question of discounting on bouquets, the Indian broadcasting Foundation (IBF) said in a statement that the cap on bouquet discounts under the NTO was struck down by the Madras High Court as “arbitrary”. “Further, the global practice in the television and cable industry is the offering of content in bouquets customised to meet the diverse needs of consumers,” IBF said.
Furthermore, according to BARC data, consumers watch 56-84 channels in a quarter. “If one selects that many standalone channels , she will be paying much more,” a broadcaster added.
The IBF has said that promoting a la carte at the cost of bouquets will deny consumers the choice they need in a country like India with such a large and variegated diversity of cultures and languages.
“Smaller as well as niche content channels will lose out and their viability will come under question. Broadcasters will be unwilling to launch new channels and producers will be unwilling to experiment with new content. All this will lead to fewer shows being produced which will have a knockdown effect on downstream production and on employment in the sector,” IBF warned.
Hue and cry over pricing
Since the new framework established by the NTO came into force, many consumers have seen a spike in their monthly cable/ DTH bills. However, it’s not something which is alarming, points out a broadcaster. In fact, data shows that over the last 10 years, end-consumer ARPU (average revenue per user) for TV services has gone up by around 4% CAGR, which is much less than the rate of inflation.
As per a World Bank report, inflation rate in India has gone up by 7.2% CAGR over the last 10 years. “We are not even beating inflation. Compared to markets like US, where cable bills are $50-75 monthly, here the monthly bill is less than $4. So even if the bill has gone up by say 10% compared to last year, how is it earth shattering?” he said “Look at price of milk or petrol or any other daily commodity and then compare with cable.”
A senior industry analyst added that the basic question is “Should the regulator be talking about the pricing of a commodity, which is not basic?”
Another broadcaster added that in an open market, no broadcaster can price channels absurdly. “Everyone has their P&L and we are not fools. Trai has set up a framework, now allow us the freedom to operate within,” he argued.
New tariff order impact
Analysis of BARC data sourced from subscribers and consumer data from distribution platform operators shows that there is a 6% drop in total impressions on television between November last year (pre-NTO) and June 2019.
If one analyses data further, there is a 4% drop for free-to-air TV, which was also because many broadcasters converted FTA channels into pay prior to implementation of the NTO, and 2% in case of pay TV.
Further, the total reach of television in India is down by 1%, which is around seven million TV viewers.
As per viewership measurement agency BARC India, impressions are the number of individuals of an audience, averaged across minutes, while reach is the total number of individuals who viewed a particular event/ show for at least one minute.
Allow the industry to settle
The biggest issue that the industry has with the Trai is on the timing of the consultation paper.
“Considering that 65% of Indian households have television, the NTO has impacted two-third of the nation. And Trai wants to make the fundamental changes in channel pricing and bouquet formation even before the industry and consumers have adapted the new regime, which is absurd and against all norms of a stable regulatory regime,” said one of the broadcaster.
IBF, the apex body of TV broadcasters has also condemned the move arguing that any regulatory intervention at this early stage in the implementation of the NTO is not only premature but will have disastrous consequences for the broadcasting industry.