NTO 2.0: With TV bills set to go up, what are the options open for consumers?

Indian broadcasters will have to implement NTO 2.0 from December 1, 2021, unless the Supreme Court overturns TRAI’s new tariff order in its November 30, 2021 hearing. Assuming that the apex court gives the go-ahead for the new pricing regime, what are the likely scenarios? After viewing the revised channel pricing revealed by the major broadcasters in the country, where they have unbundled their driver channels from the bouquets, the TV viewing ecosystem is in for some disruption. Experts see an increase in TV bills for consumers, who are likely to cut down on the number of channels they subscribe to. Some experts even see a transition to either DD Free Dish or OTT platforms. YouTube is also seen as a big gainer from the fallout of increased TV bills.

Let’s take a look at the old and new pricing of some major broadcasters who have announced their new RIOs as per NTO 2.0.

While as per NTO 1.0 ZEE TV was priced at Rs 19, the revised pricing is Rs 22.42. The MRP of Zee Cinema, which was Rs 12, has gone up to Rs 17.7 under the new pricing regime, while the MRP of Zee Cinema HD has gone up to Rs 22.42. Previously, Sony Pictures Networks’ channels were priced at Rs 19. Under NTO 2.0, the MRPs are as follows: SET India – Rs 24, SET HD – Rs 30, SAB – Rs 23, SAB HD – Rs 28, Sony Max – Rs 12, and Sony Max HD – Rs 19.

With the top five broadcasters taking their driver channels off the bouquets and making them available on a la carte basis, the monthly TV bills are set to be much higher than what they are currently. It could go up to as much as Rs 5,000 annually. Will an average Indian middle-class household be ready to shell out that kind of money to watch television? Already reeling under the double whammy of an economic downturn due to the adverse effects of the pandemic and rising prices, an almost 50% hike in TV bills is something that consumers will seriously reconsider.

Analysts are of the opinion that while the lower-income sections are likely to migrate to DD Free Dish in a big way, for the higher income groups, OTT could be an attractive alternative. A quick calculation of the annual subscriptions of the major OTT players reveals that even if one were to subscribe to Netflix, Amazon Prime Video, SonyLIV, Disney+ Hotstar, Voot, ZEE5, the bill will come to around Rs 3,700, which is still far below the projected revised annual TV bill of Rs 5,000.

Karan Taurani, Senior Vice President - Research Analyst (Media, Consumer Discretionary & Internet) at Elara Capital, described the scenario with an example. “A consumer may not pay Rs 20-25/month for a ZEE TV channel a-la-carte basis, if he is able to get a ZEE5 subscription (catch up TV with all channels + movies + original content) for Rs 42/month. Selective viewing will further intensify and negatively impact viewership share of marquee channels with a lower recall,” he felt.

Taurani further added, “We believe subscriber revenue growth, which is estimated to be in the range of 7-8% YoY, will move lower in the range of 3-5% in the first year of NTO 2.0 implementation; post that, there would be a steady state growth of 6-8% in the medium term. We retain our view that there is little room for TV ARPU growth, given increased move toward digital, specifically in urban areas; increased TV penetration and growth in HD subscribers remain the triggers that will contribute to subscription revenue growth for broadcasters.”

He predicted that as penetration of smart TV rises, consumers will either cut the cord or move toward basic low ARPU packages. This, according to him, is primarily on the back of convenience of watching content in the digital format.

“Sports and news remain two genres that would be favoured, as they need Live viewing. Further, we believe TV is the only traditional medium in which 60% of the revenue is pay-based; its share may be slightly lower in the medium term, due to less growth in TV subscriber revenue vis-a-vis ad revenue; monetisation of over the top (OTT) too remains a challenge, as most broadcasters offer lower ARPU on their platforms and bundle offers with partners, which too limits ARPU,” he added.