TRAI NTO 2.0 amendment: A much-needed respite finally, say experts

The latest amendments to the regulatory framework for broadcasting and cable services by the Telecom Regulatory Authority of India (TRAI) is seen as benefitting the industry stakeholders and providing clarity to the broadcasters.

It was in January 2020 that TRAI introduced the amendments to the NTO. Broadcasters and DTH operators were peeved at the conditions, primarily the price cap reduction to Rs 12 from Rs 19 for a channel to be included in a bouquet, and the introduction of twin conditions that effectively blocked broadcasters from selling bouquets at the price they wanted.

TRAI has now come up with the amended new tariff order (NTO), reverting to the maximum retail price (MRP) cap of Rs 19. TRAI’s intention, according to the regulator’s statement, is to safeguard the interest of consumers. "In the present amendments, TRAI has addressed only those critical issues, which were suggested by the Stakeholders’ Committee to avoid inconvenience to consumers while implementing the Tariff Amendment Order 2020,” said the regulatory body.

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NTO 2.0 is the outcome of strong collaboration between industry & TRAI: K Madhavan

TRAI has informed that channel bundle discounts will remain capped at 45% while continuing with forbearance on the maximum retail price of TV channels. This means that broadcasters are at liberty to price their a-la-carte channels.

The regulator has instructed all the distributors of TV channels to make sure that services to the subscribers, with effect from February 1, 2023, are provided as per the bouquets of channels opted by them. It is expected that TRAI will unveil a consultation paper to address the concerns of the distribution platform operators.

Reacting to the amendment, K Madhavan, president of the Indian Broadcasting and Digital Foundation (IBDF) and Country Manager and President, Disney Star, had said, “NTO 2.0 is the outcome of the strong collaboration between industry and TRAI under the leadership of Dr Vaghela. Rather than pursue a litigative approach to address pending demands, our approach of engaging in constructive dialogue has allowed us to make strong progress in creating a more conducive environment for the industry on the pricing front. We remain confident of moving to an environment of regulatory forbearance.”

Broadcasters, obviously, are a relieved lot. They are welcoming TRAI’s decision to lift restrictions imposed on bouquets as the majority of Indian households prefer bouquets to à la carte.

The implementation of the New Tariff Order 2.0 is a positive development for all the broadcasters, says Mahesh K Sharma, Vice-President, Strategic Partnerships and Alliances, Pitaara TV and Chaupal OTT.

“If the new directive is implemented as it is, the industry stakeholders are expected to benefit from it. It will improve subscription revenues and strengthen the business,” he adds.

Overall, says Sharma, the GEC segment is set to gain from the new tariff regime. However, he adds, it is the top channels with high viewership that will earn more revenue from subscription and enjoy the benefits of the new pricing.

TRAI announced the implementation of NTO 2.0, which has provided much-needed respite and clarity to the broadcasters, says Karan Taurani, Senior VP at Elara Capital. According to him, this may positively impact subscription revenue in the near term if the broadcasters were to hike prices.

“As per the earlier NTO 2.0 version, price on channels forming a part of bouquet was capped at Rs 12; this would directly hit ARPUs of consumers subscribing channels on an à la carte basis (~8% of the universe), as pricing pares ~40%. Also, there was a capping on discount of 33% for bouquet prices versus sum of à la carte. This meant that broadcasters would have to take a hit on their marquee channels (with higher MRP) by either removing them from bouquets or hike total bouquet price to meet the 33% discount requirement,” he explains.

But, adds Taurani, as per the latest NTO 2.0 order: 1) channels forming a part of bouquet should be capped at an à la carte price of Rs 19 (same as in NTO 1.0), and 2) a discount of maximum 45% can be imposed on the bouquet price versus sum of à la carte.

“We believe most broadcasters are already offering their bouquets with discount in 35-55% range. Hence, this norm may not have a big impact in terms of bouquet/ à la carte prices of the broadcasters. But this may hit subscription revenues of channels/ broadcasting groups (sports/ mainstream GEC-led broadcasters) offering a discount of >45% on the bouquet prices versus sum of à la carte, as the former will have to reduce discounts by: 1) removing certain ancillary channels from the bouquet or 2) remove some marquee channels from bouquet to pure à la carte. It is also mentioned in the TRAI order that the discount quantum on MRP price of a channel will depend on combined subscription of that particular channel,” he says.

According to him, TV industry subscription revenues dipped at 2.2% CAGR in FY19-22, on NTO 2.0 overhang. NTO 2.0 implementation, says the analyst, will pave way for at least inflation-led price hikes in TV broadcasting.

“But expect price hike to be in the lower end of the high single-digit range. Thus, core TV subscription revenue (excluding OTT) may grow at least 6-7% (price hike) over medium term, on clarity emerging over NTO 2.0. We do not foresee a sizeable growth (double-digit price hike) in TV subscription ARPUs given: 1) lack of growth in HD penetration (digital, a key winner for HD content), 2) OTT offering convenience led viewing, 3) continued dip in TV consumption by the youth, 4) increased penetration of smart TV (bundled OTT offerings), and 5) very little or no growth for TV households (net adds). Cable ARPUs in India are still very low at ~Rs 350 versus OTT ARPU in Rs 600-700 range, if one were to subscribe to the top OTT platforms in India (excluding data charges); this in turn shows the potential for marginal growth in TV ARPUs of India,” says Taurani. 

According to him, a larger chunk of the above growth will come from sports/ mainstream GEC genres, which appeal to the urban audience on a very large subscriber scale.


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