What awaits broadcasters in wake of NTO 2.0 verdict?
Last week, the Bombay High Court finally delivered its verdict in the NTO 2.0 case. While largely upholding the tariff order, which will bring about major changes in the way channels are provided to consumers via distribution platform operators (DPOs), the court did provide a small but significant relief to broadcasters. If either the Indian Broadcasting Foundation (IBF) along with its members or the Telecom Regulatory Authority of India (TRAI) challenge the HC order in Supreme Court, ostensibly, the implementation of NTO 2.0 will remain in limbo. While IBF is aggrieved that NTO 2.0 has been upheld barring the second part of the twin conditions, the TRAI would want to get the Bombay HC order corrected to the extent that the SC upholds the twin conditions in its entirety. The amended tariff regime will have a major impact on the subscription business of the broadcasters. The NTO 2.0 has brought down the MRP cap on individual channels to Rs 12. Channels that are priced above Rs 12 cannot be part of a bouquet. Further, the regulator has disallowed broadcasters from giving an additional 15% discount on bouquets and has allowed it only for  la carte offerings. Broadcasters were giving away the discount to DPOs on bouquets over and above the 20% mandatory distribution fee. According to industry sources, the NTO 2.0 will make  la carte affordable since the MRP cap has been brought down to Rs 12 and broadcasters can offer a 35% discount on  la carte channels. It will make it an attractive proposition for DPOs also due to the discounts that they are entitled to. This will bring more choice for consumers, as they will not be forced to take a large bouquet of channels and opt for only those channels that they want to watch. "Broadcasters were giving 35% discounts on bouquets and not on  la carte, due to which,  la carte was never pushed as an offering. So there is a cap of 20% on bouquet discount, while on  la carte broadcasters can give 35% discount. This means that there will be demand for  la carte channels. Secondly, channels with MRP above Rs 12 cannot be part of either broadcaster or DPO bouquet. So if the driver channel is pulled out of the bouquet, then the bouquet will not have much heft," a top official from a leading cable TV company said. Another cable TV executive said that the DPO packages will gain more currency under the NTO 2.0 regime. Under NTO 1.0, the uptake for DPO bouquet was more than the broadcaster bouquet. "We are waiting for broadcasters to declare their prices. However, the NTO 2.0 will make  la carte attractive and the DPO packs will become more important than the broadcaster bouquets in this new scenario. This means that the monthly subscription bills will see a drop. Today, broadcasters are charging Rs 19 + taxes for their driver channels. Now, subscribers will potentially get two driver channels for the same price, since the MRP is capped at Rs 12." With the Bombay HC setting aside the second proviso of the twin conditions, the broadcasters will be able to offer channels that are priced lower than the average rate of a pay channel in a bouquet as part of their bouquet offering. This is seen a major relief by the broadcasters. The second proviso of the twin conditions states that "the a-la-carte rates of each pay channel (MRP), 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". For example, if a bouquet priced at Rs 45 has 15 channels, then the MRP of a channel cannot be more than Rs 9 for it to be part of that bouquet. Media consultant Shaji Mathews, who has worked with companies like Star India and GTPL Hathway, said that the  la carte will be the next big change in the industry. " la carte will start gathering momentum. It's not an immediate thing, but it will happen over a one-year horizon. The ball will start rolling in that direction. Till now,  la carte has been a non-starter," he stated. A senior executive from another distribution platform said that the NTO 2.0 will usher in more transparency while offering more choices to consumers. "The NTO 2.0 is going to bring more transparency and customer will get more choices. In NTO 1.0, the broadcasters were keeping the  la carte pricing of popular channels artificially high while giving huge discounts on bouquets. This helped them push their second and third tier channels along with the popular ones. So customer choice was effectively getting impacted. Going forward,  la carte will become attractive. Consumers who watch only selective channels will be able to pay for only channels without having to worry about the high  la carte rates that were the norm in NTO 1.0," he noted. According to a senior executive from a leading broadcast network, the TRAI is trying to promote  la carte while trying to limit the discounts being offered on bouquets. The executive also said that pulling channels out of bouquets and selling them on  la carte is not a viable option considering the dual revenue model (ad+subscription) that most broadcasters have. The broadcasters need a wide audience reach in order to sell commercial airtime to advertisers. "TRAI saying you get out of the bouquet and go  la carte and charge whatever you want. The TRAI is interfering with the business models of the broadcasters by putting a limit on the price if it's in a bouquet, and also putting a limit on the discount that you can give. We want to give more channels and price it attractively because we want to maximise the wallet share. We are not force-feeding the subscribers, but offering value. In any case, the broadcast tariffs in India are the lowest in the world," the executive stated. In their plea before the Bombay HC, the IBF had cited BARC figures stating that 40 channels had on an average lost 50%, in some cases 86%, of their reach and since the time NTO was implemented effective February 2019. It had also argued that the conditions in NTO 1.0, like keeping channels priced more than Rs 19 out of bouquet and non-bundling of SD & HD, and Pay & FTA channels, together had also resulted in a drop in reach of many channels. This, the IBF stated, has impacted ad revenue of broadcasters, which contributes as much as 70% to the overall revenue. Read more news about (internet advertising India, internet advertising, advertising India, digital advertising India, media advertising India)