Broadcasters take another hit

The brinkmanship between the Telecom Regulatory Authority of India (Trai), and broadcasters would be funny if it wasn’t dangerous.

Star, Sony, Zee, among other broadcasters, have just priced their flagship channels at Rs 20 and above, taking them out of bouquets where their prices were mandated by Trai. By one estimate, over 20 million TV subscribers fell off the grid thanks to an earlier tariff order in 2019, the pandemic and OTT (over-the-top). This one could push more of India’s 210 million TV homes off the cable/direct-to-home or DTH grid. Analysts estimate huge value erosion across the chain in the Rs 68,500-crore broadcasting business — for cable/DTH operators, broadcasters and distributors. Most broadcasters understand this. Why then have they priced their flagship channels so? As one broadcaster puts it: “We are calling the Trai’s bluff.”

The battle of wills between the world’s second largest TV market and its regulator, which began maybe five years ago, continues. By the looks of it, this will end only when the TV business goes into decline or when Trai realises that in a highly competitive market where consumers have a choice of distribution technologies — cable, DTH, online — there is no need to micro-manage the price of television channels; that broadcasters have every right to price their channels the way they want to; that prices of entertainment, sports, films or music cannot be set like that for voice or data or food grains; that bundling actually benefits consumers across businesses such as airlines, hotels or even consumer goods; that changing rules too frequently and without analysing their impact creates a negative spiral, which affects growth, jobs, taxes and consumer choice, exactly the things that a good regulator should facilitate.
 

As for the television business — it is on a very slippery slope. At the top end, OTT is eating into DTH subscribers and at the bottom, DD Freedish, a free DTH service from Doordarshan, is taking away a big chunk of the audience from pay TV. That leaves the middle, which thanks to Trai’s obsession with price control and bundling, will keep slipping away. Much of this could end up making broadcast television a largely ad-driven, free-to-air, rural service. Broadcasters reckon they stand to lose either way, so why not go down singing.

But a quick flashback first. In 2004, against the backdrop of the mess that mandatory digitisation was causing, Trai was appointed as the broadcast regulator. It was meant to be a stop-gap arrangement till a proper broadcast regulator was created. That never happened. To its credit, Trai did a good job in the first decade or so, bringing order to the Wild West that India’s cable business had become. In 2019, of India's 210 million TV homes, roughly 100 million were on cable and 40 million on DD Freedish (which is outside the purview of this regulation). Of the rest, about 67 million were on paid DTH services such as Airtel TV. In spite of mandatory digitisation, last-mile ownership remains an opaque area in cable — the format with about 100 million homes. That explains why, several years after 100 per cent foreign direct investment was allowed into cable, not a single investor has come in. This coupled with price regulation has made the Indian television business hopelessly dependent on advertising and killed any incentive to invest in good shows and sell them through pay revenues.

It was against this backdrop that the New Tariff Order or NTO, which was Trai’s reaction to what it thought was bundling of irrelevant channels with others, was implemented in 2019. It detailed every aspect of the complex relationship between broadcasters (say Zee) and the people who distribute TV signals. It also capped the maximum price for a channel as part of a bouquet at Rs 19; though it is not clear how it arrived at this figure. The idea was to force broadcasters to sell channels a la carte.  

It actually did some good, pushed up prices and improved subscription revenues for broadcasters. But it also killed many niche channels such as AXN and NatGeo, thereby reducing the variety on offer and further pushing broadcasting towards the mass, ad-driven model. In August 2019, even as the trade was settling into NTO, came another consultation paper that sought to make more changes. Unlike most Trai papers which are reasoned, this one was essentially a rant against bundling and it capped channel price at Rs 12; again without any apparent basis. When all appeals failed, broadcasters took NTO to court. Earlier this year the Bombay High Court ruled in favour of Trai and the matter is now with the Supreme Court. However, since there is no interim relief, Trai pushed broadcasters to comply with it. They have, to the letter of the law.

 By bringing them out of the bouquets and pricing the channels in line with inflation, they are telling the regulator “we believe our content will stand on its own.” But the fact remains that as prices rise and annual OTT bundles from Rs 99- 1,000 start looking good compared with the Rs 200-800 that cable TV subscribers pay, there will be a shift. Trai is already getting calls from DTH and cable operators who are wondering how they will explain the price rise to consumers.

And that brings this to the biggest failure on the part of broadcasters — to communicate to consumers, trade and the media, that in real terms, cable prices have actually fallen in India over the last 20-odd years. That average revenues per user remain pathetically low in India — a third of those in Thailand and one-fourth the monthly average in Malaysia. The Indian broadcast market has remained under-monetised through the prime of its growth years. And now as digital starts eating into its share, Trai has ensured that it will remain so.

@vanitakohlik