Last week’s merger between Subhash Chandra’s Dish TV and Videocon d2h could end up creating a Rs 5,900-crore behemoth with over 26 million subscribers.
It is also the strongest signal that price regulation in TV should go. Here’s why. Ever since it came in 2003, direct to home (DTH) has pushed digitisation and brought transparency to the opaque, black-money infested, TV distribution business which was dominated by cable. Yet, DTH remains unprofitable, thanks to taxes, license fees and high content costs. You could argue that these are variables in any business. But in a highly competitive market, with a not-level playing field, that argument doesn’t hold. DTH competes with four different technologies — cable, IPTV, HITs and OTT. Its prices are regulated based on cable, an industry where thousands of operators do not show their real numbers.
So, a fully tax-compliant DTH industry competes with cable that pays taxes on a lower base, improving its ability to make money. Globally, most DTH firms start breaking even by the seventh year and at roughly 6-8 million subscribers. In India, the world’s second largest TV market by volume, firms with more than 10 million subscribers and over a decade behind them are yet to give any return to investors. Dish TV is still sitting on accumulated losses. The merger with Videocon d2h will reduce costs and increase operating profits by three-four per cent over the next three years, say analysts. Those are the reasons consolidation is inevitable across DTH and organised cable too, says Dish TV managing director Jawahar Goel. And, that brings us to the question that regulators will be examining before clearing the deal — is a firm with over 26 million homes in a market with 170 million TV homes a dominant player or not? The creation of potential monopolies through consolidation is being driven not because the market is mature, growth opportunities are over or TV viewing is stagnating. India remains a high growth albeit under-monetised TV market. A huge part of the predicament for DTH operators and the rest of the TV industry stems from the Telecom Regulatory Authority of India or TRAI’s insistence on micromanaging tariffs long after the need to do so was over. Read its consultation paper and then recommendations earlier this year on tariffs. It delves deep into genres and channels and comes up with all kinds of dos and don’ts and caps on pricing.
TRAI has done an excellent job of bringing order to the chaos that the TV business was in 2003 when it became broadcast regulator. But, its commodity and voice/telecom-oriented view on pricing TV content, a creative business, is counterproductive. Since pay revenues remain depressed because of the convoluted regulation and the litigation surrounding it, the industry is completely and absolutely dependent on advertising. As a result, everything from news to entertainment remains largely at a lowest common denominator level, because advertisers buy eyeballs. So, programming diversity, variety and news quality everything suffers. Ironically, price regulation has harmed the very constituency it seeks to protect — consumers.
When it began in 2004 there were several arguments for price regulation the biggest being the mess in cable, practically the only technology offering TV signals then. India is no longer a one channel, one technology market. It has five competing technologies, over 800 channels and the internet. If a channel is too expensive, subscribers have many choices, including free video apps. And, there is always the mandatory free-to-air package. The new tariff paper takes price regulation to a more complicated level, interfering in basic freedoms a firm should have in a competitive market.
Think of it this way – what if regulators defined how Unilever priced Pears and Lifebuoy. Or how Bennett Coleman & Co can price Navbharat Times and Vijay Karnataka. All the regulator needs to do now is start telling broadcasters that they cannot take Amitabh Bachchan or Salman Khan in a show because their of costs and therefore prices will go up. Why not push for digitisation, standard taxation (which should come with goods and services tax) and better compliance and see this sector bloom. Leave pricing to the market. Who knows prices may actually fall.
Twitter: @vanitakohlik
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