The framework for pricing of TV channels that aims to give subscribers the right to choose what they watch and pay for, is turning out to be a liability that could force most subscribers to cough up 13-23 per cent more than what they've been paying for their favourite channels, a new study by ICRA said.

Increase in monthly bill

According to Ms. Sakshi Suneja, Assistant Vice President, ICRA, “Any subscriber who wishes to view two or more of popular general entertainment channels (GEC) and sports channels is likely to either witness an increase in the monthly bill by 13-23% or a substantial reduction in the number of pay channels to be viewed. While earlier, a monthly budget of Rs. 230-240 could give the subscriber access to 250-300 channels, the same budget will now fetch only three GECs and one sports channel, in addition to FTA channels. Subscribers, can however, lower their monthly bills by up to 15%, if they opt for only sports, news and movie channels, a choice which was not available in the previous tariff regime. This would eventually lead to better selection of channels and focus on content quality.”

After more than 18 months of regulatory tussle, in October 2018, the Hon’ble Supreme Court cleared the way for the implementation of the Telecommunication (Broadcasting and Cable) Services (Eight) (Addressable Systems) Tariff Order, 2017 - a new framework for the pricing of television (TV) channels. The Tariff Order aims at giving the subscribers their right to choose, by mandating the broadcasters to declare the nature of channels as free-to-air (FTA) or pay channel as well as declare a-la-carte pricing of all channels.

Channel bouquets

ICRA expects channel bouquets to dominate the subscription patterns, given their continued attractiveness and discounted pricing (by 40-50%) vis-a-vis a-la-carte channel prices. Multi-TV connections are likely to go down as monthly bills for these connections have gone up. The increase in cable/direct-to-home (DTH) bills for some subscribers is expected to result in an increase in consumption of over-the-top (OTT) services, especially in Tier-I and II cities. Notwithstanding this, television (TV) is expected to remain the primary screen for majority of the subscribers, with OTT platforms becoming increasingly supplemental to TV viewing.

Given the channel pricing of popular channels, large broadcasters, who enjoy high ratings for their channels are expected to benefit and shall continue to push their non-popular channels to the subscribers by way of discounted channel bouquets. Nonetheless, as the structure of broadcasting industry has now changed to business-to consumer (B2C) from business-to-business (B2B) earlier, non-popular channels of lesser-known broadcasters are expected to be at a disadvantage in the current regime. This could result in many channels shutting down, thereby leading to consolidation in the industry.

Quality of service

With parity in channel pricing across distribution platform operators (DPOs), competition is set to intensify further. In such a scenario, the quality of service becomes paramount from the point of view of the subscriber and hence a key differentiator among the DPOs. ICRA also expects the DPOs to provide bundled services, including broadband and DTH/cable (as is the case in the West) over the medium term, with a view to offer greater value for money to the subscribers and improve average revenue per user (ARPU), especially in the backdrop of increasing consumer preferences towards OTT platforms.

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