The impending December 29 deadline for the introduction of a new set of rules governing the prices of TV channels has set the stage for a mega showdown between broadcasters on the one side and the cable and DTH industry on the other.
At the core of the fight is the question of who gets the right to form channel packages and bouquets.
Traditionally, the role of forming channel packs and bouquets rested with distribution platforms like cable and DTH providers.
However, the regulator has always been trying to take away this power from the supplier and give it to the consumer.
Giving the consumer the full right to choose what he wants to watch, TRAI maintains, will result in the most efficient operation of the media sector and the most pleasant outcome for everyone involved.
It was 11 years ago that TRAI struck the first blow in this direction. In September 2007, it asked all parties concerned — broadcasters as well as cable and DTH operators — to make sure that they offered all channels on a one-by-one, or a-la carte, basis.
However, this requirement was easily circumvented by industry players by making single channels so expensive that no consumer would consider buying channels one by one.
Eventually, the regulator caught on, and in 2017, brought out a new set of rules that were aimed at preventing this practice of making individual channels prohibitively expensive to push packs.
Last year in March, TRAI brought out a new set of tariff orders that laid down that the total a-la carte cost of all the individual channels in a pack should be no more than 18% more expensive than the pack itself.
In other words, if the price of a pack of 10 channels is Rs 85, then the cost of all the constituent channels put together should be no more than Rs 100.
How effective this provision would have been in ‘unbundling’ TV channels can be guessed from the fact that both broadcasters, like Star India, and DTH providers, like Tata Sky and Airtel Digital, challenged TRAI’s 2017 regulations in court. And they scored a victory too, with the Madras High Court striking down the 85:100 rule.
However, the High Court upheld several other provisions of the TRAI order related to the use of hard negotiation tactics by cable and DTH providers — such as blacking out an entire broadcaster’s channels — to get lower prices for the channels.
The net result is that distribution providers can no longer use hard negotiating tactics to bring down channel prices, and must instead agree whatever price is decided by the channel owner.
At the same time, the broadcasters got back their right to form bouquets and packages.
The net result: Broadcasters have got the upper hand, and both cable and DTH providers — as well as consumers — have no option but to pay the price they demand.
Not surprisingly, the channel owners have used the situation to their advantage — and have kept individual channel prices comparatively high in order to get consumers to buy their channel bouquets.
PLATFORMS STRIKE BACK
So, are the cable and DTH players back in a corner, licking their wounds?
Not really, according to our industry interactions.
In the words of a cable operator: “They can demand any price. But at the end of the day, consumers see what we show them. Channels priced at 17 rupees and 19 rupees today will be available in 2 rupees and 3 rupees in a few weeks if nobody watches them.”
Broadly, the strategy of most of the platform operators — especially those on the cable side — seems to be to ‘starve out’ the broadcasters by denying their core channels what they crave most — reach.
According to the new rules, cable operators can make a variety of packs — including even those comprising entirely of pay channels — and offer these as ‘base packs’.
For example, a cable operator can throw together a ‘base pack’ by combining the cheaper bouquets of Sony, Star and Zee for around Rs 250 per month.
Of course, such basic packs will not have premium offerings like Star Movies or &flix. But they would still have popular pay channels like Star Plus, Zee TV and SET.
This would be a great help to broadcasters as their inclusion in low-cost base packs would give them the required reach to maintain their advertising revenue.
However, from our interactions with the cable industry, it looks they are not in a mood to oblige the broadcasters.
Instead, the strategy seems to be to boycott ’19-rupee’ channels in their base offerings and go with free or cheaper options, allowing them to price the base offering at Rs 150 per month.
Once the broadcasters cut the price of ‘premium channels’ to the 2-3 rupee range, they can be added to the base packs without substantially increasing the base price, according to their calculations.
If customers want to watch Star Plus, SET and Zee TV, they will have to either go for packs costing at least Rs 300-350 per month, or activate broadcaster packages separately, which would also cost around Rs 200 extra per month on top of the Rs 150.
Hathway, the country’s largest cable operator has already started showing messages to its customers that it will be including only free (or FTA) channels in its base pack, and that pay channels will be sold “on a fixed MRP basis” from Dec 29.
The channels, on their part, seem to be getting ready for a showdown too. They have called for the ratings body BARC — which they largely control — to stop releasing viewership data starting from Dec 29 and resume doing so only after the industry settles after a month or two.
In the end, the outcome of the fight is likely to be determined by the reaction of a third party — the consumer.
If consumers decide to spend the extra Rs 200-400 to buy broadcasters’ packs in addition to what they’re getting in their ‘base offering’, the channel owners will be laughing all the way to the bank.
On the other hand, if consumers adjust their viewing habits and start relying more and more on non-premium channels, the broadcasters will have no option but to reduce the prices of their so-called premium channels within a matter of weeks.
Meanwhile, the TRAI is also attempting to bring back the anti-bouquet safeguards by having the Madras High Court order overturned in the Supreme Court.
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