Zee Entertainment Enterprises CEO Punit Goenka reassured investors that the recent cut in the price of some of its popular TV channels, such as Zee TV, is short-term in nature, and won’t leave any long-term impact on the company.
Zee Entertainment, Star India, Sony India and TV18 Broadcast have cut the a-la carte prices of the standard definition versions of their popular channels by about 37% over the last one week.
Channels such as Sony, SAB, Max, Zee TV, Star Plus, Colors, Zee Marathi, Zee Bangla and Zee Kannada have had their prices cut from Rs 22.40 per month to Rs 14.16 under a ‘promotional scheme’, even as sector regulator TRAI puts the final touches on a new law that will anyway force down prices.
The voluntary cut caused some anxiety among analysts and investors as these broadcasting companies had been maintaining that their popular channels will find takers even at the existing tariffs and they wouldn’t need to go for price cuts. The move to the new prices had seen a sudden drop in the reach of popular TV channels.
Responding to concerns about the price reduction, ZEE CEO Punit Goenka said the cuts were not permanent, and the maximum retail price continue to be Rs 19.
“It is a festive offer. It is not a change in the [MRP], and if you read the tariff order, any promotional activity cannot be valid for more than three months. So, I expect this to be a short-term matter.”
TRAI FIGHT
The broadcasters are engaged in a stand-off with cable distributors, consumer rights activists and the regulator over the pricing of TV channels.
While cable operators, consumer rights activists and the TRAI have mostly called upon the broadcasters to make their channels available one-by-one, channel owners have claimed that their business models do not allow them to promote individual channel sales.
Instead, they have pointed out that they need to push their channels in packages — which can cost as much as Rs 200 per month — so that the expenses of running premium channels can be recovered from ad sales on non-popular channels.
Without such packs, nobody would subscribe to laggard channels, which will reduce the broadcaster’s overall ad revenue and in turn lead to a decline in the quality of programming on their main channels.
Consumer organizations, on the other hand, see this as a way to force subscribers to buy unwanted channels, while the regulator and cable operators see it as a part of an anti-competitive agenda to deny space to smaller and newer channels.
TRAI has repeatedly pointed out that big broadcasting companies are trying to prevent the rise of new competitors by selling their channels in mega packs. These packs, it has argued, are intended to soak up the carrying capacity on cable and DTH networks, making it difficult for smaller channels and new entrants to find space on these networks. TRAI is shortly expected to come up with a new set of regulations addressing these concerns.
Goenka, however, maintained that Indian consumers prefer bouquets or packs, instead of selecting channels one by one, even if individual channel prices are reduced.
“People will continue to buy bouquets. I am very clear on that,” he said. “A la carte will be a small segment of the audience. I don’t see much impact happening.”
“The total number of a-la carte penetration for us is less than 10%,” he added to drive home his point.
“So I don’t see any big impact on revenues [from price cuts on a-la carte channels],” he added.
Meanwhile, Zee’s latest numbers indicated that the shift to the current pricing, considered unaffordable by many consumers, has indeed hit the reach and viewership of most broadcasters. This has in turn hurt the rates that they are able to get for each ad sold on their network.
For Zee, this has contributed to its ad revenue growth falling to low-single digits from the 20% range seen before the introduction of the new tariff order (see chart on top).
This has in turn halved the overall revenue growth from around 15% before Zee Entertainment started charging the current tariffs from consumers.