85% of the customers who have shifted to tariff packs under TRAI’s new tariff plan have gone with packages created by the cable operator, said
Aniruddhasinhji Jadeja, founder and MD of GTPL Hathway, one of India’s largest cable networks.
Jadeja said, as of Feb 12, close to 30% of the total subscribers have been moved to new packs under the TRAI scheme.
“85% of the customers have gone for our suggested pack,” Jadeja said, speaking on the first two weeks of implementation of TRAI’s new tariff order. “Only 15% subscribers have gone for either a-la carte, [broadcaster] bouquets or FTA.”
FTA or free-to-air refers to channels that come with zero content charges. Customers who go for FTA packs have to pay only Rs 153 per month, while others have to pay content charges in addition to the Rs 153.
Channel owners are anxiously waiting to see if customers can be persuaded to subscribe to their channel packs, in place of the packs offered by cable and DTH players.
Traditionally, 99% of the customers go for the packs offered by cable and DTH players as a-la carte or one-by-one selection was prohibitively priced.
TRAI’s new tariff scheme was targeted at resolving the above situation by reducing the price of the a-la carte (one-by-one) schemes.
However, the regulator has failed in this endeavor as the Madras High Court issued an order staying some of its crucial provisions.
As a result, customers continue to have to pay very high charges if they go for a-la carte option.
The only difference that the new tariff scheme has brought about is that customers can now also choose from packages offered by channel owners (broadcasters) in addition to those offered by cable and DTH operators.
Broadcasters like Star India, Zee and Sony have therefore offered their own packs under names such as value packs, family packs and happy plan.
It was expected that a large section of users — as many as 50% or more — would avail of such packs offered by channel owners. However, going by Jadeja’s statement, that transition is yet to take place.
Nevertheless, Jadeja — whose firm provides TV signals to nearly 1 crore households in India — said it is too early to derive trends from the implementation of the new tariff order.
He said customers are experimenting with their packs and plans.
“Just wait till month end,” he said. “Everyone is waiting for the first batch of results, which will come out in the first week of March or so.”
GOOD FOR MSOs
Jadeja, a well-respected figure in India’s cable TV circles, said his company is not facing any substantial resistance from its distribution partners over the implementation of the new tariff order.
Companies like GTPL Hathway get most of their customers indirectly, by supplying their signals to local cable operators who then carry it to their customers’ premises on their network.
There has been a lot of disquiet over the rollout of the new scheme as local cable operators across the country used to get Rs 100 to 150 per subscriber per month, which could come down under the new scheme.
Earlier, they would keep 100-150, and pass on only Rs 70-125 to the feed provider. The feed provider would in turn pass on about 35-50 rupees from that amount to the broadcaster (channel owner).
However, under the new TRAI scheme, many local cable operators are being forced to bring down their share of revenue to around Rs 65 per customer per month — or about half of the base connectivity charge of Rs 130.
Depending on negotiations, some MSOs (feed providers) have signed agreements to let LCOs keep as much as Rs 100-110 per month out of the 130 base charge. This is especially true in urban areas where customers typically pay between Rs 300-400 per month.
In such cases, MSOs get to keep a 20% ‘distributor margin’ on the pay channel charges paid by the customer. Under the new rules, 80% of pay channel charges will go to the channel owner, while the MSO and the LCO can split the remaining 20%.
Jadeja did not go into details of the new revenue share arrangement that his company has with local cable operators, but said there is no major resistance to the new scheme from its local partners.
“The reaction is very good from our LCOs. There is no retaliation, on the ground. Migration is going on very smoothly,” he said.
Jadeja said his company could take a hit on the revenue that it used to get from channel owners, but this would be compensated by an increase in the revenue from consumers.
GTPL Hathway used to get between Rs 73 to Rs 120 per customer per month from local cable operators. It also used to get almost an equally substantial chunk from channel owners in the form of carriage fees, placement revenues and so on.
Under the new scheme, LCOs will pass on a greater share of customer revenues to the MSO, and the MSO will pass on most of that to channel owners.
“If my ARPU was 73 rupees and all, and if the customer himself is taking 100 rupees of pay channels, suddenly you will see subscription revenue going up,” Jadeja pointed out.
“In accounting terms, the subscription revenue is going to increase, and your pay channel revenue is going to increase. Placement revenue is going to go down a bit. But overall impact we see will be positive on a margin level for MSOs,” he added.
BROADCASTERS TO BENEFIT
Jadeja’s comments indicate that channel owners are likely to benefit majorly from TRAI’s new tariff scheme.
Against Rs 30-70 per customer that broadcasters as a class used to get in the old scheme, the new scheme would see them getting between Rs 50-300 per month, depending on the class of the customer.
Of course, another section of subscribers who are on FTA (free channel) only packs will generate zero income for broadcasters, going forward.
However, the percentage of users who are on FTA-only packs is not likely to be substantial.
According to Pankaj Krishna of Chrome DM, an analytics company that tracks media distribution, about 20% of customers who have migrated to new plans are on free-to-air packs at the end of the second week of February.
Under the earlier scheme, even these 20% users would have generated income for broadcasters at the rate of Rs 30-70 per month.
But the increase in revenue from the remaining 80% of subscribers, who will be opting for pay channels, is likely to far outstrip any losses suffered on account of FTA subscribers, thus benefiting channel owners.