A-la-carte to cut your TV bills

The new tariff order by Telecom Regulatory Authority of India (Trai) effective December 29, 2018, is set to bring a fundamental shift in the way the Indian television broadcasting industry works. Like most consumer products, households will now have the right to decide what to watch and how much to pay for it.

The typical scenario until now, according to Punit Misra, chief executive officer - domestic broadcasting business, Zee Entertainment Enterprises Ltd (ZEEL), was that subscribers bought a cable TV or direct-to-home (DTH) connection and paid a certain price for the package being opted for.

"What they watched and didn't was immaterial. That will not be the case any more. Households will now critically evaluate which TV channels they actually watch and then decide to pay for it. Additionally, based on the new pricing that's getting introduced, if it's all adding up to what they want to watch, they will continue without any changes. However, consumers will also look to lower their monthly outgo by removing channels they hardly watch and vice versa," said Misra.

The new tariff order basically mandates every television broadcaster to offer various bouquets across languages, while also setting a maximum retail price (MRP) for TV channels to be made available on an a-la-carte basis. Prior to this, broadcasters would bundle paid and free-to-air channels in bouquets. Also, the a-la-carte channels were priced higher, forcing consumers to opt for bouquets.

The new order does away with the bundling and caps the a-la-carte prices at Rs 19 if the broadcaster wants to include them in a bouquet. Also, consumers can select and pay for the channels they want to watch at the MRP fixed by the broadcaster.

Currently there are 550-odd TV broadcast channels available across genres / languages. Anywhere between 55 and 75 channels are watched on a regular basis accounting for 80% of the consumption. And if the consumer is offered bouquets that largely cover the channels being watched then that's what the consumer will opt for to start with. For instance, in ZEEL's case the broadcaster has created a bouquet of 24 channels for Hindi markets that's priced at Rs 45 that offers its key channels considered crucial in every household.

With the implementation of the new tariff order, ZEEL expects its subscription revenue to continue at the growth rate that's been guided earlier in the investor meets. "The CAGR will be more like 12-13%. Will it go up? Any one predicting that will be a bit premature in my view. We are certain about our guidance and have priced our offerings to ensure the same," said Misra.

On the advertising part, changes will be made by companies (advertising on TV) based on their internal reasons and not because of what is happening in the TV broadcasting industry. "If consumers are going to decide which channel to watch, as a broadcaster I have the right to charge a price appropriately. So there is no reason for dropping advertising rates," he said.

According to Misra, every middle class home generally has a specific budget in their mind for everything they consume. They will stick to the budget until something like what happened with petrol and diesel prices earlier and the households had no option but to go beyond the allocated budget for the same.

"People will have to realise that TV entertainment is similar to the monthly budget thing across a basket of goods. It's not just about choices between TV channels, but everything they are spending on. They will also evaluate and increase spends if watching certain channels is going to cost them more than what was already budgeted for. Consumers will also look to remove some other TV channels to mitigate the increase in costs for what they want to necessarily watch," said Misra, adding that consumer behaviour will be the key deciding factor going forward.

"People's need for entertainment is as basic as their need for food and will make choices accordingly. Genres like general entertainment channels (GECs), movies and news account for almost 85% of the consumption on a daily basis and that's staple. Consumers will prioritise and make sure to find bouquets that offer them the staple. There will, of course, be homes that will want kids, sports, infotainment channels among others and they will have to make the choices accordingly. We have conducted extensive research on this and have gone to consumers for the same. People pick and choose based on the budgetary allocation and must have channels and finalise accordingly," said Misra.