FTA price to be Rs 70-80 per month

MUMBAI: The JP Morgan report concludes the final price of the FTA (free-to-air) bouquet will be around Rs 70-80 per subscriber per month.

The JP Morgan report raises the following points about the parameters for FTA bouquet, likely prices, stance of pay channels, bundling and changes in subscription rates post CAS:

Free-to-air bouquet parameters

The 17-member government task force panel is in the process of deciding on the following issues:

o The minimum number of channels that should be there in the FTA bouquet.

o The 'must-carry' channels in the FTA tier. For example, the state-owned Doordarshan is likely to be a 'must-carry' channel.

o The channels may also be specified genre-wise, like education and news.

o The maximum permissible rate that should be set for the FTA bouquet.

o All the above may be specified as separate values for different towns or provinces. For instance, it may be necessary to carry a regional channel for a particular province.

Likely price of the FTA bouquet

The FTA price is what the LCO will keep with himself and will not be shared with any other body. There is currently a stalemate in the decision on FTA prices. The LCOs feel that their costs justify a price of over Rs 150 per subscriber per month. The finance ministry has suggested a rate of around Rs 40-50 per subscriber per month for the FTA bouquet.

The final price of the FTA bouquet will be around Rs 70-80 per subscriber/month. Talks with the LCOs, MSOs and broadcasters indicate that the final settlement will be reached around the above-mentioned levels.

A point to note regarding FTA is that the subscriber will have to pay entertainment and service tax on top of the set FTA price. Currently, the entertainment tax is different across states. For example, Mumbai has a flat entertainment tax rate of Rs 30/subscriber/month. The government is trying to work out some uniform rate in this regard. Overall, the FTA bouquet inclusive of taxes will cost around Rs 105-110 /month to the subscriber.

Stance of pay channels 

The decision to go FTA is like a prisoner's dilemma for the broadcasters. If any of the three flagship general entertainment channels go FTA, for want of better reach and boost in advertisement revenues, it might lead to all of them going FTA. Thus, effectively it will spoil the subscription revenue stream for all the bouquets.

The revenue mix between advertisement and pay revenues has been shifting towards pay for all the players, due to the heavy growth in domestic pay revenues. As such it is unlikely that any of the three channels will shift to FTA mode. The chairman of Zee TV had announced in the company's earnings call about their unwillingness to go FTA. Industry people confirm that all three flagship channels will remain pay.

Will Subscription Rates Come Down?

There is a definite chance that subscription rates will come down in the long term.

The Star bouquet, for instance, had announced that it was going to charge a lower rate to cable operators with higher declaration in their latest price revision. The prices that pay channels will charge will depend on the FTA bouquet pricing as determined by the task force.

Additionally, rates can only come down when the declaration levels increase, i.e., there is considerable offtake of the STBs. Thus, there is a chicken and egg situation here, where lower prices will lead to a rise in subscriber offtake and a rise in subscriptions will lead to a drop in prices. The situation is very similar to the Indian cellular market where subscriber numbers exploded with the drop in tariffs.

Overall, the broadcaster will determine how much lower prices will drop. There might be a small drop in prices initially, though these are likely to drop further in the medium to long term.

Bundling of channels 

The government statement that subscribers will be able to choose and pay for only the channels they want to see is often quoted as an argument that each channel should be offered separately as well. The law requires that every cable operator must publicly declare to his subscribers the price of each pay channel. This implies that satellite broadcasters must list the individual cost of each pay channel.

However, there is no diktat against the grouping together of pay channels-even offering a group of channels at a lower rate than the individual channel as a stand-alone. The matter of whether a bundle of channels can be offered is thus one possible grey area. Currently, there is nothing to stop the bouquets from bundling their channels, as long as they provide the individual channel rates as well.

The bundling of channels is also disadvantageous from the viewpoint of the cable operator who sets up the encoders. If bundling is done, the realization from the incremental channel (which is bundled with stronger channels) will effectively be low, but the investment required for it will be equal to the stronger channel.

Revenue-Sharing agreement for the Pay Channels

Negotiations are on between broadcasters and cable operators to reach an amicable settlement regarding the revenue share of subscription revenues. Currently, cable operators are demanding around 70 per cent of the revenues, which broadcasters are not willing to part with.

Globally, the broadcasters retain around 40-60 per cent of the subscription revenues. The situation in India will be similar, where broadcasters will likely get around 50 per cent of the total revenue pie, though this will depend on the popularity of the channel per se. The remaining revenue will be shared between the MSO and the LCO, with the MSO getting a much greater share.

Legislation To Limit Advertising Time on Pay Channels

It is unlikely that there will be any legislation curtailing or specifying time limits for advertising on pay channels. Industry sources indicate that they believe that market forces should be allowed to handle issues like these.

Possibility of Under-Declaration in the CAS scenario

The digital STBs that are likely to be used for CAS can be hacked. In fact, some industry people claim that high-end analog boxes offer more security than lower-end digital boxes. Piracy is unlikely to be eliminated overall. There will certainly be improvements in the declaration levels, but we expect the declarations to be around 70-80 per cent and not the entire 100 per cent.

Latest Reads
MNX to premiere supernatural fright flick, ‘Wish Upon’

MNX, the preferred movie channel of the millennials, will premiere, American supernatural horror film, ‘Wish Upon’ for the first time on Indian television.

Television TV Channels English Entertainment
Hill+Knowlton Strategies India wins communication mandate for Discovery India

After a competitive multi-agency pitch, Hill+Knowlton Strategies, one of India’s premier communications consultancies

Television TV Channels English Entertainment
Doordarshan now wants all matches of men’s hockey WC

Even as TV sports channels are wracking their brains as part of a public consultation to justify why proposed tweaking of rules relating to mandatory sharing of signals of sporting events is not a good idea, the Indian government has gone ahead to notify hockey World Cup for sharing with the...

Television TV Channels Sports
Balaji Telefilms reports higher programming hours and better realisation

The Ektaa Kapoor-led Balaji Telefilms Ltd reported a consolidated profit from continuing operations of Rs 7.1 crore for the quarter ended 30 September 2018 (Q2 2019, quarter or period under review) as compared to a loss of Rs 22 crore for Q2 2018 and a loss of Rs 0.6 crore in the immediate trailing...

Television Production House Post Production
3rd Sahitya Aaj Tak India’s largest Hindi Literature Festival promises a grander & a bigger show

Aaj Tak, India’s No. 1 Hindi news channel with over 25 crore viewers (Source: BARC, TG:2+,Mkt:HSM, Period: W29'18-W32'18,) kicks-off the third edition of its annual mega Hindi literature festival - Sahitya AajTak .

Television TV Channels News Broadcasting
Excitement Tenfold as Nickelodeon India Brings a Week of fun to celebrate children’s day

The memories that we make as children always set path for the adult in us.  Nickelodeon, India’s leading kids’ entertainment franchise by Viacom18

Television TV Channels Kids
The Irwin Family -Terri, Bindi and Robert - come home to Animal Planet in ‘CRIKEY! IT’S THE IRWINS’ which premiers in India on November 15 at 9 PM IST

Lace up your boots because you’re about to embark on the journey of a lifetime with the family that’s bringing khaki back.

Television TV Channels English Entertainment

MUMBAI: A new study on type 2 diabetes (T2D) patients in India finds that obesity among diabetics is on the rise. The same study also revealed that majority of patients prefer to have fewer large meals as opposed to more frequent small meals which are more diabetes friendly The results are part of...

Television TV Channels News Broadcasting
Cartoon Network celebrates 20 years of heroic supremacy of The Powerpuff Girls in November

Cartoon Network, home to the three fabulous superhero sisters, Blossom, Bubbles and Buttercup rings in 20 glorious years of ‘The Powerpuff Girls’ this November. Cartoon Network India along

Television TV Channels Kids

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories