Subscription income of major broadcasters sees strong growth post NTO 1
As per their financial statements, subscription income of broadcasters grew in the range of 20-45% in the past three years. The growth was more in FY 20 than FY19
While a lot has changed in the distribution business of the broadcasters, especially after the implementation of Telecom Regulatory Authority of India’s New Tariff Order (NTO) 2019, it has hardly impacted their revenue.
Although, post the implementation of NTO, overall time spent on TV reduced 6% (July-Dec 2018 vs 2019), and also the number of active pay television subscriptions fell, according to the FICCI FY2020 report, the subscription revenue grew 7.5% for the industry in the year 2019. Subscription income of major broadcasters jumps 35-40% in last three years.
In the past three years (FY18-FY20), as per the financial statements of these companies, all major broadcasters witnessed strong growth, especially in FY20, on the back of NTO implementation. For instance, Zee Entertainment Enterprises Ltd (ZEEL) posted a 25% increase in revenue to Rs 2887.3 crore for the year ended March 2020 (consolidated) against Rs 2310.5 crore in the previous year. The broadcast subscription revenue grew 42.32% in FY20 as compared to Rs 2028.7 in FY18. The company witnessed strong growth in FY20 and FY19 as compared to FY18 (Year ended on March 2018).
“During FY20, domestic subscription revenues witnessed a growth of 33% led by better monetization of TV viewership after implementation of NTO and growth in ZEE5’s subscriber base. Over the past decade, the viewership share of our television network has almost doubled from 11% to 19%. However, our subscription revenue did not grow commensurately over the same period due to legacy pricing,” ZEEL CFO Rohit Gupta said in their annual report 2020.
Gupta further mentioned that the implementation of NTO gave flexibility to consumers to choose and pay for content they want, and it allowed broadcasters to decide the pricing of their content. He shared, “NTO has given the company an opportunity to monetize these strong viewership gains, especially in the southern markets. This resulted in industry-leading growth in subscription revenues for ZEEL during the year. The offtake of our channels under the new regime is a testament to the strength of our content offering to the end consumers.”
However, he predicted that after a jump in FY20, television subscription revenue growth will moderate this year due to the uncertainty relating to the implementation of NTO 2.0.
“NTO helped broadcasters positively and pushed their subscription revenue growth as well,” said a senior analyst. “Whether it is Sun TV, Network18, or ZEEL, all major broadcasters have reported a strong growth. While it might not be as high as them for others, it's definitely higher than the previous financial year.”
Similarly, Network18 mentioned in its annual report 2020 that the implementation of NTO impacted channel reach, but boosted subscription revenue. The unbundling of existing bouquets resulted in the creation of customised language bouquets as well as segmentation of the market by price. The order gave consumers more control in choosing channels, which resulted in an obvious drop in the reach of certain channels versus the previous regime. Industry discussions indicate that over 85% of subscribers opted for DPO-designed packages. Channels that were not opted for by consumers faced erosion in not just subscription but also ad revenue.
“Improved distribution tie-ups across cable and telcos have brought the consumer closer to our class-leading content bouquet at an affordable optimum price. The implementation of NTO provided a reset to pricing (shifted from B2B to B2C), boosting our linear TV subscription income substantially, by 40%+ YoY,” read the report. It further added that increased proportion of subscription in revenue mix at 35% (vs 26% in FY 2018-19) provided stability,” read the report.
The network posted advertisement, subscription revenue, and program syndication revenue at Rs 4,83,720 (lakh) in FY20 against Rs 4,71,014 (lakh) in FY 19 and Rs 1,555,97 in the previous fiscal year. The revenue saw an increase of 210.88% from FY 18. (This revenue includes ad, subscription, and program syndication revenue)
“The companies mostly don’t share individual revenue of verticals. However, digital or any other revenue is very small which can’t grow with the core of business growing,” said an industry observer.
Sony Pictures Network India’s (SPNI) subscription income grew 21.17% to Rs 2378.75 crores as compared to Rs 1962.99 crore in FY19. The network’s subscription income declined 1.9% in FY 19.
“There is a massive increase in subscription income majorly backed by NTO. Post NTO implementation in 2019, the distribution share arrangements worked in the favour of broadcasters. The distribution industry grew by almost 35% in FY20. In three years CAGR basis, the last quarter’s growth is because of NTO, and before NTO, it was growing 12-13%,” explained Karan Taurani, VP, Elara Capital.
He further shared that the growth rate has now conversed to about 5% for two reasons- first, because second household TV got impacted due to COVID, and secondly, because the commercial lines were not working for first six months. “The key factors were pricing and bundle arrangements. Now these lump sum arrangements become fix after NTO arrangements and hence there is no growth factor there. The only factor is basically a shift towards HD and an increase in the number of TV households.”
He predicts that if NTO 2.0 gets implemented, there will be a negative impact for some selective broadcasters, specifically those in the sports genre, as their discounting is heavy as compared to al-a-carte pricing. Also, the price hike will remain a challenge for broadcasters because of the regulation.
