Sun TV Network doesn't see major impact on subscription revenue from TRAI's NTO 2.0

In Q1 FY22, the network's pay channel and digital revenue dropped to Rs 201 crore from Rs 226 crore in the previous fiscal

by Javed Farooqui
Published: Aug 16, 2021 8:30 AM | 5 min read

Sun TV Network's senior management has said that the company will not see a major impact from the implementation of the Telecom Regulatory Authority of India's (TRAI) New Tariff Order (NTO) 2.0. It is pertinent to note that the broadcaster's pay channel and Direct to Home (DTH) revenue saw a dip in Q1 FY22.

The TV broadcasters have challenged the Bombay High Court order upholding the NTO 2.0 before the Supreme Court. The broadcasters have contended that the NTO 2.0 will restrict the fundamental right to speech and expression of the broadcasters and will give powers to the TRAI to micro-manage the broadcasting sector.

In Q1 FY22, Sun TV Network's pay channel and digital revenue dropped to Rs 201 crore from Rs 226 crore in the previous fiscal. DTH revenue saw a marginal dip at Rs 214 crore from Rs 216 crore. The company reported advertisement revenue of Rs 244 crore as against Rs 126 crore a year ago. The company's international revenue was Rs 25 crore.

Recently, ZEEL MD and CEO Punit Goenka had said that the NTO 2.0 will cause disruption in the growth of subscription revenue for a quarter or two. He further stated that the growth will come back once the NTO 2.0 settles down.

The Indian Premier League (IPL) revenue from a truncated 2021 season came in at Rs 124 crore during the quarter. The truncated IPL had a Rs 46 crore impact on the company, the management said. The company owns the Sun Risers Hyderabad franchise of the IPL.

“The NTO 2.0 matter is sub judice because the appeals are pending in the Supreme Court. However, it will not have any major revenue impact on pricing. We will not be impacted by TRAI's NTO 2.0 order. We will have to wait and see what happens in the SC and accordingly revisit the pricing. On subscription growth, clarity will only emerge depending on whether the NTO 2.0 is implemented or not,” Sun TV Network MD Mahesh Kumar told analysts during a Q1 earnings conference call.

On ad revenue, Kumar said that the company saw a sharp recovery in April in the continuity of the Q4 trend till the second Covid-19 wave disrupted the growth trajectory. “Retail advertising has not returned in full swing, so it is not at the pre-Covid level. Even when we have come out of the lockdown, we haven't seen pre-Covid level spends by retail advertisers. From the national level, we are getting pretty good support but for the retail segment to come back on a full swing basis it will take time, particularly with the threat of the third wave. So we need to get out of this to see aggressive spend by the retail segment,” Kumar noted.

Sun TV Network Group CFO SL Narayanan said that the company may not spend Rs 1200 crore on movie production in FY22 as was mentioned earlier. He said the investments on five movies, which are under various stages of production, will be close to Rs 600 crore.

"It may not be Rs 1200 crore because the cost of movies if different. Not every movie is a blockbuster, and non-blockbuster movies don't cost that much. Many of the movies are with mid-tier star cast, so they will not average around ticket size of Rs 100 crore, it could well be Rs 50 to 60 crore. So our total investment will be just 50% of the number we have indicated. We have Rs 600 crore budget for five movies," Narayanan said.

He further stated that Rs 1200 crore amount is an indicative number over year and a half kind of time frame. Currently, the company has only five projects up and running with actors like Rajinikanth, Vijay, Surya, and Dhanush. The company also sees big opportunity in dubbing these movies and releasing them in other formats as well. The Rajinikanth movie will release on 4th November, even as the company expects the remaining four movies to get ready by September or October. The company hopes to release other movies after the Rajinikanth movie.

The company's focus is to complete existing movies and then kick off investment plans for video streaming platform Sun NXT. “Sun NXT is going to be a key part of overall content strategy because that is the future. We will be investing heavily in it but at this point in time with so many moving parts and so much of uncertainty on Covid-19 I am not able to tell you any precise number or precise date,” Narayanan said.

He also revealed that Sun NXT has 23.5 million subscribers, mainly through telecom operators. “We are currently averaging at about 23.5 million subscribers. Many of these subscribers are through the telecom players and OTT players other than Sun NXT. We have some negotiated fixed fee deals. The pure play subscribers who come organically, that number is very small, but it is growing on a small base.”

While Sun NXT is heavily dependent on subscription revenue, the ad revenue has also started picking up as brands want to target very precise psychographics and age-groups.

The network has lined up big-bang shows for Tamil, Telugu, and Malayalam markets. Sun TV has already launched MasterChef Tamil on 7th August. It also plans to up its investments in Sun Bangla. “We have big ticket shows lined up. Overall response has been encouraging. On 25th August, KBC Telugu with Junior NTR. We are also launching MasterChef in Telugu. We are launching an international format show in Malayalam. Furthermore, we are also working with other format owners to launch big-ticket shows in other markets like Kannada and Bengali,” Kumar said.

On Sun Bangla, Kumar said that the channel has gained traction through its fiction shows. “We will now be also focussing on Bangla because some of the fiction shows which we have done have been tracking very well. This year, if there is no Covid-19 impact, we will be stepping up investments in Bengal on big ticket shows.”