Cases related to the pandemic COVID – 19 have been growing at an alarming rate with the first case in India being detected on 30th January 2020 to over 42,000 cases as on date. With there being a lockdown of the entire nation and social distancing protocols in place for more than a month, only essential services are available for the common public (barring a few states, which have permitted some relaxations of the lockdown). Almost every industry in India has suffered financially including the cable and broadcasting sector.
The cable and broadcasting sector is primarily divided into two parts i.e. the production of content and the distribution of this produced content for consumption by the subscriber/viewer (hereinafter referred to as viewer).
The content production can be loosely categorized into original productions, syndication of content in local languages, acquisition of previously aired content, live sporting events, music or art events etc. which are either created, curated or telecasted based on the demographic or demand of the viewers. A television channel curates and packages this content as per pre-defined genres (general entertainment, news and current affairs, movies, sports, kids etc.) and makes it available on a 24 x 7, 365 days a year basis. Some examples of popular TV channels are Star Plus, Zee TV, Sony Ten 1, Colors etc.
This availability of this content on a TV channel at the click of a button of the Set Top Box remote is possible only because of the intermediaries/ service providers who ensure that the viewer receives uninterrupted and good quality signals of these channels.
It is thus important to understand who these intermediaries’/service providers are:
- Broadcasters – They are commonly known as channel owners or distributors who are involved in content production/ curation for transmission to the viewer.
- Distribution Platform Operators (DPOs) – They are the intermediaries between the Broadcasters and the viewer as they collate channels of various Broadcasters and then retransmit the same on the Set Top Boxes procured by the viewer. DPOs are of various kinds i.e. Multi System Operators (MSOs), Direct to Home Operators (DTH), Headend in the Sky Operators (HITS) and Internet Protocol Television Operators (IPTV).
- Local Cable Operators (LCOs) – The LCOs are small network operators specific to an area or locality who based on an agreement with the aforementioned DPOs (except DTH) ensure that the Set Top Boxes opted for by the viewers are installed and all details of the viewers are taken and the choice of channels of the viewers are reported back to the DPOs for activation. The LCOs are also responsible for collection of subscription amounts on a monthly basis from the viewers for the channels subscribed by them.
The Telecom Regulatory Authority of India (TRAI), the expert body which regulates the cable and broadcasting sector in India introduced a New Tariff Regime i.e. the Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017 (No. 1 of 2017) along with necessary regulations etc. which brought about the concept of the Broadcaster pricing the channels directly to the viewers. Thus, a viewer now had the option of choosing as many channels of various broadcasters either on a-la-carte or as part of a bouquet and pay only for those channels. This Tariff Regime came into effect from 01.02.2019 after going through various rounds of litigation. Thus, the viewer who initially had no choice on what channels he/she opts for suddenly had full freedom to choose channels.
Thereafter, the TRAI after monitoring the implementation of the new Tariff felt that certain changes in the pricing for the benefit of the viewers should be brought about and thus issued an amendment to the Tariff Regime, 2017 i.e. the Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff (Second Amendment) Order, 2020 (No. 1 of 2020) which has been challenged by various stakeholders/service providers before various High Courts in the country and the same are pending adjudication.
REVENUE GENERATION BY SERVICE PROVIDERS
There are two categories of Broadcasters, Pay Channel Broadcasters and Free to Air Channel Broadcasters.
The Pay Channel Broadcasters are the category who charge an amount per month as subscription fees from the viewer to give access to their channel(s) whereas Free to Air Broadcasters do not charge any subscription fee and are available to the viewer on the platform of the DPO if they choose to opt for the same.
The primary source of revenue of the Broadcasters is advertisement revenue wherein depending on the popularity of the programme or the event being transmitted by the broadcaster, various brands pay to market/promote their goods/services to the subscribers/viewers.
In addition to the above, the Pay Channel Broadcasters also add to their revenue through subscription fees collected from the viewer. Advertisement revenue is however the only source of revenue for the Free to Air Broadcaster.
With the coming into force of the New Tariff Regime, the revenue source for the DPOs is 20% of the subscription revenue collected from the viewers for the channels chosen by them. The Broadcasters also provide certain incentive schemes to the DPOs for promotion of their channels to the customers/viewers.
Further, the DPOs are also allowed to charge an amount of upto Rs. 160/- per viewer as Network Capacity Fee towards utilization of their infrastructure.
The DPOs also generate revenue from various carriage and placement agreements executed with Broadcasters for access to their network apart from advertisement revenue for promotion of goods/services on their self-owned local channels.
With the coming into force of the New Tariff Regime, the LCOs get a share in the 20% received by the DPO (except DTH) from the subscription amounts collected from the viewers apart from a share in the network capacity fee charged by the DPO (except DTH) from the viewers. The share can either be mutually decided between the parties or as a fall back, in the case of failure of negotiations the share as stipulated by the TRAI.
The collection of subscription fees from the viewers and distribution/settlement of revenue between all the service providers happens primarily on a monthly basis.
IMPACT OF COVID 19
In view of the all India lockdown announced by the Hon’ble Prime Minister of India with effect from 24.03.2020, the Ministry of Information and Broadcasting (MIB) issued directions dated 23.03.2020 to the Chief Secretaries of all States and Union Territories to ensure operational continuity of Print and Electronic Media in view of the threat of COVID 19 outbreak, thereby ensuring that the television channels are made available to all subscribers/viewers during the lockdown. Cable and Broadcasting Services were declared as an essential service by the Ministry of Home Affairs vide order dated 24.03.2020. Infact, certain broadcasters converted some pay channels into free to air channels for the benefit of the subscribers/viewers to ensure the successful implementation of the lockdown and the same was informed vide notice dated 30.03.2020 by the MIB to all DPOs concerned with directions to make appropriate changes. The directions issued by the MIB were further reiterated vide notices dated 01.04.2020 and 11.04.2020.
Thus, having been declared an essential service the entire chain of service providers continues to transmit/retransmit the channels to the viewers leading to an increase in the viewership of television channels by 8% in the first week of the lockdown as per the data released by Broadcast Audience Research Council (BARC) with the News genre being the biggest gainer with a 57% rise in viewership.
The aforementioned facts prima facie seem to suggest that the Cable and Broadcasting Sector has been immune from the economic effects of the lockdown. Going further we will be discussing:
Whether the cable and broadcasting sector is generating more revenue than before due to the increase in viewership of all genres especially news being the biggest gainer during this lockdown?
The answer keeping in mind the present scenario would be NO. The reasons are as follows:
- There is no new content being produced at present. Due to the lockdown which has lasted for more than a month now, there is no filming for any programmes and all live events such as sporting events, art and cultural events, religious events, music festivals have been cancelled.
- In view of cable and broadcasting being an essential service, all channels are continuously being aired with old or previously aired content.
- There is very little to no collection of subscription fees from the viewers owing to various factors such as;
- Social distancing i.e. the inability of the LCOs to go house to house to collect money or the LCOs not being entertained by the viewers.
- Viewers not wanting to pay subscription fee for channels which are airing old content and/or absence of new content.
- Viewers not being able to recharge their subscription accounts due to no knowledge or unavailability of Net banking, PayTM etc. at their end and the DPOs continuing to provide them service without payment in view of the MIB Advisory.
- Stiff competition from OTT platforms such as Netflix, Prime Video, Disney+ Hotstar etc. who provide a wide array of content both International and Regional from movies, web series to documentaries thereby prompting the Cable Viewer to make a shift to such platforms.
- Prioritizing spending on essential day to day requirements over subscription fees for cable.
- With no subscription collection from the subscribers/viewers, there can be no revenue sharing inter se the Broadcasters, DPOs and LCOs. In view of the lack of revenue collections from the viewers, various LCO Associations and DPOs have been requesting for waiver of their payment obligations during the period of the lockdown.
- Due to lack of new content or live events the broadcasters are losing out on advertisement revenue as the advertisers are either not wanting to advertise and/ or not paying as per their contractual obligations or not entering into any new arrangements or suspending previous arrangements with broadcasters thereby leading to about 50 % drop in advertisement revenue .
The lockdown continues and there is no surety of it being lifted any time soon, the cable and broadcasting sector and all involved therein have tirelessly worked towards ensuring that channels are available for viewing by the common man during these tough times. Contrary to the popular perception, all stakeholders in the Industry are facing hardships due to the direct and indirect effects of the lockdown and there has been a tremendous negative impact on the revenues of all stakeholders.
The distribution side of the Cable and Broadcasting industry has over 900 registered satellite channels, 1646 Registered MSOs, 7 DTH Operators, 1 HITS Operator and around 5 IPTV Operators as well as over 50,000 LCOs. It is a source of livelihood to a large section of our society and this sector like many others is also reeling under acute financial pressure owing to the pandemic.
The Indian Broadcasting Foundation (IBF), the apex body of TV broadcasters, has requested the Ministry of Information and Broadcasting for an 18 month regulatory moratorium and a phased plan for resumption of production activities and has further listed 18 demands which can help the industry to tide over the COVID 19 pandemic .
Various LCOs as well as DPOs have made representations to Broadcasters as well as the TRAI and MIB to provide respite from their payment obligations during these tough times.
In these circumstances, it would be ideal if there is some intervention by the TRAI and the MIB, to sort out the prevalent issues. Additionally, a fiscal package for the entire sector ought to be announced at the earliest.
Shivangi Dham & Pratyaksh Sharma
(VIEWS EXPRESSED ARE PERSONAL)
ABOUT THE AUTHOR
Shivangi is an associate at Vedya Partners, she is a Civil Litigation Lawyer, who regularly appears before various forums in Delhi ranging from the Hon’ble Supreme Court of India, the Hon’ble High Court of Delhi, Sessions and District Courts, TDSAT and NCDRC,, she is highly skilled in Drafting, Legal Advice, Legal Assistance and Legal Research.
| Pratyaksh Sharma
Pratyaksh is an associate at Vedya Partners, he is a Civil Litigation Lawyer, who regularly appears before various forums in Delhi ranging from the Hon’ble Supreme Court of India, the Hon’ble High Court of Delhi, Sessions and District Courts, TDSAT and NCDRC.