Freeze on pricing due to NTO 2.0 set to affect subscription revenue growth for ZEEL in FY 21

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The freeze on pricing due to the NTO 2.0 saga will affect the subscription revenue growth for Zee Entertainment in FY 21, the company stated in its Q2 FY 21 concall earlier this month.

Even though NTO 2.0 largely remains unimplemented from the broadcaster’s side due to the pending legal cases, the compliance of NTO 2.0 by DTH operators since the first week of March 2020 coupled with the Bombay High Court’s decision to not stay NTO 2.0 implementation even though it has asked TRAI to refrain from coercive action on broadcasters has resulted in a freeze of pricing with broadcasters unable to make any significant change to its current pricing.

Be it Sony Pictures Network India’s move to discontinue its lower-priced bouquets namely Happy India 30.5 and Happy India 58.3 or Star India’s recent attempt to push its January 2020 RIO or the attempts made by Discovery, Zee Entertainment, and Indiacast Media to push their January RIO 2020 each attempt has been firewalled by distribution platform operators with TRAI recently stepping in and advising Star India against any move to push non-compliant RIOs.

For the unaware, Zee Entertainment, Star India, Indiacast Media, Sony Pictures Network India, and Discovery had pre-planned revised offerings from March 2020 in a bid to increase their subscription revenue in FY 21. TRAI’s NTO 2.0 amendments however spilled water over the blueprint with DPOs unwilling to push the new RIOs amidst lack of clarity on NTO 2.0 implementation back in March which was followed by COVID-19 induced lockdown.

Due to the lingering uncertainty on NTO 2.0, our subscription growth this fiscal will be lesser than what we had anticipated at the beginning of the year. However, once this settles, we should go back to our expected subscription growth guidance,” said ZEEL’s Rohit Gupta.

Zee had planned a major revamp of its bouquet offerings down South with the launch of 44 new South centric bouquets and discontinuation of 28 existing South centric bouquets apart from price hike to 35 existing bouquets. The same was in line with the blueprint it had made during the New Tariff Order implementation.

So on NTO 2.0, at this point of time there is really nothing which we can share and the court has reserved the verdict and we are awaiting the verdict. As far as growth for the year is concerned what has happened is when we implemented NTO 1.0 we had a complete blue print that how we will take up our pricing and how product launches will happen over a period of time and how we will drive our subscription revenue, and in fact what you saw over last year that in third and fourth quarter we launched four new channels. So that was also a part of it. Now because of NTO 2.0 all the plans of our bouquet as well as taking up the pricing is on hold and that is the reason why subscription revenue for this year would be impacted on the domestic broadcast side; on the digital side subscription revenue continue to grow at a healthy rate. So once this NTO 2.0 is done and probably let’s say maybe a quarter of disruptions which would actually go back to healthy growth which we have been delivering over last several years,” said ZEEL’s Bijal Shah.

He further added that whether NTO 2.0 is implemented or disposed of under both scenarios ZEEL will be able to drive its growth significantly. The launch of 44 South centric bouquets was line with its Zee Thirai and Zee Picchar launch which strengthened its South portfolio.

He further added, “FY21 would be, this year would be difficult in terms of growth because of NTO 2.0 effectively freezing the pricing but going forward, what we have guided about low double-digit to low-teens is quite possible. But NTO 2.0 should be out of the way, it should have been implemented or it should be disposed of, whichever way. Under both the scenario is we should be able to drive our growth significantly.”

Bijal Shah further said that there was enough space for further growth in subscription revenue with 100 million TV households still not having a TV with television penetration having a long way to go. ZEEL feels that there is a significant opportunity for more subscribers in the domestic broadcast business with current ARPUs pretty low for ZEEL’s liking.

On the subscription, see on the domestic broadcast side subscription opportunity is still at both the places, we have long way to go as far as television penetration is concerned, and in most of the television penetration really most of the people take up Pay TV. So we have still 100 million homes who do not have TV. So from a longerterm perspective there is a very significant opportunity as far as more subscribers are concerned in domestic broadcast business as well as pricing side we think that the ARPUs are pretty low. As I said that we had already planned our price increases in some of the markets and also it is not only about price, we are going to offer more product, so like in Tamil Nadu market we have launched a movie channel. So it is also driven by more product launches. So overall our ARPU from this existing subscriber itself will grow. So that is as far as domestic broadcast is concerned,” added Bijal Shah.

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