As ad revenues shrink, broadcasters seek a waiver on carriage fees from MSOs and DTH players

On average, a channel spends between Rs 40-60 crore on distribution in a year. But with advertising dropping to the tune of 80%, the broadcasters have asked distributers to share their financial burden and let go off the carriage fees

Niraj Sharma
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As ad revenues shrink, broadcasters seek a waiver on carriage fees from MSOs and DTH players

Covid-19 has impacted all the businesses across the industry and sectors. Many industries such as travel, hospitality and experiential are entirely closed. But in their cases, loss of their income is at the cost of no expenses except maintenance.

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Consider the media and entertainment industry, which is alive and kicking, entertaining the public when they are confined to their homes due to the strict lockdown across the nation. Even as general entertainment channels are not spending on the productions of shows due to restrictions, they are bearing the cost involved in the distribution and airing the content. As far as news channels are concerned, their cost has increased on account of on-ground coverage with extra precautions.

While broadcasters are reducing costs across business functions, including staffing, they are aiming at reducing the largest cost of their business, which is distribution.

According to industry observers, a Hindi news channel typically spends around Rs 50 crore on distribution every year while an English news channel shells out anywhere between Rs 35-40 crore.

As far as Hindi general entertainment channels and Hindi movies are concerned, their spends on distribution exceed Rs 60 crore. However, the subscription income subsidises the distribution costs significantly.

In the current scenario, where every business unit is axing its expenditure wherever possible, a cut on huge distribution cost was inevitable.

According to highly placed sources in the industry, broadcasters have already started asking for a 100% waiver on carriage fees to multi-system operators (MSOs) and DTH players on account of a 70-80% reduction in advertising income.

On the other hand, it is proving to be a double whammy for MSOs as they are already under pressure because of nearly no payments from local cable operators.

In these conditions, MSOs are negotiating with broadcasters to shell out some percentage of carriage fees, which is acceptable and workable for all stakeholders.

A senior executive of a large MSO told on the condition of anonymity that ground collection might be affected by the lockdown.

Although broadcasters are urging subscribers to pay subscription fees to LCOs through a digital mode of payment, and that could be helping in collections, LCOs might be holding on those monies to deal with the fear of future.

MSOs are now persuading LCOs to pay up the subscription revenue and not disturb the value chain.

There may be dropouts in recharge and pay channels from packages but the collection is not an issue in the case of DTH players, said another industry observer. “Hence, their struggle with liquidity is far less than any other stakeholder in the broadcast ecosystem,” the observer said.

For distributors, carriage fee is a major chunk of the revenue and the remaining comes from subscribers, which is also shared with the broadcasters.

In the last two months, the industry has also seen major losses in subscription fees with the shutdown of commercial establishments.

MSOs DTH players