TRAI explains how broadcasters can offer discounts to distributors of TV channels

The Telecom Regulatory Authority of India (TRAI) has amended the new tariff order.

TRAI has said that only those channels which are having MRP of Rs19 or less will be permitted to be part of a bouquet. A broadcaster can offer a maximum discount of 45% while pricing its bouquet of pay channels over the sum of MRPs of all the pay channels in that bouquet. Discount offered as an incentive by a broadcaster on the maximum retail price of a pay channel shall be based on the combined subscription of that channel both in a-la-carte as well as in bouquets.

The amended NTO order states that for a broadcaster to offer discounts, on the maximum retail price of a pay channel or bouquet of pay channels, to distributors of television channels, should not exceed 15 % of the maximum retail price:

• Provided that the sum of distribution fee declared by a broadcaster under sub-regulation (3) and discounts offered under this sub-regulation in no case shall exceed 35% of the maximum retail price of the pay channel or bouquet of pay channels, as the case may be.
• Provided further that offer of discounts, if any, to distributors of television channels, shall be based on the combined subscription of the channel, both in bouquets as well as in a-la-carte and such discount, if any, shall be offered on proportionate revenue from such channel as a-la-carte and as part of (any) bouquet.

TRAI commented, “Any discount, offered as an incentive by a broadcaster on the maximum retail price of the pay channel or bouquet, based on the actual number of subscribers or actual subscription percentage, recorded in a month, shall take into account the total subscription of the channel both in a-la-carte as well as the bouquet.”

For example, if a broadcaster is offering a discount, as an incentive, of say 10% on the maximum retail price of a pay channel to the distributor in case the actual subscription percentage of that channel reaches say 75%. In case the actual subscription percentage of that channel reaches say 30% on an a-la-carte basis and say 45% in bouquets, then the distributor should become eligible to get the above-mentioned discount, as the actual combined subscription percentage of that channel would be 75%. 

Let us assume a broadcaster is offering a discount, as an incentive, of say 10% on the maximum retail price of a pay channel (Channel X) to the distributor in case the actual combined subscription percentage of that channel on the a-la-carte basis and as part of a bouquet, reaches say 75%. Now, say the actual subscription percentage of that channel reaches 30% in a-la-carte and 45% as part of a bouquet, then the distributor should become eligible to get the above-mentioned discount because the actual combined subscription percentage of that channel would be 75%. In such case, the discount to be offered as an incentive for the combined subscription attained will be calculated in proportion to the channel’s revenue on an a-la-carte basis as well as in a bouquet, i.e. on the maximum retail price and the ‘effective price’ of the channel, respectively.

Now, say the bouquet has been designed by combining a few channels and offering a 40% reduction of the sum of the a-la-carte price of individual channels forming part of that bouquet. Say, Channel X has a maximum retail price of Rs 10, then in such case, the ‘effective price’ of Channel X in the bouquet will be Rs 6 (i.e. 40% less than the maximum retail price of the television channel). The final amount of incentive for this Channel X will be arrived at as below:

Sum of proportionate revenue of the channel X on an a-la-carte basis and as part of the bouquet = Maximum retail price x Subscription on a-la-carte basis + Effective Price in bouquet x Subscription of the bouquet Amount of Discount on Channel X = Sum of Proportionate Revenue of Channel X on a-la-carte and bouquets * Prescribed % Discount.

Let us assume a broadcaster is offering a discount, as an incentive, of say 10% on the maximum retail price of a pay channel to the distributor in case the actual combined subscription percentage of that channel reaches say 75%. Now, say the channel is offered on an a-la-carte basis and also as a part of two bouquets, and its actual subscription percentage is 10% in a-la-carte, 20% as part of Bouquet A and 45% as part of Bouquet B.

In such case, the discount to be offered as an incentive for the combined subscription attained will be calculated in proportion to the channel’s revenue on a-la-carte as well as in each of the bouquets.

Say Bouquet A and Bouquet B have been designed by combining a few channels and offering 40% and 30% reductions of the sum of the a-la-carte price of individual channels forming part of that bouquet, respectively. Say, Channel X has a maximum retail price of Rs 10, then in such case, the ‘effective price’ of Channel X in Bouquet A will be Rs 6 (i.e. 40% less than the maximum retail price of the television channel) and in Bouquet, B will be Rs 7 (i.e. 30% less than the maximum retail price of the television channel). In this case, the final amount of incentive for this Channel X will be arrived at as below:

Sum of Proportionate Revenue of the Channel on an a-la-carte basis and as part of bouquets = Maximum retail price x Subscription on a-la-carte basis + Effective Price in Bouquet A x Subscription of Bouquet A + Effective Price in Bouquet B x Subscription of Bouquet B ………..

Amount of Discount of the said Television Channel = Sum of Proportionate Revenue of the said Television Channel on the a-la-carte basis and as part of bouquets x Prescribed % Discount.

Provided also that offer of discounts, if any, to distributors of television channels shall be on the basis of fair, transparent and non-discriminatory terms.

Provided also that the parameters of discounts shall be measurable and computable.

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