Ever since the sector regulator Telecom Regulatory Authority of India(TRAI) had redefined the rules of the distribution game through its regulation on content aggregators, the news of Star DEN and Zee Turner ending their equal distribution joint venture (JV) Media Pro Enterprise India was expected anytime.
The Press Release dated April 11, 2014 titled "ZEE and Star to discontinue the distribution of their channels through the Joint venture MediaPro; Will set up independent Affiliate Sales", announced the split between Zee Turner and Star Den Media Services ending distribution of their channels through the three year old distribution joint venture Media Pro Enterprises India Pvt Ltd.
The decision to liquidate the company comes on the back of TRAI regulations, which has banned bundling of channels from more than one broadcaster by channel aggregators through its regulation namely, Telecommunication (Broadcasting and Cable) Service (Fourth) (Addressable System) Tariff (Third Amendment) Order 2014.
However, the split is not a surprise but an obvious thing because of many reasons, firstly Media Pro is a suspect from the very time it was created as a JV between Zee and Star, two of the largest vertically integrated media organizations who were always at loggerheads since the Zee Star breakup in 1999. This time the JV was created after much of a strategic planning, just a day before the provisions relating to combinations (acquisitions, mergers and amalgamations), were enforced by the Government of India with effect from 1st June 2011.
This policy required a mandatory approval of Competition Commission of India (CCI) before making any large joint venture crossing certain threshold of turnover. Then again, a case was filed in the CCI against Zee Network by a non-descript person for market dominance by its JV Media Pro. After a strange trip to the US by CCI Chairman along with Chairman TRAI and Secretary I&B, Media Pro was given a clean chit by CCI. The person who filed the complaint accepted the verdict and did not respond after that.
Formation of MediaPro
MediaPro was formed, with the aim to have a better bargaining power for distribution of ‘pay’ TV content to MSOs, cable operators and DTH operators. This, of course, was the plan to increase the monopoly of vertically integrated MSOs and DTH operators during digitization, making it difficult for the independent and nonaligned MSOs to negotiate content deals for popular channels as the JV controlled the distribution of 80 ‘Pay’ channels including Star and Zee.
Initially, the company started with distributing all the non-sports channels, then 68 channels from Star India, ZEEL, Zee News Ltd (now Zee Media Corp), Turner India and ABP News. Today, the JV distributes over 85 channels. However, both Star and Zee have kept sports channels out of the Media Pro bouquet.
The industry experts and independents MSOs and LCOs say, that creation of MediaPro brought maximum harm to the digitiation process by creating market monopoly in distribution sector on behalf of pay channels of these large media groups. Even litigations increased to a great extent after creation of Media Pro as the company was literally forcing independent operators out of the market creating unreasonable conditions for them and delaying content deals till the end of the phase so that the party either leaves the business or go to TDSAT, which further delayed its operations.
Except helping the MSOs like WWIL and DEN that form part of these groups, in creating huge monopolies in DAS areas the aggregator have achieved nothing for the industry. As reported by COFI in its response to TRAI consultation on distribution of TV channels and aggregators, there were 186 cases filed against Media Pro in 2012, the first year of digitization whereas only 36 and 37 cases were filed against Star Den and Zee Turner respectively in 2010 before the merger. TRAI had to finally issue this notification to curb such monopolistic activities.
Why Star and Zee dissolved MediaPro
This is not the end of the story, there is much more to come as these two media giants will keep churning out different plans to create monopolies. According to sources, the split could have been postponed by a year or so, but sports genre is an important factor that made the split inevitable at this stage. STAR’s heavy investment into the sports genre has led the group to launch four sports channels and two HD channels. STAR India has exclusive rights for all the BCCI matches till 2018. The investment stands at more than Rs 3,000 crore. Overall, the group plans to spend Rs 20,000 crore on the sports genre, including cricket, football, hockey, etc.
Zee, on the other hand, has also made significant investments in sports through Ten Sports. However, the scale of investments and stakes are not as high as STAR India.
The latest tariff order from TRAI dated March 31, 2014, which permitted the inflation-linked hike of 27.5 per cent in Reference Interconnect Offer rates (in two stages), is likely to provide a positive fillip to the subscription revenues.
TRAI regulation on Content Aggregators
All was fine till 10th February 2014, when sector regulator TRAI notified amendments to the existing regulatory framework with regard to distribution of TV channels, reducing the role of the content aggregators.
The difficulties for MediPro was that under the new regulation, content aggregators are barred from forming bouquets which have channels from more than one broadcaster. While curbing the powers of the content aggregators, the sector regulator has allowed them to function as ‘agents’ of broadcasters. While curbing the powers of the content aggregators, the sector regulator has allowed them to function as ‘agents’ of broadcasters. The aggregators can continue to sell bouquets of more than one broadcaster, but they will be able to bundle channels from only one broadcaster (or its group companies). TRAI gave broadcasters six months for reworking their existing deals with content distribution platforms.
However, the regulation has come as a blessing in disguise for both Star and Zee. The first aggregator to unbundle itself is Media Pro and this gives a benefit to them that now they can bundle their Sports channels along with their other channels giving them additional revenue which ultimately will be pulled from the customers.
Reactions on the split
Nonetheless, the distribution platforms particularly those not integrated with any major broadcaster are rejoicing that the Goliath of the broadcasting sector will cease to exist in a few months’ time. Due to its sheer size, Media Pro had given nightmares to many a direct-to-home (DTH) and multi system operator (MSO).
Hailing the move as a great development for the industry, Hathway Cable & Datacom MD and CEO Jagdish Kumar said that it was too early to assess the likely benefit for the MSOs. He also added that the separation will help to evaluate the true value of the content of different broadcasters. “Too much market power concentration in one entity is unhealthy so it’s a great development for the industry. Earlier, we were discussing Star Plus + Zee TV. Now it will be Star Plus separate and Zee TV separate. So, it will certainly help the MSOs to negotiate better and have a meaningful negotiation with the broadcasters but it is too early to pinpoint as to how it will benefit us to reduce content costs,” said Kumar.
IndusInd Media and Communications Ltd (IMCL) MD and CEO Tony D’Silva said that it was too early to talk on the ramifications of Media Pro. “We don’t know the exact nature of the split and how it will pan out. The move signals that the aggregators are falling in line to comply with the new regulation. I am sure they have a game plan to exploit the value of their content. But it is too early to talk about the impact as we need to see the new pricing they come up with.”
According to Mrs Roop Sharma, president COFI, the digitalization initiative is suffering seriously because of these channel aggregators who do not provide content or delay it under some pretext or the other to the independent MSOs and MSOs who are not part of their respective media groups but are providing cable TV services for the last 20-25 years. Not only this, they are still doing deals with MSOs on fixed amount based on Minimum Guarantee rather than number of actual STBs seeded and viewership of individual channels as per the SMS system.
In the same manner, MSOs are doing fixed deals with LCOs and LCOs with consumers (not based on consumer choice). None of the TRAI regulations are being complied with till now, even after 18 months of completion of the first phase and an year after the second phase was declared closed successfully. DTH operators like Dish TV and Tata Sky don’t see any immediate impact of the split. Tata Sky MD and CEO Harit Nagpal said, “We have amicable relations with all the broadcasters and aggregators. As and when deals come for renewal, we renew them on mutually agreeable terms. I don’t see the split affecting Tata Sky in any way.”
Dish TV CEO RC Venkateish said, “I don’t see any immediate impact but disaggregation was given. We have been actively working on reducing our content cost, which we will continue and we have all the tools to negotiate the deals.” Both TataSky and Dish TV are part of the vertical integrated groups of Star TV and Zee respectively. So it is obvious to get such a remark from them.
However, we are of the opinion this is only the beginning of a positive phase and much more stringent actions are needed on the part of the Regulator, particularly in controlling the ‘Pay’ broadcasters who are the root cause of the disorganized state of the industry. These ‘Pay’ Broadcasters have never been regulated till date and still manage to earn favours from the government.