Quandary over ad cap continues for channels

As the Telecom Regulatory Authority of India's (TRAI) 12-minute ad cap comes into practice from Tuesday, broadcasters still seem reluctant to follow it. While news channels that are members of the News Broadcasters Association and four music channels/networks have been exempted from following limit, general entertainment channels (GECs) and movie channels have not.  According to industry sources, Star India and Zee Entertainment Enterprises are in favour of following the ad cap and Viacom18 has not opposed it either. Multi Screen Media (the group that runs Sony Entertainment Television) is reluctant to implement it. "Even in the case of Zee and Star, they may end up following a 12+2 pattern with 12 minutes of monetised commercials and two minutes of network promotions," informs a media planner in the know.

Star CEO Uday Shankar has said it will benefit broadcasters in the long run as more content will make consumers stick with the channels, as has Puneet Goenka, MD, Zee. But many feel that the move is a bit too early. "The subscription revenue has not started flowing in as expected and we are still a predominantly ad revenue-driven market. Raising the ad rates beyond a point will not be possible," says an executive from a broadcast network on the condition of anonymity.A top management official of a leading news broadcaster explains, "What the regulatory body doesn't understand is that within television there are different genres with different content and hence, different advertising patterns. For a news channel, there is no scope for showing an ad if there is an important news event being telecast. In such a case, we may have an ad-less hour. We have commitments to our advertisers and hence compensate by airing those ads in the next hour. This means that we may end up overshooting the ad cap. Unlike a GEC or movie channel, our content is much more dynamic and we have to take on the spur decisions. TRAI should consider this."News channels contribute to nearly Rs 2,500 to 2,800 crore to the total ad revenue on television (estimated to reach Rs 14,000 crore by the end of 2013, according to FICCI-KPMG Media and Entertainment report). This figure could shrink significantly if the ad cap were implemented, since the channels will see a 50 per cent cut in inventory and will not be able to raise the ad rates beyond a point. According to industry estimates, the ad revenues for news channels could come down by as much as 25 to 30 per cent, even after increase in ad rates."There is no doubt that the news genre will take a huge beating. Only the channels with deep pockets and a pan-India reach and appeal can hope to survive in that event. Others will either face a shut-down or will have to look at merging with bigger networks in order to stay operational," says a media planner.In case of GECs, the reduction in inventory is around four-six minutes an hour. While this may not be much, it could translate to losses if they do not agree on the hike in ad rates. Karthik Laxminarayan, COO, Madison Media says, "The GECs will have a tough time if things don't improve with the economy. With the auto and FMCG sector looking to tighten purse strings, the reduced ad inventory may have a significant impact on revenues." Also, the genre has seen some big budget property launches (KBC on Sony, Bigg Boss on Colors, Mahabharat on Star and 24 to be launched on 4th of October on Colors), which already have high ad rates for a ten-second slot, and increasing the rates further may not be possible.Considering this, media experts predict that FICCI-KPMG's figure of Rs 14, 000 crore n ad revenues on television may be too optimistic by the end of 2013. While putting an exact number to the losses may not be possible as of now, television ad revenues will definitely take a hit with the ad cap mandate. The average increase in rates of big properties is estimated to be 20 to 30 per cent.Music channels have a very different concern. A bulk of the content on music channels includes rushes of upcoming films. These (called exposures in media jargon) may not necessarily be paid content and hence, cannot be counted as monetised air-time. Also, many of the music channels are free-to-air or encrypted and hence, depend heavily on advertising revenues. These networks/channels face a dicey future if the ad cap is implemented and their survival may be at stake."While music (and youth-focused) channels that are part of big networks will not have a problem, a lot of the smaller ones may actually shut down. From a consumer standpoint, the ad regulation is a boon since it means more content. But from a business point of view, it signals tough times ahead," says the business head of a music and youth channel from an established network.As things stand today, the next couple of weeks will decide the way forward on the regulation. Since every channel has to submit an hourly report on the amount of advertising, the regulator will get more information on the advertising patterns after the ad cap deadline and will be in a position to pull up defaulters.