Press Release

Ad brake for pay TV channels

20 March 2012

The regulator’s proposal to halve advertising duration puts the television industry in a spot

The Telecom Regulatory Authority of India’s (TRAI) proposal last week to halve ad duration on pay television channels has stirred up a hornet’s nest in the media industry.

While a discussion paper floated by the regulator says ad duration should be capped at six minutes every hour to provide clutter-free viewing experience to television audiences, industry stakeholders have questioned the viability of operating under such regulations.

“There will be a direct impact on our revenues as the advertising time is almost reduced to half,” says Kevin Vaz, president (Ad Sales, Star India). Under the existing provisions, television channels can air 12 minutes of advertisement for every hour of programming.

At present, there are 163 pay TV channels operational in the country, which account for a lion’s share of Rs 11,600 crore made in ad revenues in the television industry, according to consultancy KPMG. Subscription revenues make up another Rs 21,300 crore. But owing to leakages in the broadcasting system, pay channels depend more on advertising than subscription revenues. This is the key reason why they are unhappy with TRAI’s proposal.

The regulator, however, has argued that with the government setting the ball rolling on digitisation of the cable and satellite industry by December 2014, pay channels would not have to depend as much on advertising revenues as they now do. In fact, a report tabled by Media Partners Asia indicates that dependence on advertising by pay TV channels has reduced 71.97 per cent in 2011 from 76.33 per cent in 2007. Channel heads, however, offer an alternate view.

Rohit Gupta, president, Multi Screen Media, owner of channels such as Sony Entertainment Television, SET Max and SAB, says, “Channels depend on advertising. How can you slash it by half?”

The head of a general entertainment channel, who declined to be quoted, said the move was not in sync with ground realities. “Nowhere in the world do you have six minutes per hour for advertising. This is absurd. How do you earn your revenues?”

Ashish Pherwani, associate director, Ernst & Young, informs, “The bulk of the ad revenues in the television industry come from advertising on pay channels as they have an expansive viewer base. If the proposal goes through, it would have a significant impact on the quality of programming, which is what the regulator is trying to address in the first place. The cost of producing some of the most watched shows is as high as Rs 1.5 crore per episode. Broadcasters would not have much left to invest in content.”

A leading channel executive says, “At present over 70 per cent revenues come from advertising and remaining from subscription. The regulator has also recommended the frequency of ads to four breaks for general channels, three breaks for movie channels, and one break for sports channels. With this we may have to relook our entire business model.”

Media planners also fear that the passage of the proposal could also result in an unprecedented hike in ad rates in the industry. A senior executive at a media buying agency said, “There would be an acute shortage of inventory in the industry. Ad rates would shoot up considerably leaving only the big boys to contend for space on the medium.”

Anita Nayyar, chief executive officer, MPG, South Asia, says, “It is only at the discussion stage. We are hoping there is no adverse ruling at the end of it.”

Experts opine that the pressure to get more advertising has led to a situation where viewers are devoid of a clutter-free experience. This is especially visible on sports and movie channels, where no opportunity is missed to reach viewers during broadcast of key movies and sporting events. The TRAI discussion paper proposes to reduce all this with not only ad time slashed, but a specific duration prescribed between two ad breaks.?

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