'Trai-ing' times for channels

In the ongoing tussle between broadcasters and the Telecom Regulatory Authority of India (TRAI) over duration of advertisements per hour on television, what do television channels stand to lose? While TRAI’s limit of 10 minutes of commercial ads and 2 minutes of promos in a clock hour clearly impacts advertisement revenues, and broadcasters put up a tough resistance, Shobhana Nair finds out what will happen if TRAI’s ad cap rule gets implemented soon

In 60 minutes of television programming in a clock hour, only 12 minutes can be advertisements, the Telecom Regulatory Authority of India (TRAI) had declared about a year ago. But thanks to tough resistance by broadcasters, the regulation has not yet been implemented. Of late, the drama has peaked with TRAI stepping up efforts to implement the rule and broadcasters screaming in true Bollywood style, “Bahut nainsafi hai”. The situation is such that the Ministry of Information & Broadcasting (MIB) has decided to intervene and take up the matter with TRAI. Just last week, I&B Secretary Uday Varma told IMPACT that the broadcasters had conveyed their problems to the Ministry. “We understand that broadcasters are incurring huge losses, but there has to be a reasonable amount of advertisements. A 12-minute cap can become 13-15 minutes, but not 30-35 minutes,” Varma said. “Broadcasters have to be really sensitive to the sensibilities of viewers. To solve this issue, I am planning to meet TRAI Chairman Rahul Khullar and communicate the concerns of broadcasters and discuss what should be the way forward.”

To what extent will broadcasters incur losses, if the rule comes into force immediately? And why has TRAI taken it upon itself to safeguard the interest of viewers who have been fuming over lengthy ad breaks all along? In fact, the 12-minute ad cap already existed as Rule 7(11) of the Cable Network Regulation Rules, 1994. The Ministry of Communication and Information Technology had notified in 2004 that “broadcasting services and cable services are to be Telecommunication services” and hence TRAI does have the necessary powers to direct TV channels on the duration of advertisements. Hence, under the revised ruling of Standards of Quality of Service (Duration of Advertisements in Television Channels) (Amendment) Regulations, 2013, TRAI retained the key provision of “no broadcaster shall, in its broadcast of a programme, carry advertisements exceeding 12 minutes in a clock hour.”

IMPACT OF THE REGULATION

So now we have a scenario where TRAI does have the powers, but the rule, if implemented, will make the already bleeding broadcast industry die a slow death. Shripad Kulkarni, CEO, Percept Media points out that if the TRAI ruling is followed, there will be a huge rise in ad rates on TV. “Firstly, GEC prime-times and Hindi Movies full day Effective Rate (ER) will go up by 20%. Channels with a paid plus bonus pricing strategy will have to restrict ‘bonus’ component to avoid higher ad ratio in non-prime time. Lastly, news and frequency of niche channels will be under tremendous pressure to increase yield per 10 second and their revenues will stagnate,” he says.

As per an analysis by Percept Media Lab, the largest impact will be on Hindi news channels that right now carry advertisements for an average of 19 minutes in an hour. So if they let go of nine minutes to meet TRAI’s 10-minute cap for commercials, they will lose out on an average of 40% of their advertising revenue. This clearly is bad news for Hindi news channels. Talking of ad drops during a breaking news environment, Alok Agarwal, CEO, Zee News, says, “During a breaking news scenario, we voluntarily drop all ads to provide news to our viewers. This is a hit we take on a regular basis.”

Meanwhile, Avinash Pandey, Chief Revenue Officer, MCCS and Chief Operating Officer, ABP News explains that the entire dynamics of buying inventory for a news channel in media agencies will change. “There are a lot of products that get advertised only on Hindi news channels. Their whole marketing agenda is built around this. They will be impacted immediately.”

EXPECTED REVENUE LOSS

Not just Hindi news channels, the rule will also impact the biggest property currently on air and one that yields huge revenue for Multi-Screen Media, the Indian Premier League (IPL). Any immediate ruling will mean losses in crores for the network. Rohit Gupta, President of MSM, admits that it will be a big hit for the broadcaster.

The instant effect of the ruling will therefore be price hike in ad rates for broadcasters to recover on lost inventories. “This is a demand and supply issue. Obviously, the supply will go low from the broadcasters and the price will go up automatically. Though it will be good for market leaders, it will be bad for the other channels. The less successful channels may not be able to hike up their price. And money will get diverted into other mediums like digital, print, etc.” says Sanjeev Banerjee, National Sales Head of Raj TV.

AD RATES WILL SOAR

Commercial advertisements will be hit hard, but there’s another worry for broadcasters as the ad cap also stipulates that promotional advertisements of a channel should not go beyond two minutes. Several channels currently run way above the two minutes limit. “Another dimension to this would be increase in marketing expenses for broadcasters. Most of their shows today are promoted on-screen in the form of promos and astons. Due to TRAI’s regulation, broadcasters have to resort to other mediums of advertising to get the additional reach and frequency to promote their upcoming/ ongoing shows,” says K Subbu, Vice President & National Head - Ad sales, ETV Network.

Pawan Jailkhani, Chief Revenue Officer of 9X Media, sees this as a blessing in disguise. “It will push the rates up as viewership will increase too. Media is anyways undervalued and channels don’t get the desired Cost Per Rating Point (CPRP). It will help balance out revenues, but you need to understand that it is not a question of ‘will we survive’. There are more than 500 channels out of which may be 100 channels will survive, but what about the others that depend largely on advertising revenue?” he asks.

GENRE-SPECIFIC IMPACT

The other genres which will also be impacted are Hindi GECs and Hindi Movie channels. In order to attain a certain quality of content, these genres shell out huge money in the hope of recovering it through advertisements. Not just that, recovery for all those high cost Bollywood releases will be a task as well and there might be an effect on satellite costs if the ruling gets implemented. The other genre which demands to be treated differently is Sports.

As Prasana Krishnan, COO of Neo TV explains, “The way rules have been implemented is not conducive for sports. In the original proposal, TRAI had said that sports broadcasters could carry ad breaks during match interruptions, etc. That should have been the construct as that’s more logical. This 12-minute ad cap as a rule is impractical. What will happen if there’s a live match? Do they want us to deliberately break live action with show breaks so that we can cover the 12-minute cap? Live sports is always based on natural breaks.” Advertising in the sports genre depends on time slots such as injury breaks, drinks breaks, completion of an over, etc. But with no carry-forward option, Sports channels are feeling short-changed.

However, I&B Secretary Varma has a different take on this: “I don’t understand this argument. Why should they be seeking a separate kind of a genre? Let’s put the record straight; I have not seen a definite proposal by any of the broadcasters seeking that sports channels should be treated separately. But if I see some logic in doing that, then we will be willing to look at it. But I think this is just a notion, they have not actually crystallized.”

MIDDLE GROUND

Even as members of the Indian Broadcasting Foundation wait to meet the TRAI chairman and come to a middle ground, Ashish Pherwani, Partner at Ernst & Young questions, “This is happening on TV but why not Print & Radio? Nobody complains if there are too many Print ads or Radio spots. Why do we need this regulation in the first place? These are channels providing content and there are other channels which provide High Definition feed. If someone doesn’t want advertisements, then he should subscribe to a High Definition feed by paying more for it.”

The biggest point which arises out of all this is that long advertisement breaks result in loss of viewership. This is a fact well-known by broadcasters, who are in a Catch 22 situation of sorts. Meanwhile, all eyes are on the crucial meeting between the stakeholders, regulator and MIB, which will pave the way for the future of television in India.