India is set to become the largest pay-TV advertising market by 2010 with total ad spends on pay-TV channels touching $1.8 billion (Rs7,146 crore) by that year, but experts said that broadcasters would not benefit from this because the number of such channels would significantly increase.
A study by the Cable & Satellite Broadcasting Association of Asia (Casbaa), an industry body, said that advertising on pay-TV channels, those available to viewers for a fee, would grow from $1.1 billion currently to $1.8 billion by 2010 on the back of the emergence of several new distribution platforms such as DTH (direct to home), the conditional access system (CAS) and Internet Protocol television (IPTV). By 2010, India will have more than 77 million pay-TV subscribers, up from 46 million in 2006.
This is likely to bring in more advertisers to television, said the Casbaa study. The growth in ad spends would happen despite advertising rates in India being among the lowest in the world.
According to Paul Corrigan, consultant, Casbaa, television will likely overtake print in terms of share of the overall advertising pie. In India, the print medium has traditionally had a larger share in the total advertising pie. The size of India’s advertising industry in 2006 was Rs16,300 crore, with print commanding a 48.2% share of this. Television followed with a 40.6% share, according to AdEx India, a division of TAM Media Research, a Mumbai-based firm that tracks advertising trends. This will likely change in favour of TV by 2010, said Casbaa.
“Advertisers in India have always followed a short-term approach in their promotion strategy, such as shorter campaigns running for few a weeks in the print medium. This will soon change when advertisers will realize the increased penetration of television channels, which will happen because of the growth in distribution business,” said Corrigan.
Still, broadcasters may not have a lot to cheer about. Experts said the number of television channels would increase over the next few years, resulting in an intense rivalry among companies to woo both viewers and advertisers. By 2009, around 700 channels are likely to be on air. This will lead to segmentation in viewership, which will mean delivering ever-smaller audiences to advertisers, say experts.
To attract more eyeballs, the broadcasters will have to spend more on their distribution and marketing, and to woo advertisers they may resort to rate cuts, said experts. “In the short term, broadcasters may resort to cut in ad rates (to woo advertisers), which is likely to lead to a price war,” said Atul Phadnis, chief executive officer, South Asia, Media E2E. In the long term, Phadnis added, India has the capacity to absorb a larger number of channels.
The Casbaa study said that the growth in number of channels would increase cost of operations and erode the profitability of top broadcasters.
Broadcasters, however, are hopeful that with the increase in number of viewers, more advertisers will flock to television, with some willing to pay a premium. “While India may remain the cheapest market in the world in terms of ad rates, the number of brands advertising on channels will increase over the next few years,” said Rohit Gupta, executive vice-president, Sony Entertainment Television, a broadcast firm.
Another executive in the broadcast industry said there was no relationship between the increase in the number of channels and ad rates.
“We have increased our ad rates twice this year, yet advertisers are willing to pay premium to be on our channels. It is not the number of channels, but the product experience that will drive the advertising revenue,” added Ashish Kaul, executive vice-president, Zee Network.
Broadcasters are also launching channels targeting niche audiences. “We are in the midst of launching a number of new channels, such as ZeeNext, a general entertainment channel targeting youth, to tap niche markets,” said Kaul. Other broadcasters such as Star TV, Eenadu TV and Sun TV are also expanding their channel portfolio to cater to niche and regional audiences. According to broadcasters, traditional sectors such as fast moving consumer goods remain the largest advertisers on television. And in most cases, they added, the top 100 advertisers contribute 80% to a channel’s total ad revenues.
The Casbaa study said that with sectors such as telecom and financial services spending more on advertising, the balance is shifting gradually towards them.
“Apart from new sectors, we are seeing a growth in advertising from regional markets as well. For instance, there are local educational institutions or regional cement makers advertising their brands now,” said Paritosh Joshi, president, advertising, sales and distribution, Star India Pvt. Ltd.