New Delhi: TV news channels that are experimenting with a 20-minutes-an-hour cap on advertising, in the run-up to an October deadline to limit advertising to 12 minutes an hour, are seeing revenue shrink, even as they cope with other pressures such as a sluggish economy and the consequent fall in advertising; the decline in viewership as the country moves to a new distribution system for TV channels; and low subscription revenue.
From 1 July, nearly 100 news channels that are part of the Rs.2,000 crore news broadcasting business have reduced their so-called commercial time from between 25 and 30 minutes an hour to 20 minutes, in keeping with an order from the Telecom Regulatory Authority of India (Trai), which also oversees broadcast media, that restricts advertising time to 12 minutes an hour starting 1 October. All other channels have already reduced the limit to 16 minutes an hour.
Revenue will fall by 15-20%, said executives at news channels. Peak ad rates on even the most popular channels are as low as Rs.3,000-4,000 for a 10-second spot and most channels make up by selling as much time as they can—especially during prime time.
“The situation for news channels is indeed very grave. This will reduce the saleable inventory to less than half of the current levels for news channels,” said Ashok Venkatramani, chief executive officer (CEO) of Media Content and Communications Services (India) Pvt. Ltd, the company that operates ABP News.
Economics says that when supply shrinks prices rise, but news channel executives question that logic, especially in the context of the current economic scenario. India’s economy expanded by 5%, the lowest growth rate in a decade, in 2012-13 and the government expects it to grow by between 6.1% and 6.7% in 2013-14. October marks the beginning of the festive season in India, a time when advertising peaks.
“From 1st of October, the situation may be disastrous,” added K.V.L. Narayan Rao, executive vice-chairperson at NDTV Group. While inventory will be halved, ad rates cannot be doubled, he said.
Indeed, the past two quarters have seen a 20% fall in advertising across news channels on account of the slowdown, said a media analyst, who did not want to be identified. Venkatramani admitted that there has been a decline, but said it was in the single digits. Audit and consulting firm EY’s (formerly Ernst and Young) Ashish Pherwani, a media and entertainment industry expert, attributed the fall to advertising that went to the Indian Premier League and the Champions Trophy.
“This fiscal has been amongst the slowest, more so for news than entertainment as many of the typical news advertisers such as financial services, real estate and auto are seeing a drop,” said Sunil Lulla, managing director and CEO of Times Television Network that operates Times Now and ET Now. In recent weeks, he added, the volume of advertising across all channels had dropped even more due to an uncertain economic environment and weak market sentiment.
News channels, clearly, have been at the receiving end.
According to advertising executives, the market share of news channels as a genre in terms of viewership dropped to 4% from 7% in the past few months. They attribute the fall to changes in reach and viewership, with fewer households opting for news channels after digitization—TV channel distribution, in 38 cities, is now done through digital signals and set-top boxes, which while ensuring audiences become more addressable (or measurable) also provide them with more choice, which means they can opt not to receive some channels and pay only for what they watch. They add that the expansion of the accepted television monitoring mechanism to small towns that showed a high viewership of Doordarshan News was another reason for this.
The figure on the decline in market share could not be independently verified as TAM Media Research, the audience measurement agency, refused to share data. Lower ratings and shares have been one reason behind the recent stand-off between broadcasters, especially those that have news channels, and TAM. Broadcasting companies that refused to acknowledge TAM data are still negotiating with the audience measurement body, advertisers and media agencies to arrive at a solution.
“The English news genre showed a drop of more than 50% in viewership post DAS (digital addressable system) although it may have gone up after the Uttarakhand tragedy,” said Basabdutta Chowdhury, CEO of Platinum Media, part of Madison World, the integrated communications agency.
Venkatramani of ABP News said that news viewership may not have dropped so “sharply”, but by a few decimal points. He said he does not think that the demand for English or business news has plummeted and added that digitization “is throwing up numbers which are fluctuating wildly and are clearly erroneous”. Venkatramani resorted to the homily about news channels doing well when there is news and said that “with five state elections (this year) and general election in the year ahead, viewership and share is only likely to go up”. He also articulated a long-standing desire of news channels to be paid on the basis of the absolute number of people they reach as opposed to the relative proportion of TV viewers they do.
Digitization was supposed to benefit channels by making sure they get subscription revenue (previously, cable operators would fudge these numbers) and reducing, to nothing in some cases, the so-called carriage fee they pay cable networks for carrying them. These benefits are yet to kick in, said NDTV’s Rao. The regulator is implementing the ad cap even before these benefits have begun to flow in, he added.
A cable industry executive, who asked not to be identified, said that while carriage fees have come down, by up to 30% in some cases, they are still around.
The impact of the advertising cap would have been softer on news channels had the regulator resolved issues related to subscription revenue and carriage fee, said the owner of a broadcasting firm, who asked not to be identified. News channel executives claim they are in talks with Trai to extend the deadline, but the regulator’s chairman Rahul Khullar said he isn’t discussing this with anyone.
A government official, who did not want to be identified, said the heads of some TV channels had also met the Prime Minister, but added that the government wouldn’t be averse to seeing some channels go out of business, especially given all the bad press it has received in the past few years.
Meanwhile, broadcasters are trying to cope by increasing advertising rates if they can, and reducing costs.
Media buyers will likely resist any move by the news channels to increase rates, although the bigger ones will end up doing this.
“Few years ago, news channels were the darling of media planners for the kind of reach they delivered, but their advantage has worn off. They are not as efficient and there has hardly been any incremental reach,” pointed out Madison’s Chowdhury.
Venkatramani said he expects media buyers to “fall in line soon”. Still, smaller news channels can’t expect to increase rates significantly, said the owner of the broadcasting firm.
Given that, the focus of most channels will be on costs.
The former head of a Hindi news channel said Indian news channels are not oriented towards cost control. “How can an industry be unprofitable for 15 years? It is not just overstaffing, but (the issue of) other overheads as well,” added this person, who did not want to be identified.
Raghav Bahl, founder and managing director of Network18 Group that operates several news channels, did not respond to specific queries on cost control or advertising. In an emailed response, a spokesperson of the company said: “We would refrain from any comment on specific questions.” He added that the broadcast news environment was “indeed challenging in the short to medium term”. The spokesperson also clarified that the company’s news operations were profitable and they had more than doubled their operating profits in the last fiscal (FY13).
“There are inherent inefficiencies that exist in the news channel business,” said EY’s Pherwani. “You have to address costs. It is not a revenue play right now. It is a cost play.”