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FICCI Frames 2010: Seeking profitability in television

By Sapna Nair , afaqs!, Mumbai | In Media | March 19, 2010
Solely relying on advertising as a source of revenue is not advisable today. TV head honchos gathered to discuss alternative sources of revenue generation to achieve profitability

It has become increasingly tough to rely on advertising revenue alone for television businesses. Last year, many media companies suffered setbacks during unfavourable market conditions. A panel of television head honchos discussed about where the profitability of the TV industry lies.

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Subscription revenue, a reliable, alternative revenue stream for broadcasters, is plagued with problems. Ajay Vidyasagar, COO, Sun Network, said that with the rising prices of daily commodities, people were finding it difficult to afford them; therefore, how could they afford a DTH connection? The broadcasters' bigger regret, however, was of not leveraging the CAS opportunity.

KVL Narayan Rao, group CEO and executive director, NDTV Group, said that for the television business to be viable, the dependence on revenue generation from advertising has to reduce. But that was difficult to do, because, "less than 10 per cent of the actual subscription revenue is what comes to the broadcaster; that too, to only the top 3-4 broadcasters," he lamented, adding that the news business reaps no benefits out of it.

"Ninety-seven per cent broadcasters get nothing, despite spending huge money on carriage fee. What, then, is the other source of revenue, when advertising is not forthcoming?" he questioned. Rapid digitisation is the answer, the panel said.

But what will determine viability? Rajesh Kamat, COO, Viacom18 Group and CEO, Colors, said that the approach to the business would determine viability; and the approach is dictated by the management and investors.

"A strategic investor believes in investing in the brand and nurturing it, before reaping dividends. Exiting the business is not on the agenda for them. Meanwhile, a financial investor may give it a timeline of three to four years, before deciding to exit," he said.

It is critical to be in the top three to be labelled profitable, failing which a broadcaster may get engulfed in price, content bidding or carriage fee wars, he added.

Rajesh Jain, executive director, Corporate Finance division and head of Information Communication and Entertainment, KPMG presented an encouraging picture. He said that TV subscription revenue was slated to grow by 30 per cent per annum, if digitisation progresses rapidly in the next few years. Besides, content cost is expected to rise by 15-20 per cent, while advertising revenues would grow by 13 per cent.

In his opinion, broadcasters needed to look at increasing the size of the market, by innovating in a sustainable manner. "Colors launched in a hyper competitive market and made a splash, with their shows and their expanded reach. IPL is another fine example of expanding reach and the market, so as to garner a larger share of the pie," he said.

Anshuman Misra, MD, Turner International India also believed that there is still light at the end of the tunnel, as the number of television homes and C&S homes are expected to increase. "There are more than 100 million homes without TV, and that's an opportunity we must explore. Besides, new technology -- mobile and internet -- also remain to be explored and leveraged," he said.

Sunil Lulla, MD and CEO, Times TV Group said that it was time that broadcasters sell not just airtime, but brands. "Fifty per cent of the business comes from indigenous, home-grown brands. We should charge for the premium-ness of our brand. I don't think the argument that people watch shows and not brands is true," he asserted.

He said it was imperative for broadcasters to promote their channels and build a brand out of them. "The print industry has been a smarter marketer of its product, or so to say, a better salesperson than television," he remarked.

Vidyasagar had another suggestion. If one has to reduce dependence on ad revenues, another avenue to look at is by creating compelling and disruptive content. "The broadcaster can figure out ways to monetise it across platforms such as merchandising, home video and licensing. A larger pot of gold lies there," he explained.