Goafest 2010: Is television becoming too cheap?

By Sapna Nair , afaqs!, Goa | In Media | April 09, 2010
Industry head honchos debated about the impediments of working in low-priced media

Some of the biggest names in the media industry were part of the panel discussion at Goafest 2010. Shashi Sinha of Lodestar Universal, Bhaskar Das of the Times Group, Uday Shankar of STAR India and Ronnie Screwvala of UTV debated on the how the advertising revenue pie could be grown.

Sinha began by quoting some statistics. He stated that while the world's average media spend as a percentage of GDP (gross domestic product) was 0.8 per cent; in India, it was only 0.4 per cent. Statistics reflect under-leveraging of core media, such as television and magazines. Interestingly, the use of internet and radio is comparable to that in other countries; but there are large gaps in television. While the ad volumes grew by 29 per cent in 2009, it has not translated into value.

Sinha said that there is a huge latent opportunity and a need to leverage and grow the industry. Media sellers need to focus on driving pricing parity and let CPTs (cost per thousand) finally gain a place across media. Making CPT the currency would be of great benefit, he said. Currently, India's CPT rate is far lower than other countries, he added.

Bhaskar Das quoted the Magna study and stated that the print industry is slated to grow at 13 per cent over the next six years. "We are doing very well. The industry faced a problem last year due to increasing cost of capital and drop in demand; and there was shift in focus from the metros to tier 2 and 3 markets," Das said. But now, the sector is poised to grow, according to him.

In order to grow the industry, he said, one must stop looking at linear brand experience. Instead, new growth should come from multiple revenue sources. The new approach, he said, is creating communities, selling experiences, customizing and co-creating, attracting attention, retaining and sufficiently engaging it.

"Think 'and', not 'or'. With media moving from unique sales proposition to total value proposition, the challenge is to position print as part of the continuum and complement the solutions-seeking mind of the advertiser," Das added.

Uday Shankar of STAR began by stating that the broadcasting industry is the largest segment of the media and entertainment advertising pie. Television overtook print and accounted for 45 per cent of the ad revenue pie last year. He said that TV reaches 520 million C&S viewers; while newspapers reach 175 million and mobile reaches 390 million. Thus, TV is still the highest reach medium.

Besides, despite having 500 channels in the last five years, the TV broadcast sector is not profitable. The industry reportedly lost US $35 million in 2009, on a revenue base of US $2.3 billion. "The industry is losing its health and robustness. Rapid increase in carriage costs, content and talent costs have hit broadcasters across the board," he said. Cost of content has grown by 35 per cent year on year for the last two years; while carriage costs have increased by 40-50 per cent in the last two years.

The biggest hindrance is the very low subscription revenue that reaches the broadcasters. "Unlike any other country, broadcasters in India get a very low share of the distribution revenue, due to under-declaration of the number of subscribers by cable operators; hence, there is a huge dependence on advertising," he lamented.

Besides, he said, too much ad inventory is being exploited, leading to over-commercialization that creates clutter. He said that during Diwali last year, news channels aired ads for as long as 24.7 minutes per hour. Dedicating 30 minutes to ads every hour is becoming a common practice among channels today, which is beyond the permissible limit. Enticed by the low ad rates, advertisers fail to realise the impact of such advertising. In turn, the ad volumes of the TV industry are increasing; but the value generated is a matter of concern.

Ronnie Screwvala agreed with Shankar on most points. He added that such a scenario was not favourable for innovation. "Growth in content innovation is slowing down because of the pressure on pricing," he said, adding that there should be a huge gap between supply and demand. "The industry needs to consolidate by coming together and shrinking the supply chain," he stated.

The panel was of the opinion that there was plenty of scope for ad costs in India to become at par with that in other parts of the world; and that the pricing strategy of the broadcast industry needs evaluation.