Fewer ads, more programming. Television viewers are bound to look forward to the new regime that will be ushered in less than four months from now when the TRAI's (Telecom Regulatory Authority of India) notification takes effect. Known in the business as the 10 + 2 ad cap - 10 minutes for ads and two for channel promotions - broadcasters, agencies and advertisers are furiously debating what the notification on Quality of Service (Duration of Advertisements in Television Channels) will mean.
The squeeze has already begun. From June 1, all channels have been asked to limit advertising to 30 minutes per hour. From next month, it will drop to 16 minutes for all channels except for those in news who will be permitted 20 minutes of ads. It finally drops to 12 minutes per hour for everyone on October 1.
Not each genre of television content will be impacted in the same way, believes afaqs! Before you begin reading about the nature of the impact, two points to note: one, a channel which is part of a large network will be less hurt by the ad cap than one which is an independent, everything else being equal. Two, the leaders in each category will suffer less than the also-rans. Now, read on.
What will happen once the new rules are imposed? The bigger channels are optimistic that it will clear the field by destroying the fringe players who run a high proportion of ads because their rates are so low, sometimes as little as Rs 200 per second. If some go under, it will allow the serious players to - hopefully - raise their rates. According to some estimates, the ad inventory in the news genre will crash by 60-80 per cent.
There is one counter argument which runs that the 'frivolous' players will not go bust because they are not in the television business to make ad-based profits in the first place. Politicians and real estate players, among others, have floated news channels in most languages because it gives them clout.
Smaller advertisers, who used the less known news channels to advertise, may find the going tough. They will have to increase their ad spend or look beyond the genre to get their message across.
In these uncertain times, the gradual decline in carriage - or distribution - fees because of digitisation will bring some consolation to news channels.
Some media buyers say that there is already pressure from the GECs to increase the rates by approximately 20 per cent and more. However, as the deals are done on a CPRP (cost per ratings point) basis, the agencies are asking the channels to show better yield.
Broadcasters believe that media agencies will have to bite the bullet and agree to a price hike. They also feel that if agencies want greater yields in a fragmented market, they should sign deals on a CPT (cost per thousand) basis. Ad sales heads of top TV networks have believed for years that media agencies have squeezed them unfairly - and they will be trying to get their own back.
In any case, GECs are also well placed because with digitisation taking place, they can look forward to stronger subscription revenues than before.
While they will have to cut down the ad inventory, media agency experts believe that there are a few marquee properties, which an advertiser can't afford not to put money on: for instance, an IPL, or an India versus Pakistan cricket series.
Broadcasters with cricket properties will be less vulnerable than others. Broadcasters agree that while the cost of acquiring these properties is humungous, advertisers can't do without them either which will force them to agree to an increase in rates.
While live sporting events are time-break-based, on an average the channels have been airing ads for around 14-16 minutes per hour and hence the inventory cut could be compensated by a hike in ad rates.
Broadcasters are also expecting some flexibility from the regulators for the live matches where they tend to give injury breaks and so on.
Revenues have been growing steadily but the business is title driven so it is not clear how channels can increase their ad rates once their ad time is capped. Channels in this space are going to be especially hit since they currently air 15-25 minutes of ads per hour on average. If the channels can no longer pay as much for movie acquisition as they did before what will film-makers do in such a situation?
Digitisation will enable many more people to pay and watch the films they love. Whether that will take some pressure off broadcasters in the bidding war remains to be seen.
Youth and Music
Music, especially, is a commodity. The coming ad cap will force channels to use more trailers in terms of content. Like the movie genre, music too is a frequency generator. Media agency executives believe that these channels will have to correct the ad rates - which are low - in order to compensate for the loss of inventory. Some channels may be able to pull that off.
The genre, on an average, airs 16-20 minutes of ads per hour. Music broadcasters believe that with the 12-minute ad cap, they will get to air more content which will get them more GRPs and hence more money from the advertisers.
Interestingly, these channels generate a significant part of their revenue through brand integration. The ad cap move will not only force them to try increase ad rates but also opt for more brand integration and advertiser-funded programmes.
Also, as mentioned earlier, in this genre too the standalone channels will suffer more than the channels associated with the bigger networks.