Are advertisers, who have earmarked Rs 27,700 crore for TV in FY 2020, bothered by TRAI's NTO 2.0? The NTO came into full effect in February 2019.
By the time we enter the new financial year in April 2020, television will be a Rs 82,400-crore industry in India. Present in 200 million households, it is the medium with the largest reach in the country. Subsequently, the advertisers spend the most in this medium. However, in the last couple of years, TV industry's pride - its reach - has been under stress. It is due to the significant changes enforced by the Telecom Regulatory Authority of India (TRAI) in the form of a New Tariff Order, commonly known as NTO.
In February 2019, the NTO came into full effect, following which, the pay TV cost for consumers went up manifold. Six months into the new regime, TRAI issued a fresh consultation paper. And, in January 2020, it announced a set of amendments to the NTO, which is now known as NTO 2.0. The regulator has asked the broadcasters to change the pricing, and put a cap on discounting to restrict bundling of channels. According to TRAI, the broadcasters are pushing "unwanted" channels by bundling them with "driver" ones and, therefore, forcing the customer to pay more.
The broadcasters decided to oppose the regulator and went to court, the matter is now sub-judice. The Indian Broadcasting Foundation (IBF) has publicly admitted that if the new amendments are enforced then TV reach in India will suffer even more, and million will resort to cord-cutting. (The IBF is an industry body comprising all major broadcasters in India.) So, are the advertisers, who have earmarked Rs 27,700 crore for TV in FY 2020, and will spend an estimated Rs 31,400 crore in FY 2021 (according to KPMG), bothered by the NTO and its possible repercussions?
Typically, at the beginning of the year, the advertisers earmark budgets for particular mediums. But, a change in something like the tariff regime disrupts the ecosystem. Last year, when the NTO was first implemented, the Indian Society of Advertisers had advised its members not to use Broadcast Audience Research Council (BARC) India data for media planning or buying for a period of six weeks.
The new NTO amendments could force marketers to rethink their strategies, believes, Poulomi Roy, CMO of RSH Global, which owns FMCG brands like Joy Cosmetics. She says, "The broadcasters are already grappling with the changes. Therefore, it does impact media strategies, results in a realignment of media plans from advertisers' end, leading to an impact on spends."
Temporary disruptions are on the cards, feels Aalok Bhan, director and chief marketing officer of Max Life Insurance. He says, "The NTO 2.0 aims to bring in more viewership options to the audiences at a lower cost and higher free-to–air channel access... These tweaks will lead to temporary disruptions in advertising spends as marketers will look to gauge its impact before committing any spends."
"The smaller channels are already facing competition from OTT platforms," says Roy. In 2015, the advertisers spent Rs 4,700 crore on digital. In 2019, the figure went up to Rs 17,300 crore (38.5 per cent CAGR). In the same period, the ad spends on TV grew at 9.9 per cent CAGR. "Thirty to forty per cent of our ad spends now are earmarked for digital. It used to be about three to four per cent seven years back," informs Shashank Srivastava, executive director (Marketing & Sales), Maruti Suzuki.
While digital growth is evident, there aren't enough pieces of evidence available to attribute it to the changes in the TV regulatory framework. "Digital is growing because of the deep internet penetration, because it's more measurable, it offers you opportunities to personalise," says Srivastava. On the other hand, Roy feels that the changes in the regulatory framework are playing a role, too, "However, it's hard to quantify the growth of digital advertising, owing only to the changes in the tariff (TRAI issues). But yes, from advertisers' perspective, the consideration of digital advertising is growing and possibly factors, like so many amendments to the NTO, are fuelling the decision to some extent."
It is not yet an obvious TV versus digital battle in India even with the NTO in the background, according to Chandramohan Mehra, chief marketing officer, Bajaj Allianz General Insurance. He opines, "The choice of medium, or the media mix, is a function of marketing task at hand. Each medium has a role to play and digital advertising may not necessarily be an obvious substitute to TV." Bhan echoes, "Digital and television have their respective target audiences and are complementary mediums of advertising. It is content, rather than mediums, that will guide marketers’ decisions on ad spends."
The broadcasters had several reservations against TRAI's amendments to the NTO. They questioned why TRAI enforced a regulatory framework if it had to change it again within the span of a year. They alleged that TRAI dictating the pricing is a contradiction to the Government of India's "Ease of Doing Business" stand. The broadcasters said they spent several crores by running ads on their channels and other mediums to educate customers about the NTO. The new amendments, according to them, nullifies the effort. TRAI has its counter-arguments, too. And amidst all this, it is clear that the advertisers are not short of alternate options - something the broadcasters must be already worrying about.
(With additional inputs from Aishwarya Ramesh.)