2014 04 the Ad Cap Ghost TelevisionPost Research 16 Apr 14

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The Ad Cap Ghost

[email protected]

16 April 2014

Introduction

The Telecom Regulatory Authority of India's (TRAI) 12-minute ad cap regulation has

evoked mixed reactions depending on which side of the fence one is. On the one hand,

the big broadcasters think that the regulator's move to enforce the advertising code

into the framework of the Cable Television Networks Rules 1994 is a blessing in disguise

as it will help them to push ad rates up.

On the other hand, the news and regional broadcasters fear that they will have to shut

shop if the ad cap is enforced since this is their principal source of revenue.

The ad cap regulation has been in effect since 1 October 2013. While the big networks

are following it, the news channels and many of the niche and regional broadcasters

have got a breather from the Delhi High Court in the form of an interim order that

restrains TRAI from taking coercive action against broadcasters.

TelevisionPost.com decided to delve deeper in order to study the impact of the ad cap

on the revenue of broadcasters in different genres. We also looked at the strategic

implications this could have on the broadcasters.

Some of the key highlights of the research are:

• Broadcasters will have to increase ad rates on an annual basis to grow their ad revenue

• The other way to grow ad revenue is through the launch of more fresh hours of

programming to create additional ad inventory

• The four most watched Hindi GECs will need to implement a rate hike of 15–25 per

cent to mitigate the impact of lower ad inventory

• Compared to GECs, smaller genre channels will find it very difficult to take a hike higher

• Convincing advertisers to increase ad rates would be a tough task, especially if the

viewership market share is dwindling

• Sustained performance and changed ratings metric from TVR to TVT will help

broadcasters to increase ad rates

• While digitisation was expected to fuel niche channel launches, the implementation

of ad cap will force broadcasters to rethink their strategy

• Larger networks would launch more channels to create incremental ad inventory

• Standalone channels will be hit the hardest as they will find it difficult to survive

• New channel launches could actually slow down from independent promoters

• Content costs to go up as channels will have to increase the number of programming

minutes due to cut down in ad inventory


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Chapters ................................................................................................... Page No.

1. Ad cap-The story so far ......................................................................................... 4

2. Hindi GECs open the door to higher ad rates ....................................................... 6

3. Hindi movie channels in difficult terrain ............................................................ 9

4. News channels to find biz models badly mauled .............................................. 11

5. Revenue loss for news channels could be Rs 200 crore in first year................ 16

6. Niche channels need discipline ......................................................................... 16

7. Radio and print could gain ................................................................................ 18

8. Summing up

a. Smaller channels to get squeezed out .......................................................... 18

b. How to grow ad revenue under ad cap ......................................................... 19

c. How ad cap and TVT will help increase ad rates ......................................... 19

d. Climate for new channel launches favourable? .......................................... 20

e. Content cost to increase ............................................................................... 20


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Ad cap—The story so far

The 12-minute limit on advertising duration is covered under the advertising

code of the Cable Television Networks Rules 1994. As per the advertising code,

“no programme shall carry advertisements exceeding 12 minutes per hour, which

may include up to 10 minutes per hour of commercial advertisements, and up to

2 minutes per hour of a channel’s self-promotional programmes”.

However, the ad cap rule could not be enforced by the Telecom Regulatory

Authority of India (TRAI) for almost a decade due to a loophole in the advertising

code. While the limit of ad duration was specified, the advertising code did not

specify whether it would be on a clock-hour basis or an average of ad duration

over a period of 24 hours.

Through an amendment to the CTNR, the regulator corrected the loophole by

mandating that TV channels cannot run more than 12 minutes of ads in a clock

hour. The amendment to the CTNR was implemented by TRAI after a due

consultation process involving all the stakeholders. TRAI had issued a consultation

paper on 16 March 2012 titled “Issues related to advertisements in TV channels”.

TRAI’s ad cap regulation had to go through a series of litigations before it was

amended, notified and implemented on 1 October 2013.

The principal regulation “Standards of Quality of Service (Duration of

Advertisements in Television Channels) Regulations” was notified on 14 May

2012. As per the regulation, broadcasters cannot carry more than 12 minutes of

advertisements on their TV channels in a clock hour.

The regulation also stated that (i) advertisements should be carried only during

breaks in live sporting action, (ii) the minimum time gap between consecutive

advertisement sessions should be of 30 minutes in case of movies and 15 minutes

otherwise and (iii) no part screen advertisements should be permitted.

No sooner had the regulation been notified than the broadcasters raised the red flag

arguing that the timing was not right for TRAI to regulate ad duration on television,

particularly since their business model was loaded in favour of ad revenue and fair

share of subscription revenue though addressability was still a pipedream.

TRAI, however, was in no mood to roll back the ad cap regulation and contended

that its duty as a regulator was to ensure quality of service (QoS). The regulator

stated that the ad cap regulation was implemented with the primary objective of

striking a balance between giving a consumer a good TV viewing experience and

protecting the commercial interests of broadcasters.

With the regulator refusing to relent, the broadcasters challenged the regulation

in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on 11 June

2012. The tribunal admitted the appeals and put the matter for hearing on 17 July

2012. In the interim, TRAI assured the tribunal that it would not take any coercive

action against broadcasters till the next date of hearing.


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When the matter finally came up for hearing on 17 July 2012, the TRAI counsel

stated that the regulator was inclined to consider the issues raised by the

broadcasters in the appeal and, in the meantime, TRAI would not take any coercive

action.

Taking into consideration the issues raised by the broadcasters in the TDSAT, the

authority decided to amend the said regulations by dropping contentious clauses

like ads only during natural breaks in live sporting events, time gap between two

consecutive ads and no part screen ads.

A draft of amended regulations was uploaded on TRAI’s website on 27 August

2012, calling for the comments of the stakeholders. The draft had a provision

regarding enforcement of the prescribed restriction on duration of

advertisements on the clock-hour basis.

Following an extensive consultation process, the authority notified the amended

ad cap regulation on 22 March 2013, once again drawing protest from broadcasters.

The authority under its crusading chairman Rahul Khullar was firm in

implementing the ad regulation from 1 October 2013.

After some tough talking by the authority, the broadcasters agreed to follow the

12-minute ad cap from 1 October beginning with a phase-wise cut-down in ad

duration from July. In fact, the News Broadcasters Association (NBA) and Indian

Broadcasting Foundation (IBF) had communicated to its members to implement

ad cap in letter and spirit.

Meanwhile, the authority took the extreme step of taking the broadcasters to

court over violation in ad cap. The regulator filed complaints against 14 channels

at the Patiala House courts in Delhi on 16 August for not adhering to the ad cap

duration.

Rattled by the regulator’s move, the NBA rushed to the TDSAT in order to protect

its members from getting prosecuted by TRAI. The NBA in its plea alleged that

TRAI had filed cases against channels despite the matter being pending before

the tribunal.

The tribunal offered relief to NBA members by asking TRAI not to take coercive

action. The matter was put up for hearing on 11 November 2013. Buoyed by the

relief granted to the NBA, other broadcasters, particularly the regional ones,

also rushed to the TDSAT as the 1 October deadline for implementing the 12-

minute ad cap arrived.

The tribunal granted relief to one broadcaster after another and clubbed all the

cases for hearing on 11 November. The hearing in the case began on 11 November

and each of the petitioners presented its arguments in the case including the

lead petitioner, the NBA. The tribunal completed the hearing in the matter on 29November and reserved its judgment.


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April 2014

Hindi GEC – Primetime (1900–2300 hrs) ad duration per hour

Quarter Quarter Quarter Quarter Quarter Quarter Quarter Month

Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Jan 14

Star Plus 16.8 15.5 16.8 17.0 16.3 15.8 13.9 13.8

Life OK 12.7 14.1 15.0 15.2 15.0 15.7 13.7 13.9

Zee TV 15.6 15.9 16.2 15.9 16.0 15.8 14.0 14.0

Colors Viacom18 16.4 15.4 15.4 15.9 16.1 15.0 13.3 13.6

Sony 13.7 13.3 14.7 13.5 13.5 13.9 15.5 14.1

Entertainment TV

Sony Sab 16.2 15.9 15.8 15.7 15.4 15.6 15.7 14.2

Source: TAM AdEx data provided by industry, TelevisionPost Research

As is evident from the table above, the major Hindi GECs (top 6 channels)

complied with the 16-minute ad cap during the quarter. However, none of the

major GECs (top 6 channels) had the right-sized haircut capping their ad time to

12 minutes in the beginning of October.

Star Plus, Life OK, Zee TV and Colors are following a 12+2 norm (12 minutes of

commercial time and two minutes of self-promotion) rather than the prescribed

10+2 regulation (10 minutes of commercial time and two minutes of self-

promotion). For the quarter beginning October, the MSM channels (Sony

Entertainment Television and SAB) have an overrun by 3–4 minutes during

primetime. However, since January, the MSM twain have also started following

the genre norm of 12+2 minutes.

If we analyse the average ad duration per hour vis-à-vis the full-day period, all major

GECs followed the 16-minute ad cap during the quarter ended September 2013. Even

in the following quarter (when the ad cap was implemented), all major GECs

(excluding Life OK and Sony TV) across the day fell in line with the 12-minute diktat.

In the month of January 2014, Sony also started following the 12-minute ad ceiling

(over the 24-hour period). Life OK, however, continued to sell inventory upwards of

12 minutes (at 13.6 minutes per hour average in the month of January 2014).

Hindi GEC - Full day (0000-2400 hrs) ad duration per hour



Star Plus 17.0 15.9 16.8 16.5 16.2 14.2 12.6 12.8

Life OK 13.5 14.8 15.5 15.7 15.5 16.0 13.6 13.6

Zee TV 13.4 13.5 13.4 13.2 12.8 11.3 9.7 9.7

Colors Viacom18 15.4 14.5 14.8 15.2 15.2 12.8 11.7 12.2

Sony 13.6 13.5 14.3 13.5 13.0 12.1 13.1 11.8

Entertainment TV

Sony Sab 13.3 13.0 14.0 13.7 13.5 11.1 10.9 10.4



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So, how much will the discipline cost the Hindi GECs? Mapping out the average

ad inventory consumption for FY13, we have worked out a rate hike which the

GECs will have to impose to mitigate any revenue loss.

Star Plus and Colors are recommended to get hikes of 38 per cent and 25 per cent

respectively to guard their old revenues while Zee TV and SET will need to up

their ad rates by 12–14 per cent.

Hindi GEC

Average Drop in average Average hike in ad

inventory inventory assuming rates required to

FY13 (minutes 12-minute ad cap neutralise the

per hour) is followed (%) impact of loss in

inventory (%)

Star Plus 16.5 (27.4) 37.7

Zee TV 13.4 (10.3) 11.5

Colors Viacom18 15.0 (19.8) 24.7

Sony Entertainment TV 13.7 (12.6) 14.4


So, how have the channels been impacted? Digging into the financial figures of

the listed entertainment broadcasters, we have found that ZEEL has been insular

to the ad time haircut while Sun TV Network has been negatively impacted. We

are looking at regional-language broadcaster Sun TV Network to understand how

the impact will be on regional GECs as well.

Ad growth of select listed broadcasters (%)

Listed entities Sep Qtr Ad growth Dec Qtr Ad growth

Zee Entertainment 10.5 34.3

Sun TV Network (4.5) (7.1)

TV Today 30+ 20+

NDTV 0-2 0-2

Zee News 20.5 3.1


ZEEL has sustained its above-industry ad growth rate (20 per cent plus YoY in its

ex-sports portfolio), led by its flagship channel Zee TV’s gain in primetime market

share and stronger performance of its regional portfolio. Launch of new channels

(Zee Anmol and &pictures) in the fiscal second quarter also helped by providing

higher saleable inventory.

Sun TV Network, however, found the climate harsh and the advertisers were less

receptive to its steep rate hikes. The strategy of hiking average primetime ad

rates beginning July by a steep 19 per cent did not work with the advertisers. Ad


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inventory was left unfilled and revenue fell by 4.5 per cent to Rs 234 crore (Rs

2.34 billion) in the fiscal second quarter ended 30 September and by 7 per cent in

the December quarter. The ad revenue contraction over the earlier-year quarter

was due to a decline in ad volumes.

Sun TV, which charges a broadcast fee from its content providers, has a problem

peculiar to itself. The company allocates eight minutes of ad time to its content

providers while reserving the remaining 10–12 minutes of commercial time for

its own sales team to exploit. Bringing such high level of inventory down to 12

minutes would mean hefty ad rate hikes of 50–60 per cent across the network.

In the short run, there will be trouble negotiating fruitfully with the advertisers

and Hindi GECs may find their growth rates moderated by the inventory they

have to shed due to the ad cap regulation. However, they are not against ad cap

as this will give them an opportunity to raise rates in the medium term by limiting

supply of inventory. Some of them have already hiked rates in bouts. Anotherpertinent point to note is that Hindi GECs are part of bigger networks and hence

their strategic needs are more long-term so that they can get higher pricing for

their content.

The average ad consumption pricing for the genre is set to climb, making life

difficult for the bottom-of-the-pyramid advertisers. As for broadcasters, the

strategy will be to launch second GECs to create more space for advertisers to

consume.

Hindi movie channels in difficult terrainHindi movie channels have a lot to worry. Consuming higher levels of ad inventory,

they have more to undress than their general entertainment peers. Fixing a

pricing model that would offset their inventory loss is almost impossible, made

more difficult by the performance of the genre that has dipped in recent times.

In the quarter ended September, the Hindi movie channels got disciplined and

brought that ad time to 16 minutes per hour. Further correction took place in the

next quarter and all of them barring Max started mostly adhering to the 12+2

minutes per hour ad cap. Max, however, started following the industry norm of 12+2 minutes of ad inventory per hour from January 2014 onwards. Noteworthy

is the inventory fill level of &pictures, a new Hindi movie channel from the Zee

stable, which clocked 13.8 minutes on average per hour (during primetime)

despite being just two quarters old.


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Hindi movie channels - Primetime (1900-2300 hrs) ad duration per hour



Zee Cinema 14.2 14.2 14.7 14.8 15.0 15.6 14.0 14.2

Star Gold 15.2 15.1 16.8 16.7 15.9 15.9 13.9 13.5

Sony Max 12.7 14.7 13.2 12.8 13.5 16.0 15.4 13.6

Movies OK 9.4 15.2 18.6 17.7 17.4 16.2 13.9 13.5

&Pictures – – – – 0.0 5.0 13.8 14.1

UTV Action 19.4 16.2 15.7 14.7 15.4 15.4 12.6 12.2

UTV Movies 20.0 15.9 15.7 15.9 15.5 15.7 13.1 13.8

Zee Action 5.6 6.1 7.0 8.3 8.3 7.4 7.9 8.9

Zee Classic 7.7 6.7 6.5 8.6 10.3 10.8 13.1 13.7

Zee Premiere 6.9 6.3 6.3 7.9 7.7 7.6 7.5 7.7Source: TAM AdEx data provided by industry, TelevisionPost Research

Hindi movie channels - Full day (0000-2400 hrs) ad duration per hour



Zee Cinema 14.7 14.2 15.3 14.6 15.4 14.6 11.6 11.9

Star Gold 12.9 13.5 15.8 16.0 16.3 13.3 11.3 10.9

Sony Max 14.8 14.9 15.1 15.2 13.7 14.2 13.6 10.6

Movies OK 7.9 13.0 15.4 15.3 15.8 13.4 11.2 10.9

&Pictures – – – – 0.0 4.6 10.6 11.3

UTV Action 12.7 11.1 11.1 10.4 11.1 11.0 10.1 8.8

UTV Movies 13.6 11.9 11.6 11.6 11.6 11.3 11.0 10.7

Zee Action 5.4 4.6 4.7 6.1 5.5 4.8 5.0 5.7

Zee Classic 5.5 4.9 5.1 6.7 9.3 8.9 10.0 10.5

Zee Premiere 5.7 4.5 4.5 5.9 5.8 5.5 5.2 5.3


The rate hike across the top three channels has to be in the range of 21–25 per

cent. The argument that movie channels can up their ad rates to that extent as

they are the second most-watched genre just doesn’t fly. The problem is that

they have had rate increases over the past few years and a correction of the

pricing has already taken place. As a strategy, major networks have launched

second movie channels to make inventory available to advertisers and consolidate

their revenues.


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Hindi movie channels - Average ad rate hike


inventory FY13 inventory assuming rates required to

(minutes 12-minute ad cap neutralise the


inventory (%)

Zee Cinema 14.7 (18.3) 22.4

Star Gold 14.5 (17.5) 21.2

Sony Max 15.0 (20.1) 25.2

Movies OK 12.9 (7.0) 7.6


News channels to find biz models badly mauled

Muddied in a pool of low advertising rates and high inventory consumption, the

news channels will have nowhere to turn to. They have found temporary shelter

in the Delhi High Court but if the ruling comes in favour of the 12-minute ad cap

regulation, they will have their business models badly mauled.

Hindi news channels

Hindi news channels will have more ad inventory to undress than their English-

language peers. Consuming ads in upwards of 20 minutes per hour during prime

time (7–11 pm), they will have to cut commercial airtime by 40–50 per cent.

As per TAM AdEx data provided by the industry, all Hindi news broadcasters have

strayed far away from the 12-minute boundary line. In fact, the top three channels

have been the highest consumers of ad time per hour from 7–11 pm (see table

below). The December 2013 ending quarter has actually seen a rise in ad inventory

consumption because of elections across five major states in India.

Hindi news - Primetime (1900-2300 hrs) ad duration per hour


Jun - 12 Sep - 12 Dec - 12Mar - 13 Jun - 13 Sep - 13 Dec-13 Jan-14

Aaj Tak 20.2 18.5 24.7 22.0 22.9 22.9 24.4 20.3

Abp News 22.7 20.6 25.4 23.7 21.5 20.6 24.0 23.4

NDTV India 17.9 14.2 19.1 20.0 18.0 19.4 21.6 18.3

India TV 23.9 22.2 26.4 22.5 22.0 21.3 24.9 23.4

IBN 7 21.2 19.7 20.3 16.5 19.1 17.9 20.1 15.3

Zee News 18.3 18.6 23.8 22.9 22.5 20.1 21.6 19.7

News 24 18.7 18.1 22.4 19.0 18.9 20.4 19.4 15.8

DD News 7.1 7.8 9.2 13.0 9.3 8.3 9.1 10.8

Dilli Aaj Tak 13.5 13.4 15.4 18.5 17.7 16.2 18.0 15.2

Tez 11.9 13.1 17.0 18.1 20.6 18.6 20.8 18.0

Samay 11.0 12.1 13.2 16.1 8.1 8.6 10.4 12.5



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Even in the full-day cycle, there is no dramatic shift. The top-end consumption

has fallen, but only marginally. This, however, does not signal a positive trend

but only emphasises the fact that news channels have been unable to find takers

in thin viewing hours.

Hindi news - Full day (0000-2400 hrs) ad duration per hour


Jun - 12 Sep - 12 Dec - 12Mar - 13 Jun - 13 Sep - 13 Dec-13 Jan-14

Aaj Tak 18.1 17.0 20.8 19.1 19.4 19.8 21.1 17.9

Abp News 17.6 15.7 19.7 18.4 16.5 16.7 19.6 18.4

NDTV India 17.1 14.3 18.7 18.3 18.3 18.2 19.9 16.5

India TV 20.1 19.1 22.9 19.8 19.4 18.3 20.7 19.7

IBN 7 19.6 19.1 20.2 16.4 17.9 15.9 17.3 13.9

Zee News 15.8 15.5 20.1 19.3 19.9 17.5 19.2 15.9

News 24 14.5 15.1 17.2 14.1 14.9 15.5 15.5 12.9

DD News 5.3 5.2 6.1 8.2 6.5 6.7 6.9 6.9

Dilli Aaj Tak 13.5 11.4 13.2 15.1 15.1 14.4 14.4 12.4

Tez 12.0 11.9 14.6 14.8 16.2 15.4 16.4 14.5

Samay 5.5 7.1 6.9 9.2 5.6 6.0 7.1 9.3


There will be tremendous pressure on Hindi news channels to increase ad rates

and many of them will have to give up the quixotic battle against the main

advertisers. For a genre that has too many players and the audience fragmentation

is deep, the negotiating power resides in the hands of advertisers.

Commodification of news has only worsened their case in turning the tables.

Hindi news channels will have to hike rates by 50–70 per cent to neutralise the

impact of lower inventory. Their case becomes more pathetic as Hindi GECs up the

ante to command better pricing power from the advertisers. Industry feelers

indicate that the top channels will not be able to get a hike upwards of 20 per cent.

Hindi news channels - Average increase in ad rates





inventory (%)

Aaj Tak 18.8 (36.1) 56.4

ABP News 17.9 (32.8) 48.8

India TV 20.5 (41.5) 70.8

IBN 7 18.8 (36.2) 56.8



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A small part of the loss can be absorbed by the sale of non-FCT properties such as

ticker, activation, digital and events. Hindi news broadcasters have already started

working on this revenue tap. But sitting at a very low level, this can go up at best

to 15 per cent of the revenues. The end result is that they will not be able to stop

from bleeding red ink.

Low in confidence, news broadcasters are not taking any steps to control the ad

time on their channels. The fate of commercial airtime is decided by seasonality

and availability of advertisers. Any shrinkage in inventory will impact revenues

and hit the bottom line hard, which is not even 10 per cent of the turnover.

The top three are not prepared to take the lead in fighting the price war against

the advertisers. They feel that advertisers will migrate to other news channels

and that there are too many of them waiting in the queue. A view running in the

industry is that an ad ceiling of 20-minute per clock hour would be reasonable.

By allowing their inventory to grow, Hindi news channels have pulled down their

effective ad rates to a very low level. This linkage impairs good content and the

consumer proposition is harmed. There is, thus, a business need to progressively

cut down on ad time, build better audience profile, and progressively jack up ad

rates. Unlike the GECs which target females, these channels, having a male skew,

will be able to get value in the medium term if they play their cards properly.

English news channels

The general English news channels are not so extravagant when it comes to consuming

ad time. They have adhered to the 16-minute per hour advertising schedule during

the two quarters through September 2013. They are, however, not in compliance

with the 12-minute limit and during the quarter ended 31 December 2013, have

actually upped their consumption due to elections across five major states in India.

Interestingly, CNN IBN is the heaviest consumer of ad time in the quarters

examined by TelevisionPost.com. Moreover, the last two channels are consuming

less than the permissible time, indicating that they are not able to evince

advertiser interest at the rates they want to sell. No wonder that they earn much

less than the other three.

English news channels are better behaved in the prime viewing hours stretching

from 7–11 pm. They, in fact, have stayed within the 16-minute mark for two

consecutive quarters ended September 2013. Even in the next quarter involving

elections, only Headlines Today crossed 16 minutes of ad duration per hour in

prime time. The TV Today English general news channel, in fact, has a better ad

uptake in this time zone, sending forth the message that anchor-driven shows

work for the genre. The top three revenue earners—Times Now, NDTV 24x7 and

CNN IBN—have more popular anchors and command higher rates.

Headlines Today can be in the reckoning, making it a four-channel battle. News X

is clearly at the bottom of the heap and can be left on the sidelines.


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April 2014

English news - Primetime (1900-2300 hrs) ad duration per hour



NDTV 24x7 11.9 12.3 13.6 14.0 12.2 12.0 14.0 12.6

Times Now 15.0 14.2 16.4 16.8 13.4 12.8 15.8 12.6

CNN IBN 16.4 15.7 16.1 15.8 14.0 14.1 16.0 15.3

Headlines Today 12.0 13.8 15.1 15.0 13.0 13.0 17.7 13.0

News X 9.4 9.2 8.1 5.6 5.0 6.8 6.7 6.9


Even during the 24-hour period, English news channels were non-compliant to

ad cap during the December 2013 quarter. In fact, ad inventory has increased

sequentially in the quarter ended December 2013 (in the range of 12–18 minutes)

because of elections in five states in India. English news broadcasters are also

opposing the ad cap in the Delhi HC. Inventory consumption in January 2013 is

lower and could be due to overall softness in the ad market.

English news - Full day (0000-2400 hrs) ad duration per hour



NDTV 24x7 13.7 13.8 15.4 16.3 14.2 12.8 15.8 14.2

Times Now 15.1 15.0 16.8 17.9 13.8 13.6 16.0 13.1

CNN IBN 19.0 18.9 18.8 18.3 15.8 15.4 18.2 17.0

Headlines Today 10.3 9.7 11.6 12.0 11.3 10.3 12.2 10.8

News X 9.9 9.7 8.3 5.7 4.6 6.3 6.4 5.7


In case of a 12-minute ad cap regime, the equations among the top three channels

will come into play. They will have room to up rates substantially when they

together decide to choke the inventory. The fear, perhaps, is that they do not

have very large viewership numbers and are already priced high by the perception

that they command in the marketplace. Any flexing of muscles may lead to

advertisers deserting them.

For the English news channels, the hike will have to be in the range of 23–56 per

cent, making it a tough ask. Though better placed than the Hindi news channels,

they will have to resort to non-FCT properties to mitigate the impact.


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April 2014

English news channels - Average increase in ad rates





inventory (%)

NDTV 24x7 14.8 (18.9) 23.3

Times Now 16.2 (25.8) 34.8

CNN IBN 18.7 (35.9) 56.1


Business news channels - Full day (0000-2400 hours) ad duration per hour



CNBC TV18 16.3 16.4 16.8 16.3 14.7 13.9 16.0 15.2

CNBC Awaaz 17.4 17.4 20.3 18.5 15.3 15.5 17.3 16.1

NDTV Profit 10.9 10.6 12.2 12.8 13.2 14.2 14.8 14.7

Et Now 10.2 9.6 11.1 13.6 10.3 11.2 13.7 11.3

Bloomberg TV 13.4 11.9 12.1 12.1 11.0 11.0 1.4 10.6

Zee Business 14.3 13.0 13.8 13.1 11.8 12.0 11.7 11.0


Business news channels

Following in the footsteps of the Hindi and English news broadcasters, business

news channels are also opposing the ad cap and are not adhering to the regulation

(see table).

Among the business news channels, ET Now is complying with the ad cap (over a

24-hour period). The TV18 channels—CNBC TV18 and CNBC Awaaz—will,

however, have to implement hefty hikes to the tune of 37–54 per cent, which is

almost impossible to come by in this macro-economic environment.


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Business news channels





inventory (%)

CNBC TV18 16.5 (27.1) 37.2

CNBC Awaaz 18.4 (34.9) 53.5

ET Now 11.1 7.7 (7.2)

Zee Business 13.6 (11.5) 13.0


Revenue loss for news channels could be Rs 200 crore in first year

As stated earlier, news channels will not get commensurate increase in ad rates

to mitigate the impact of loss in ad inventory. This will force them to harness the

potential of non-FCT ad inventory to compensate for the loss of FCT ad revenue.

News channels are planning to get sponsors for tickers, banners, L-shaped

banners, etc. and have started having discussions with advertisers. Advertiser-

funded shows could also increase during non-primetime.

We feel that out of the average 50 per cent ad rate hike that is required by news

genre as a whole (Hindi, English and business), they will be able to implement

only 25 per cent. Additionally, they will be able to get 5–7 per cent of the overall

revenue from non-FCT monetisation. Thus, news channels might lose 10–12 per

cent of their revenue on the implementation of ad cap. This could translate into

Rs ~2 bn (Rs 200 crore) of lost revenue for the genre during the first year of

implementation of ad cap.

Niche channels need disciplining

None of the niche channels is following the ad cap regulation. However, some of

them (such as Star World and Animal Planet) are adhering to the 12+2-minute per

hour cap. It is difficult to judge whether it is their intent to follow the ad cap

strictures or it is their inability to sell incremental ad inventory that is ensuring

their near compliance with the ad cap rule. Other channels are not following

even the 12+2-minute ad cap.


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Niche - Primetime (1900-2300 hrs) ad duration per hour



Animal Planet 13.8 14.3 14.0 13.9 14.1 14.8 13.1 13.6

Axn 16.8 16.4 17.3 18.1 17.7 14.6 16.5 14.9

Discovery Channel 15.9 15.9 15.7 15.9 15.8 16.4 16.1 15.7

Discovery Turbo 15.0 15.2 14.7 14.9 15.2 14.9 15.2 15.4

Foodfood 11.9 12.5 12.8 12.9 12.0 12.5 14.2 17.7

Fox Traveller 15.4 15.1 16.0 15.6 15.8 15.6 16.0 15.2

History TV18 16.0 16.4 17.4 17.0 16.8 16.2 16.0 16.5

National Geographic 14.6 14.0 14.2 14.3 13.9 14.3 14.8 14.1

Sc Discovery Science 14.5 14.5 15.0 14.7 14.9 15.3 15.6 15.7

Star World 17.7 17.0 18.0 17.4 17.9 15.8 13.0 13.3

Tlc 15.3 15.0 15.0 15.2 15.0 15.2 14.7 14.6

Travel Xp Hd 15.0 15.5 12.8 14.1 15.6 15.4 10.3 11.1

Travel Trendz 0.0 12.4 12.9 11.3 2.4 0.0 0.0 0.0


During the 24-hour period, the violation of ad cap regulation is less severe by the

niche channels.

Niche - Full day (0000-2400 hrs) ad duration per hour



Animal Planet 11.6 11.7 11.6 11.6 11.7 12.0 10.9 12.4

Axn 12.2 11.8 13.0 13.3 13.3 11.1 15.1 13.7

Discovery Channel 14.4 14.9 15.1 15.3 15.1 15.1 15.1 15.4

Discovery Turbo 13.2 13.8 13.0 13.3 12.8 12.2 12.2 12.8

Foodfood 10.2 10.3 10.4 10.0 9.7 10.5 12.4 15.7

Fox Traveller 13.4 13.3 14.0 13.9 14.6 14.8 15.3 14.8

History TV18 15.4 16.5 17.0 17.1 16.9 15.8 16.2 16.6

National Geographic 12.7 12.4 12.4 12.4 12.8 13.3 13.6 13.4

Sc Discovery Science 13.0 12.7 12.6 12.3 11.9 12.1 12.6 12.4

Star World 17.7 17.3 17.9 16.0 16.1 14.0 11.7 11.4

Tlc 15.0 14.7 14.9 15.0 15.0 14.9 14.9 14.8

Travel Xp Hd 15.0 15.2 13.5 14.4 15.6 15.5 10.2 11.2

Travel Trendz 0.0 11.6 12.8 10.5 2.4 0.0 0.0 0.0



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Radio and print could gain

It is too early to conclude that radio and print companies have gained because of

the ad cap on television. Smaller advertisers, especially the ones who advertise

in spurts (with no specific mid-term or long-term budgets) and on regional

channels, will be hit by the rate increase across the board. For some of them, TV

might become too expensive and they might explore alternative media vehicles

such as radio or even print (despite print being costlier on a CPT basis, it can be

used to target specific locations and generally gives instant ROI) to pass through

their commercial messages. Over the medium term, radio and print can benefit

from such advertisers.

For large national advertisers, it is difficult to imagine that the cost factor would

prompt them to lower their spend on TV and increase them on radio or print in a

significant manner. Certain TV-heavy categories such as FMCG have started using

print more aggressively, but that is because they are focusing more on Tier II andIII towns and it has nothing to do with ad rate increase in TV.

Ad growth of select listed print and radio companies

Listed entities Sep Qtr Ad growth Dec Qtr Ad growth

DB Corp 17.6 17.8

Jagran Prakashan 10.7 14.7

HT Media 6.3 8.8

ENIL 12.3 12.7

Fever FM 11.2 24.9

DB Corp Radio 11.8 25.3


Smaller channels to get squeezed out

As per our analysis, the four most watched Hindi GECs will need to implement a rate

hike of 15–25 per cent to mitigate the impact of lower ad inventory, whereas smaller

genre channels such as Hindi news would need a much bigger hike. We believe that

the Hindi GECs will be able to increase ad rates (although after a lot of back and forth

with the advertisers) because the hike is being taken across all networks.

However, smaller genre channels will find it very difficult to take a hike higher

than that implemented by the Hindi GECs. Among the other genres also, only the

top two or three channels will get ad rate hikes. Smaller channels across all

genres will have to be content with a much smaller hike or none at all. This will

be a big blow for standalone channels (who are not part of a larger bouquet) as

their expenses will see an increase while revenue would fall. This is the exact

reason why almost all small channels have legally challenged the ad cap. While

this is not what TRAI’s intention is, it will make the larger networks even stronger

and eventually squeeze the smaller channels out of business. Ad cap will improve


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consumer experience but it might end up limiting choice in the medium to long

term, with smaller networks falling by the wayside.

How to grow ad revenue under ad cap

Once ad cap has been implemented across all channels, broadcasters will have to

increase ad rates on an annual basis to grow their ad revenue. The other way to

grow ad revenue is through the launch of more fresh hours of programming to

create additional ad inventory (for example, Hindi GEC channels might think of

reviving the afternoon slot, Hindi movie channels might telecast a greater number

of fresh movies, etc.). This explains why most of the major Hindi and regional GEC

channels have extended their weekday programming by a day to six days a week.

Launching new channels is another option. However, programming higher fresh

hours or launching new channels would also entail an increase in cost and the

best way to grow ad revenue is to hike ad rates. This appears to be a simple

proposition on paper. However, convincing the advertisers would be difficult,

especially if the viewership market share is dwindling.

How ad cap and TVT will help increase ad rates

Broadcasters who are able to maintain or improve market shares would increase

ad rates to grow their ad revenue once ad cap is implemented. Their ad rate hike

plea will be supported by the changed ratings reporting structure (from TRPs to

TVTs). TRPs, as we all know, gave the percentage of population that has watched

a particular programme. The TRP of the top-rated programme has fallen

progressively over the years, despite the growth in absolute number of people

watching it. This is because of increased viewership fragmentation with the robust

growth in the number of C&S households. As the number of C&S households

grows at a frantic pace, the percentage of people watching a particular show

could be coming down. But there might still be growth in absolute number of

viewers. Thus, broadcasters will be able to justify the increase in their ad rates.

Imagine just one channel in any particular genre which is carrying inventory of 12

minutes per hour with an ad rate of Rs 100 per 10 seconds. A new channel launches

in the same genre and is able to garner 25 per cent of the viewership of thatgenre in a certain period of time. It prices its inventory at Rs 10 per 10 seconds

and because advertisers are able to reach one-fourth of the population (watching

that particular genre) at one-tenth the rate, there is enough demand for the

inventory of the new channel. This leads to the new channel running 20 minutes

of ad per hour from its own initial expectation of 15 minutes per hour. The

incumbent channel is unable to increase ad rates in such a scenario.

However, if inventory is capped at 12 minutes per hour, then the new channels

will not be able to offer their ad inventory at ridiculously discounted rates. The

only way they will be able to grow their revenues would also be through higher

rates rather than randomly increasing ad inventory. Thus, TVTs, along with ad

cap, should help in the hardening of ad rates from a medium term perspective.


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Climate for new channel launches favourable?

Digitisation promises differentiated content as cost of carriage on a per-channel

basis is expected to come down leading to a slew of niche channel launches.

However, ad cap should temper this expectation. We feel that larger networks

would launch more channels to create incremental ad inventory (e.g. Zee Anmol)

because the cost of a new channel launch is insignificant for established networks.

Standalone channels will find it difficult to survive (unless there is a strong pull

for that channel’s content) and new channel launches could actually slow down

from independent promoters. Ad cap, along with TRAI’s proposal of disallowing

content aggregators from bundling channels from more than one broadcaster,

could lead to a consolidation of the broadcast business in a handful of networks.

Content cost to increase

As ad inventory is cut, channels will have to increase the number of programming

minutes. We feel that this would lead to an increase in content cost, although

the quantum might be restricted to low- to mid-single digits and if this content is

well received by the viewers, then incremental ad revenue will be able to take

care of the higher cost.


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2014 04 the Ad Cap Ghost TelevisionPost Research 16 Apr 14

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