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Magazine
MEDIA MATTERS
Virtual boom
SEVANTI NINAN
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Though there are over 300 TV channels today, very few are actually making money.
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Photo: Vijaya Bhaskar
Profitless: Too many channels?
Ever seen a boom that is more about spending than earning? Where very few are making money but everybody is itching to invest? Well, we are in the middle of one. Favourite adjectives for the state of the media industry today are: booming, galloping,
taking off. Industry associations toss out ballpark figures of how much media and entertainment will be worth five years from now. Rupees one lakh crores, said FICCI (Federation of Indian Chamber of Commerce and Industry), earlier this year. The annual growth for this sector is pegged at 18 or 19 per cent. But it is a profit-less boom, riding more on hype than on revenues.
Foreign direct investment, or FDI, is flowing in, particularly in the news and current affairs segment. Dozens of new TV channels are waiting to be cleared by the Ministry of Information and Broadcasting. Advertising expenditure in 2006 was 23 per cent higher than in 2005. Yet a serious fight between advertisers and broadcasters has been unfolding in recent weeks because all that advertising is not translating into revenues for broadcasters.
Earlier this month, on the eve of the advertising-rich festival season, the Indian Broadcasting Foundation (IBF), an association of broadcasters, announced a 25 per cent surcharge on TV advertising rates, applicable from October 16. The reason? Ad rates have not been revised for some five years and the broadcasters have their backs to the wall. Thanks to conditional access (CAS) as moderated by TRAI (Telecom Regulatory Authority of India), no broadcaster can earn more than Rs. 5 per channel per household. What’s more, new channels coming in are free to air, so old players cannot afford to hike per channel rates.
Unresolved issue
The advertising industry represented by the Indian Society of Advertisers (ISA) fought back indignantly, and some of the biggest advertisers (Hindustan Unilever, Procter & Gamble, Airtel, Pepsi, Coca-Cola and Reliance Communications) instructed their media buying agencies not to book spot advertising on 16 leading TV channels. Faced with reduced advertising, most channels have caved in and the IBF withdrew its advisory. But the issue won’t go away because boom time has begun to mean losses for broadcasters, big time.
India is now one of the biggest cable and satellite markets in the world. The number of cable TV households has been growing rapidly, pegged at 70 million today by some estimates, 80 million by others. But too many channels together deliver this audience so it is an increasingly fragmented market. To compensate for having to include many more channels in their media plan, advertisers have not paid higher rates for some five years. The surcharge is a manifestation of the broadcasting industry’s pent up frustration at this state of affairs. Because, meanwhile, competition has driven up costs of programming.
The advertising fraternity concedes that broadcasters have a point but they outline the current state of affairs as they see it: there are at least a 100 more channels today than there were just three years ago, television viewership ratings for popular programmes has come down from 10+ to between 1 and 2; the share of the top five channels in the viewership pie has come down from 40 per cent to 30 per cent, and so on. According to analysts using TAM (television audience measurement) figures, there are 324 channels today on which advertisers buy time compared to 210 four years back. (Sulina Menon, agencyfaqs) Given the uncertainty about how much audience a channel is delivering, why would they increase ad rates, advertisers ask. IBF, for its part, alleges profiteering; media buying agencies buy TV spot slots in bulk and then resell them to make a profit, it alleges.
So how does it continue, then, this profitless boom? If fewer channels are making money, why are new ones entering the fray? How come entire bouquets of new channels are now materialising with fat budgets reserved for advertising campaigns to establish them?
Ways of the market
Well, there is this upbeat commodity called “market perception” which is driving new entrants into the media business and has all manner of investors flocking to bankroll them. Institutional investors, both foreign and Indian, routinely pick up equity in new ventures in the blithe hope that they will increase in value in the future. Nobody is worried about whether any of these ventures will make any profits for some time to come, they merely believe that the market’s faith in the media business will deliver valuations which can be turned into cash if equity is offloaded. TV has become a market cap industry. Leads one to recall uneasily, the dotcom boom of the late 1990s.
So you have this strange spectacle of listed companies like NDTV, which does not even make a profit every quarter, launching new channels. You have new players like BAG films and INEX which are splurging on new channel bouquets because they have been able to raise money on the market. Media barons and baronesses are being born out of nothing in this illusory TV industry wonderland.
So is nobody making money? The big boys are. In TV, CNBC TV 18, and software king UTV, both are, the former handsomely. And guess who has paid 140 per cent more advance tax this year than last year? Bennett, Coleman and Co, owners of the Times of India.
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