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‘Sports is a pillar of growth for our future’
The last quarter of 2016 was tough for the advertising industry due to demonetisation. For Sony Pictures Networks India (SPNI) president Rohit Gupta, 2017 should be much better.
In terms of genres, Gupta is optimistic about the future of sports and sees it being crucial in the coming years. Moreover, with BARC now reflecting rural viewership data, he is confident that more rural ad spends will shift to above-the-line activation and television will be a big beneficiary, especially the FTA genre.
Although he acknowledges that the niche channels are struggling, he is hopeful that 2017 will see a recovery.
In an interview with Televisionpost.com’s Ashwin Pinto, Gupta speaks about the TV ad industry and the road ahead.
Is the big challenge for TV channels going to be to up ad rates given that each genre has several players?
Ad rates have been going up every year. Speaking for ourselves, inventory levels have been the same for the last three to four years, and we run at 98% inventory capacity. So, the only way to grow revenue is to increase the rates. The reach growth in television, which is the most critical aspect for any advertiser, means that ad rates need to go up. It is a very natural phenomenon. This year the universe went up from 150–180 million. I am quite positive that channels would be able to increase rates on the premise of universe growth to 180 million homes.
It is difficult to generalise for the industry. But the large channels run at sell-out throughout the 12 months. That is the reason why the industry has been growing in double digits.
Which is the TV genre that you see growing the quickest in 2017 at an industry level?
Sports would be the big driver. Advertisers have started putting in money in non-cricket also, and there is enough happening whether it is football, tennis or wrestling. Kabbadi league brands are willing to put money there. Today cricket is just one aspect of sport. You need to understand that 65% of this country is below the age of 35. Youth are drawn towards sports. The difference between the IPL and other cricket is that the IPL brings in youth and females in large numbers that no other form of cricket does. Hence, advertisers are willing to pay the premium for the reach it delivers, and this year in season 10 we are confident that the IPL will cross the 400-million mark.
Then there is the movies genre. The general entertainment and the regional channels will continue to drive growth because of the kinds of numbers that they deliver. These are the top genres. Sports will continue to be the main driver over the next four to five years.
Sony grew IPL revenues in 10 years from Rs 350 crore to Rs 1300 crore. Over the next five years, what growth do you see for the property?
I cannot comment on that. It is difficult to see what will happen over the next five years. I just want to say that the IPL has clearly established itself as the number one property on television. It has now reached a mature stage and is growing year on year. This year we are confident that it will cross the 400-million viewership mark which is huge by any stretch of the imagination.
|‘We have almost all the big tournaments of every sport with us. Sports is clearly a pillar of growth for our future, hence the big investments’|
How will Ten Sports boost the value of Sony’s sports portfolio?
Obviously, there is a big value and that is the reason we invested in it. When you look at sports, we have the biggest event, the IPL. We have all the football that is available. We have got FIFA, La Liga, Serie A, Uefa Champions League and Confederation Cup.
We have got WWE now, which has the highest daily rating. In contact sports, we have got everything from UFC to TNA. We have cleaned up everything. In tennis, we have entire ATP; in baseball we have NBA. We have almost all the big tournaments of every sport with us. Sports is clearly a pillar of growth for our future, hence the big investments.
Are Hindi GECs and Hindi movies at the same level from a rate, revenue standpoint?
Today, the CPRP trading levels are similar. The difference is that GECs have impact properties which get sold very differently. But on the trading level, there is little gap due to the reach that the Hindi movie genre delivers. It can command a premium. Max has been a leader in this genre from the beginning and last year it was the leader in all the 52 weeks. Advertisers want to be associated with the leader. Our other Hindi movie channels like Max 2 and Wah are also leaders in their category.
Hindi movies have created a niche for themselves. Now with rural coming in, it plays an integral part in that genre. Viewership for the genre in rural is much higher.
Which other genres have benefitted from more representation of rural?
The GEC channels are benefiting. The FTA movie channels are doing well. FTA is going to be a big driver as 55% of the country is rural. For any marketer, not to represent himself in 55% of India would be a foolish move. A lot of consumption is happening there. FTA is now becoming a part of most advertisers’ plans. It will soon hit Rs 1000 crore. Pal and Wah are leaders in their genres and are big growth drivers for us.
|‘The main challenge for BARC is to ensure that there is adequate representation for the niche channels. They have taken a big hit’|
Is the ad revenue growth for FTA channels incremental or is it eating from somewhere else?
It is incremental. When you look at urban spends, 70–80% of the spends are on above-the-line mediums like television and print. Only 20% is for below the line. When you go into rural marketing, it is the reverse as 70% of spends are below the line, as there were no ratings and brands could not really see the impact of advertising. So most large FMCG companies were using a lot of ground activation such as mobile van activations in villages. This is a very high-cost activation per user compared to television, which has the lowest cost per contact by far.
Brand activations by FMCGs are high cost in rural areas. Now with rural data coming, you can get your consumers through television. This is going to grow. Above-the-line spend will grow from 25% to 40%. The ratio will change now.
How are advertisers looking at HD channels?
High definition is another area where there is obviously good potential. The penetration hasn’t grown the way we thought it would. It is still 8–10 million homes out of 180 million. With more channels coming in the HD space, that market should grow fast. In some cases, the content is different from the SD feeds and in some cases the content is the same. But the user is different. HD becomes very important especially for brands looking to target the top-end consumers.
HD is an important segment from a planning segment as well. Once you have an HD box, you cannot consume SD. The top-end users are HD users today. So, if you are a high-end brand, then HD becomes very critical. We have seen that with the IPL, where we were able to up the rates to Rs 225,000 for a 10-second spot.
In HD, money is coming in from print. Earlier, there was overspill and so brands like high-end cars, luxury goods would not spend on television. The reach even for 10 million HD homes is higher than any magazine or print medium.
How has the television adex been faring this year?
The TV ad sales business was doing extremely well till demonetisation happened. There was a two-month hiccup during November–December. Mid-January onwards, the business picked up. When you look at February and March, it is back to normal. While there were expectations that the demonetisation effect would go on for six to seven months, things came back to normal very soon. For the current fiscal, we should see an industry growth rate of 10–12%. However, over the last four years, we have been growing double the industry growth, and in FY16–17 we achieved the same once again despite tough conditions.
The kids genre, which Sony has just entered, is under-indexed. It only makes Rs 500 crore a year, and some players are struggling. Given this, why do you feel that now is the right time to enter this space?
Kids is a very important genre from a brand perspective. This was one genre that we did not have in our portfolio and we are confident that Yay will be able to grow the genre as the content is very different. All our shows are homegrown. All are locally produced. We expect this to resonate extremely well with the children. Sometimes you need somebody new to come in and shake up the genre.
Similarly, having launched BBC Earth, we are confident that we will shake up the genre as nothing has happened in that genre in the last 10–15 years. The same players have been there for so long. We have seen the buzz on BBC Earth. Everybody who has sampled it loves the channel because of the freshness of the content.
|‘If you look at the IPL, we have done the best numbers without Coca-Cola or Pepsi. Over the past four to five years, the cola spends have been coming down. There was just one e-commerce client this season. New categories came in’|
So, having a limited number of players can also be a challenge in terms of growing the ad pie?
Of course! If no new content is coming in and no new sampling is happening, the consumer gets fed up. If something new comes in, the consumer samples it more. It is like the English entertainment and movie space, from two channels you have gone to 15 channels and the pie has grown.
Infotainment is another genre that you have recently entered. Again, this is a genre that is under-indexed, but a lot of localisation is now happening. How do you see the genre faring going forward?
Infotainment is an important genre. I am confident that, with the compelling content that the BBC has, it will make headway. We have seen the initial responses. People really love the channel because of the content. Rates depend on the channel and quality. Negotiations with advertisers are tough, but if you have good content, then brands will be willing to pay a good rate.
It is more about perception than ratings. With BBC Earth and Yay, we are confident that we will get brands to pay the rate that we want due to the sheer quality of content on offer.
Is the English movies/entertainment category mainly a perception buy?
Of course! We don’t trade on numbers. Pix launched and took on the leaders who had been there for 15 years. Now it is among the top three channels. This is the same thing with every channel that we launch. We are confident that it will be in the top two to three channels in its genre in a short span
How is English entertainment faring under BARC’s rating system?
It had a bad year last year. But we are quite confident that this year people will look at it differently. Advertisers know they cannot do without this genre. Moreover, a lot of money that was going to digital is coming back to this genre.
Globally, people are questioning digital spends. We have seen that brands like Procter & Gamble in the UK have moved money to traditional media. Today brands realise that even after spending so much money on digital, they are not getting the value back. A lot of brands that went heavily skewed towards digital in the past two to three years have realised that they are not getting the brand recall scores. They are now coming back to television. The ROIs on digital is high, and there is an agency push towards digital because digital channels give agencies huge incentives to the tune of 25% and is extremely profitable for the agencies.
If you see the English space ‘Fast & Furious 8’ made a record. The box-office collection of Hollywood movies is at its highest. There are more English-speaking people than ever before. The best content is available in English. The latest shows of the US are on television. In every form, English content is being consumed more than ever before.
Has BARC stabilised and are advertisers and broadcasters comfortable with doing deals on the basis of BARC data?
The trading is happening on BARC. It still is settling down as a lot of change is happening. The main challenge for BARC is to ensure that there is adequate representation for the niche channels. They have taken a big hit.
Is measurement an issue with digital?
There are two to three issues with digital. Measurement is one; brand recall following campaign is another. When brands put in money and there are huge incentives being paid through to companies, that is not fair. Clients should see through that. Does it make sense if somebody is getting a 20–30% incentive on digital? Is it worth it? These things are being questioned.
What is the scene with the music genre?
This genre was doing well. Then demonetisation happened. Now the genre is coming back. It will be a normal year for it and grow by 15%. The efforts to build appointment viewing are already happening.
The OTT ad pie is growing. Could you talk about the trajectory expected this year?
We have seen an increase in ad sales on the OTT platforms. People are putting in a lot of money on them. The digital play is important. The growth is extremely high, and now we have a lot of original content produced especially for Sony Liv.
Currently e-commerce is seeing caution. The likes of Coca Cola and Pepsi are also cautious. Will this have an impact on ad spend growth for the TV industry, or will other categories pick up the slack?
If you look at the IPL, we have done the best numbers without Coca Cola or Pepsi. Over the past four to five years, the cola spends have been coming down. There was just one e-commerce client this season. Earlier e-commerce accounted for 25–30% of IPL revenues. New categories came in. While e-commerce is going through a tough time, other categories are growing at a rapid pace. What is most important for television is that FMCG is growing at a huge pace. This is a positive.
Which are the top categories on television?
FMCG is obviously the top category. The mobile category is becoming a very large category for television. Auto is also a large category.
Do you see a shakeout happening given the current scenario of several players in each genre?
Consolidation has already started to happen. We bought Ten Sports. Star has been buying a lot of regional channels. Zee has been on an acquisition spree. If you look at the Indian media scene, the five large broadcasters control 80% of the viewership and also the revenues. Consolidation is always positive because that is how the industry will grow. Smaller players will find it difficult to survive without the support of a large network, especially with the pressure on distribution. You need the support of advertising.