- JD(U) under Nitish decides to become part of NDA, denies split in party
- Customs arrests Air India cabin crew for smuggling ganja
- Government, RBI in talks to shore up PSU bank capital
- Bihar flood toll mounts to 153, 17 districts affected
- IndiGo cancels 84 flights over engine issues
- Trai gets tough on call drops; slaps penalty of upto Rs 10 lakh
- Yogi Adityanath targets 'Yuvraj' Rahul Gandhi: 'Will not permit Gorakhpur to become picnic spot'
- Shivraj to lead BJP in 2018 election: Amit Shah
Ad cap: Smaller channels to get squeezed out
MUMBAI: The four most watched Hindi general entertainment channels (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 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 GECs 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.
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 and III towns and it has nothing to do with ad rate increase in TV.
Ad growth of select listed print and radio companies
Click here to register and download the research report.