TRAI’s ad curbs to trip smaller, news broadcaste​rs

TRAI’s recent regulation of limiting ads per hour to 12 minutes is a landmark in many ways. It will be implemented in a phased manner and full compliance is mandated from October 1, 2013. Even though digitisation has been a success in terms of seeding of boxes, inflow of subscription revenue is in a nascent stage. Hence, broadcasters, especially smaller ones and news broadcasters who continue to remain dependent on ads as the predominant source of revenue, will be hurt the most by this regulation. An indirect impact could be reduction in carriage fees by these broadcasters to MSOs as their profits come under pressure. Similarly, smaller advertisers may not be able to bear the burden of increased ad rates and may be compelled to shift to weaker channels. Overall, we expect TRAI’s regulation to pose risk to near term ad revenues as all broadcasters adjust their ad inventory and hike prices gradually to cushion the impact. However, because of increase in collective action by major broadcasters (ad rate hike, withdrawal from TAM), strong market share and relatively lower ad duration (versus smaller broadcasters), the impact on stronger networks like ZEE and Sun TV is likely to be limited.

As per TRAI, ads on TV channels should be restricted to 12 minutes per hour (10 minutes of ads and 2 minutes of promotions) as they affect the quality of viewing. Broadcasters have agreed to comply with this regulation from October 1, 2013. The entire regulation is expected to be implemented in a staggered manner. Currently, as per Mr. Shailesh Shah, Secretary General, Indian Broadcasting Federation (IBF), per hour ad time works out to just over 11 minutes per hour if a full-day average is taken.

Several finer aspects of the ad regulations will be clear in due course. There is no clarity on what exactly qualifies as promotions. Classification of teleshopping programmes and movie trailers as ads or content is unclear. However, broadly, it is clear that Hindi news broadcasters will be impacted the most as they will have to curtail their ad duration per hour from (19+3) minutes to (10+2) minutes. Though print and digital may benefit from the spillover effect, regulating ad duration on TV also raises the question whether other media like print and radio will also be subjected to ad caps.