2014 04 The Ad Cap Ghost TelevisionPost Research 16 Apr 14

16 April 2014
The Ad Cap Ghost

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 1525 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
research@televisionpost.com
April 2014
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
April 2014
Ad capThe 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 channels 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.
TRAIs 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.
4
April 2014
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 TRAIs 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 regulators 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 12minute 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 29
November and reserved its judgment.
April 2014
Even as the TDSAT was preparing itself to pronounce judgment in the case, the
Supreme Court issued a landmark order that would have major repercussions for
the broadcast sector. The apex court ruled that the TDSAT does not have
jurisdiction to examine TRAI regulations.
In the wake of the apex court ruling, the TDSAT dismissed the ad cap case on 11
December and asked the broadcasters to move the High Court. The NBA, along
with other broadcasters, moved the Delhi HC on 16 December and got interim
relief till 13 March.
In a jolt to the broadcasters, the Delhi High Court, while hearing a petition filed
by Hyderabad-based Maa Television Network against the sector regulators 12minute ad cap regulation, observed on 19 February that the cap on advertisements
is a reasonable exercise. The matter was posted for hearing along with the
other ad cap cases.
When the matter finally came up for hearing on 13 March, the Delhi High Court,
however, adjourned it till 6 May. As a result, the interim order preventing TRAI
from taking coercive action against petitioners remains in effect.
Hindi GECs open the door to higher ad rates

Choking inventory supply, the Hindi general entertainment channels have been
able to open the door to higher advertising rates. But though advertisers have
opened their wallets to the broadcasters, the cut in ad time has not run in
proportion to the hike in rates. The lower performing channels have obviously
been hurt more.
The good thing is that the supply-chain dynamics is changing fast. For years,
entertainment broadcasters were butting heads with media agencies over
advertising rates and were on most occasions on the losing side. When TRAI
came up with the 12-minute ad cap regulation, the major networks sniffed an
opportunity of bettering the trading value of their commercial airtime. They
united and decided to get rid of excess supply of ad inventory. Falling on the
other line of the divide were the majority of broadcasters who felt that their
revenues would be badly mauled.
Being the largest mass entertainment genre, Hindi GECs decided to uncover
airtime across time zones. First to shave off ad inventory were the trio of Star
India, Zee Entertainment Enterprises Ltd (ZEEL) and Viacom18. After a brief
resistance, Multi Screen Media (MSM) followed suit from 1 January 2014.
A quick glance at TAM AdEx data provided by the industry will show how
broadcasters have progressively trimmed their ad inventory in the September
quarter to 16 minutes per hour.
April 2014
Hindi GEC Primetime (19002300 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
Entertainment TV
13.3
14.7
13.5
13.5
13.9
15.5
14.1
Sony Sab
15.9
15.8
15.7
15.4
15.6
15.7
14.2
16.2
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 selfpromotion). For the quarter beginning October, the MSM channels (Sony
Entertainment Television and SAB) have an overrun by 34 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--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
Entertainment TV
13.5
14.3
13.5
13.0
12.1
13.1
11.8
Sony Sab
13.0
14.0
13.7
13.5
11.1
10.9
10.4
13.3
April 2014
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 1214 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
20.5
3.1
Zee News
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 TVs 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
8
April 2014
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 1012 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 5060 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. Another
pertinent 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 terrain

Hindi 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.
April 2014
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
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
7.7
&Pictures
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
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
&Pictures
The rate hike across the top three channels has to be in the range of 2125 per
cent. The argument that movie channels can up their ad rates to that extent as
they are the second most-watched genre just doesnt 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.
10
April 2014
Hindi movie channels - Average ad rate hike
Average
inventory FY13
(minutes
per hour)
Drop in average
inventory assuming
12-minute ad cap
is followed (%)
Average hike in ad
rates required to
neutralise the
impact of loss in
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 Englishlanguage peers. Consuming ads in upwards of 20 minutes per hour during prime
time (711 pm), they will have to cut commercial airtime by 4050 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 711 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
11
April 2014
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
5.5
7.1
6.9
9.2
5.6
6.0
7.1
9.3
Samay
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 5070 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
Average
rates required to
FY13 (minutes
12-minute ad cap
neutralise the
per hour)
is followed (%)
impact of loss in
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
12
April 2014
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 711 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 earnersTimes Now, NDTV 24x7 and
CNN IBNhave 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.
13
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
9.2
8.1
5.6
5.0
6.8
6.7
6.9
News X
9.4
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 1218 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
9.7
8.3
5.7
4.6
6.3
6.4
5.7
9.9
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 2356 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.
14
April 2014
English news channels - Average increase in ad rates
Average
rates required to
FY13 (minutes
12-minute ad cap
neutralise the
per hour)
is followed (%)
impact of loss in
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

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).
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
Among the business news channels, ET Now is complying with the ad cap (over a
24-hour period). The TV18 channelsCNBC TV18 and CNBC Awaazwill,
however, have to implement hefty hikes to the tune of 3754 per cent, which is
almost impossible to come by in this macro-economic environment.
15
April 2014
Business news channels
Average
rates required to
FY13 (minutes
12-minute ad cap
neutralise the
per hour)
is followed (%)
impact of loss in
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. Advertiserfunded 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 57 per cent of the overall
revenue from non-FCT monetisation. Thus, news channels might lose 1012 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.
16
April 2014
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
17
April 2014
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
Listed entities
Sep Qtr Ad growth
Dec Qtr Ad growth
DB Corp
17.6
17.8
Jagran Prakashan
10.7
14.7
6.3
8.8
ENIL
12.3
12.7
Fever FM
11.2
24.9
DB Corp Radio
11.8
25.3
HT Media
Smaller channels to get squeezed out

As per our analysis, the four most watched Hindi GECs will need to implement a rate
hike of 1525 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 TRAIs intention is, it will make the larger networks even stronger
and eventually squeeze the smaller channels out of business. Ad cap will improve
18
April 2014
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 that
genre 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.
19
April 2014
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 channels content) and new channel launches could actually slow down
from independent promoters. Ad cap, along with TRAIs 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.
20
April 2014
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16 April 2014

The Ad Cap Ghost

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

Ad capThe story so far

Hindi GECs open the door to higher ad rates

Colors Viacom18 16.4

Source: TAM AdEx data provided by industry, TelevisionPost Research

Colors Viacom18 15.4

Source: TAM AdEx data provided by industry, TelevisionPost Research

Drop in average Average hike in ad

inventory inventory assuming

Source: TAM AdEx data provided by industry, TelevisionPost Research

Sep Qtr Ad growth

Dec Qtr Ad growth

Source: TAM AdEx data provided by industry, TelevisionPost Research

Hindi movie channels in difficult terrain

Source: TAM AdEx data provided by industry, TelevisionPost Research

Source: TAM AdEx data provided by industry, TelevisionPost Research

Source: TAM AdEx data provided by industry, TelevisionPost Research

News channels to find biz models badly mauled

Dilli Aaj Tak

Source: TAM AdEx data provided by industry, TelevisionPost Research

Dilli Aaj Tak

Source: TAM AdEx data provided by industry, TelevisionPost Research

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

Drop in average Average hike in ad

inventory inventory assuming

Source: TAM AdEx data provided by industry, TelevisionPost Research

Headlines Today 12.0

Source: TAM AdEx data provided by industry, TelevisionPost Research

Headlines Today 10.3

Source: TAM AdEx data provided by industry, TelevisionPost Research

Drop in average Average hike in ad

inventory inventory assuming

Source: TAM AdEx data provided by industry, TelevisionPost Research

Business news channels

Source: TAM AdEx data provided by industry, TelevisionPost Research

Drop in average Average hike in ad

inventory inventory assuming

Source: TAM AdEx data provided by industry, TelevisionPost Research

Niche channels need disciplining

Discovery Channel 15.9

Discovery Turbo 15.0

National Geographic 14.6

Sc Discovery Science 14.5

Source: TAM AdEx data provided by industry, TelevisionPost Research

Discovery Channel 14.4

Discovery Turbo 13.2

National Geographic 12.7

Sc Discovery Science 13.0

Source: TAM AdEx data provided by industry, TelevisionPost Research

Radio and print could gain

Sep Qtr Ad growth

Dec Qtr Ad growth

Source: TAM AdEx data provided by industry, TelevisionPost Research

Smaller channels to get squeezed out

How to grow ad revenue under ad cap

How ad cap and TVT will help increase ad rates

Climate for new channel launches favourable?

Content cost to increase

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