The Telecom Regulatory Authority of India’s (TRAI) decision to cap the duration of advertisements at 12 minutes per hour for broadcasters will see ad rates going up substantially. The decision was intended to make TV viewing clutter free.The regulation, which will come into force from October 1, through a phased manner, will impact news broadcasters, and small players who mostly depend on ad revenue to survive. However, in the long run, it will benefit all stakeholders as only the serious players will remain in business.
“Of course ad rates will go up. Ad rates are a factor of demand and supply. If supply is going to be restricted, ad rates will unfortunately go up. On the positive side, we are confident that once the clutter goes away, the effectiveness of the ad will go up. So while the advertisers will pay a higher price, the effectiveness of the same ad will go up. Therefore, advertisers with less quantum of advertising will achieve the same effectiveness,” said Sam Balsara, Chairman and Managing Director, Madison World, a leading ad agency.
It is believed that some leading channels with quality programming will increase their tariff by 20-30 per cent to make up for the loss of free time, but no clarity has emerged. Some experts believe that the regulation should have come a year later.
“TRAI’s decision is very good. But the timing is a little odd. Digitisation was implemented recently and the channels are yet to get optimum distribution revenue. Had it been one year later, it would have been better. Small and independent channels will suffer as they will have to take a 20-30 per cent hit in ad revenue collection. Today most small players have no distribution revenue and they cannot bear the sudden loss in ad revenue. Big networks like us have no problem as ad rates will go up irrespective of this regulation due to the vast reach provided by the television medium,” said Rohit Gupta, President, Sony Entertainment Television.
According to Punit Goenka, Managing Director & CEO, ZEE Network, advertisers will stand to benefit greatly.
“In the light of TRAI directive, requiring us to reduce inventory which will enhance the overall viewing experience to a more engaged audience, the advertisers only stand to benefit multi-fold. So, with our advertisers getting a much better media proposition, the value for the same will also be at a premium. As such, our efforts to increase rates will only get further intensified. The extent of increase in will happen through a process of renegotiation of all contracts in a phased manner between July and October,” said Mr. Goenka.
As ad rates are set for a hike, smaller advertisers may not be able to bear the burden of increased ad rates and may be compelled to shift to weaker channels, said Edelweiss Securities analysts Abneesh Roy and Alankar Garude in a report. “Overall, we expect TRAI’s regulation to pose risk to near-term ad revenues. Any reduction in ad revenue will force smaller and news broadcasters to ultimately shut shop,” they said.
