New addressability systems come with problems and now as Conditional Access System (CAS) is unfolding, some new challenges to broadcasters, advertisers and media fraternity are raising their 'interesting' heads. A recent TAM Media Research analysis shows that of the 7.96 million cable homes across the three CAS markets – Mumbai, Delhi and Kolkata – only 1.63 million homes come under the CAS mandated zones.
CAS penetration at present is only 17 per cent, while the total expected adoption, taking into account the households that are awaiting set-top boxes, is 29 per cent. This means that the connectivity of pay channels is down by 71 per cent. Overall, across the three markets, the total impact is over 15 per cent and this works to 2 per cent on an all India basis. When calculated on television ad spends being estimated at Rs 5,000 crore, this works to a Rs 100 crore loss in value to advertisers. It should be noted that while this is the loss in Phase 1, the following phases will augment the figure.
The Big Loss
Giving the advertiser point of view here, Rahul Welde, GM, Media Services, HUL, said, "CAS has resulted in loss of value to advertisers. CAS adoption at 30 per cent simply means that 70 per cent of people are not accessing major pay channels anymore. The dilution, therefore, is as high as 70 per cent in the CAS zones or as much as 5 per cent when seen nationally. That is a lot of money."
Sandip Tarkas, Head, Media, Reliance ADA Group, said, "CAS will definitely have a downward impact on viewership and in the short run will result in significant value loss. In the longer run, it will end up changing the market dynamics substantially."
Media gurus, too, see significant loss in value with the results of poor adoption of CAS. Sam Balsara, Chairman, Madison Communications, reiterated this loss, and asked, "Who pays for it? January 1 being the timing of recast TAM panel, implementation of CAS has made it difficult to isolate the impact of each."
Lintas Media Group's Director, Lynn de Souza, believes that the net loss on account of non-connectivity was notionally much more than 2 per cent since the CAS-affected areas were primarily high value customer locations.
Charles Berley Jenarius, CEO, Carat Media, is of the opinion that CAS was forcibly altering consumers' viewing patterns. Pointing facts from a recent study undertaken by Carat Media, he said, "Many channels will report a fall in viewership. Media pundits will argue that this phenomenon is currently restricted to select areas in the three metros of Mumbai, Delhi and Kolkata."
"However, while these numbers might seem small, it must be borne in mind that for advertisers these are huge numbers given that these three represent the largest cities in India. As the implementation of CAS gathers steam, these numbers will explode. In the short run, it is estimated that channel reach could be affected to the magnitude of 10-20 per cent, depending upon the viewership in the pre-CAS era," Jenarius observed.
According to MindShare's MD, R Gowthaman, "CAS is enforced in 20-25 per cent of C&S homes in Mumbai, Delhi and Kolkata, which translates to 5 per cent of all India C&S. At least 3.5 per cent of the homes will not have access to pay channels. With majority of channels currently pay, and their estimated revenue being in the region of around Rs 4,000 crore, 3.5 per cent of this is currently reduced in value terms."
How Big Is This Loss?
Is this loss big enough to advertisers? Reliance ADA Group's Tarkas thinks not yet, but when implementation reaches Phase II and III, there will be a substantial impact. Welde, on the other hand, is more vocal on the issue. He said, "Any loss is big enough. I certainly see 3-5 per cent as considerable. If this is beta-testing then the impact will be really large when CAS is extended nationally. Thus, this is a question of where money is deployed and what it is giving back. For several channels it is giving back lesser and it's diluting overall."
Agreeing with Welde, Balsara said, "Any loss, big or small, is a loss. The impact on mass brands is miniscule compared to upmarket niche brands focussed on metros." Gowthaman added, "3 per cent drop in homes reached on the back of heavy fragmentation is definitely a considerable loss to the advertiser. Considering the fact that CAS adoption is only going to expand to further homes beyond the metropolitan towns, the concern only gets bigger."
In her inimitable style, de Souza brings in another view here. She said, "We really need to establish whether ratings fall or not. There has been a slight decline, but overall we believe that this is only a temporary phase. People are not going to stop watching their favourite programmes and will work out ways to remain connected to their preferred channels over the next couple of months."
The Big Fight
HUL is clear that this loss in value is not acceptable. Welde said, "We are revisiting the profile and deployment of our spends." Tarkas is of the opinion that the key issue to watch would be the time spent on watching TV. He pointed out, "If that is maintained, all it means is that people are watching different things, and we can essentially re-organise the portfolio. If the time spent declines in non-CAS C&S homes, then we need to worry because then people are turning away from TV. My hunch is over time there will be negligible difference between the time spent by the two universes, and we will be fine."
When asked how media agencies were combating this loss, Balsara said, "Advertisers may need to recast their media mix." "We are talking to channels on a case by case basis – the elite panel of TAM is more helpful to use for this," added de Souza.
Gowthaman offered, "I think, we have to consider this also on the back of the expanded TAM universe. We cannot see this situation in isolation. There is a definite need to redeploy monies considering the 'reality' basis expanded TAM universe as well as CAS affected homes."
Jenarius offered a bigger picture here. He observed, "A big problem likely to plague advertisers and media planners is the possibility that viewers will opt for a different bouquet each month. While this cannot be said with certainty at the moment, the possibility does exist. If this becomes a reality, then TRPs will fluctuate wildly, giving the advertiser even less ROI for money spent on television. It will be a research challenge to be able to accurately monitor these fluctuations and build reliable forecasting methods."
The situation has not come as a surprise to advertisers and media experts. Players like Reliance also went with learnings from Chennai over the last two years. Nonetheless, as Welde puts it, the adoption pace was worrying, particularly in places like Kolkata.
Gowthaman explained that most of the advertisers and the agencies were waiting to get a sense on a stable viewership pattern, studying a long period of adoption.
Now as more information is available on the effects of CAS, problems are surfacing. Giving a broad picture here, Tarkas said, "Many channels would be forced to choose between remaining pay and losing viewership and ad revenues, or forgoing pay revenues to ensure ad revenues will stay protected. In many genres, laggards can take the FTA route to gain grounds and leaders will be forced to re-evaluate strategy."
Advertisers are looking for relief where they feel the loss is high and large broadcasters like STAR India, SET India, ZEEL and so on are facing pressures to re-work ad rates or figure other ways of making good the loss. Watch this space to know more on what broadcasters have to say to this.
(To be Continued...)