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Uday Shankar

President | 28 Jan 2011

One sector that needs business discipline is media agencies. In their rush for aggregating volume and growing in size, media agencies have knowingly or unknowingly brought down value for broadcasters and for themselves. In the end, they are not delivering value to advertisers as well, as they are just trying to buy cheap. There are agencies that are doing business at .5 per cent or 1 per cent, and some I am told, at negative rate of return. Then these agencies come to broadcasters and make meaningless offers. Will this not impact industry growth?

The Indian broadcasting industry is living some of its most interesting times. Even as distribution is going the digital way, the challenges of the analogue model are still hurting broadcasters. Digitisation is not happening at the right pace and some argue whether even in the right direction. The Government is ensuring a say in content and measurement and broadcasters are still dependent on advertisers to ensure their revenue flow. The Indian Broadcasting Foundation (IBF) for years has worked as an industry body that has taken steps to brave these challenges and pave the way forward.

As the current President of the IBF, Uday Shankar, CEO, STAR India, shares with exchange4media’s Noor Fathima Warsia his thoughts on the internal and external issues facing the broadcasting industry.

Q. On various industry issues, you have questioned authorities such as the TRAI and the government on their vision for the growth of the broadcasting industry. Would you say this is changing for the better now?

I am afraid, not. The government did not, and does not, have a blueprint that could guide or help in the growth of the broadcasting industry. Just recently, TRAI issued a consultation paper, which proposed that the number of subscribers should not be a currency. It suggested that when cable operators negotiated with broadcasters, it should only be about the revenue paid for the contract. Not only was this a regressive step, but TRAI is trying to institutionalise its lack of drive and competence in handling the problem of under-declaration in the cable industry and bringing any transparency in cable administration. If anything, the regulatory movement is going in the backward direction. In the last decade, the needle has not moved in the area of digitisation of the cable industry. There was only a half-hearted attempt towards digitisation in 2003. Beyond that, the analogue, cable environment continues to be as opaque, as un-evolved and as technologically underdeveloped as it was in 2001. The other area where government missed out was in encouraging choice, pluralism and diversity of content from a consumer viewpoint. Nothing has been done to support channels for special interest groups. All regulations are either to cover the lack of professionalism in cable or to benefit the new emerging DTH operators.

Q. But isn’t DTH also digitising the television environment...

Then you should either mandate that DTH is the route to go. Or else, create a level-playing field for all forms of distribution. We have to realise that multiple forms of distribution would have to co-exist in this country, and hence the regulatory mechanism should be agnostic in its policymaking to the form of distribution. It should look at distribution from consumer standpoint and with the aim of improving content quality. Policymakers have failed to do either, and that is where the frustration comes in.

Q. Your view, in a sense, contradicts the growth that one is seeing in digitisation, specifically the growth we have seen in 2009 and 2010.

Digitisation in India has happened not due to government efforts, but despite government efforts. Majority of DTH companies are private enterprises and that has led to whatever digitisation we see today. The growth of the DTH industry itself is ample evidence of the disappointment and frustration that consumers have from cable in terms of quality of service and range of content offered. The Government should take note of this, and should ensure that cable consumers are not at a disadvantage.

Q. And you expect analogue cable in its current form to continue for long?

For a significant time to come. Cable’s existence also depends on whether organised cable sectors wake up and start responding to DTH, and secondly, how DTH shapes up. With the exception of a few platforms, one area where DTH has done a great job of getting customers is of creating quality service. At the same time, people should understand that DTH is a device, not content. People do not buy the DTH box because they are in love with that box, but because it is a funnel of content. And again, due to regulation, all DTH players today offer the same content. Where does the objective of offering consumers more choices factor in that? How and why should I choose between platform X or platform Y? The most rational basis would have been which channel offers me content relevant to my viewing preference. That is another sign of a regressive regulatory mindset. To some extent, the platforms themselves are responsible for this.

Q. One can argue that the DTH customer has the best, since she/he is getting the range of content from all players and then it is about how well a player services the viewer and offers value addition...

But it’s important to create options, which range from the very frugal to the very affluent in a market like India, and then let people choose. Every sector that has been throbbing and growing in an exciting manner has created that choice for the consumers. This is a society, where people of various economic strengths and resources live. So, we should be able to offer quality digital content at Rs 150 and at Rs 1,000 and give them greater value at the higher price point, which is not possible right now.

Q. Are we doing enough, as an industry, to address some of these issues?

Yes and no. At individual levels, we have done a few things, but the biggest problem is lack of shared consensus on some issues amongst broadcasters and other stakeholders. Our industry is still one of the smaller segments in India. I am always struck by the level of differences and lack of trust amongst stakeholders such as the MSOs, broadcasters, DTH players, cable sectors and others. Perhaps because this is a knowledge sector of sorts, hence everyone has his own view, but personal prejudices and business differences are coming in the way too often, and that is holding the industry back.

Q. Let’s get more specific to some of the things that the IBF says is on its four-point agenda. The focus on growth and profitability is supposedly the top priority for the IBF. When one looks at channels mushrooming despite complaints on growth margins, one wonders if profitability is something that broadcasting is experiencing right now.

You are right -- if you see the overall scenario, on a network basis, it’s just a handful of people who make decent profit, a few make just any profit and most make losses. Sometimes one wonders what the real intent of such people to stay in the business is, because business is about profitability.

Q. What do you think are some reasons due to which we see channels launching as randomly as they do at present?

While those who are launching randomly can better answer your question, I would say there are a few things from an industry viewpoint that have encouraged this. The easy entry barrier is the first and the biggest problem. Anyone can launch a channel and this has allowed people with varied interests, such as political or commercial, to set up broadcasting entities. The focus is not necessarily running a professional outfit, but to leverage their presence in media for other reasons. Also, there are big networks that have been created, which have been around for a decade and haven’t made money in their entire cycle. One wonders why, but if you see the overall scheme of business interest, there are many not-so-right reasons for launching channels.

Q. Wasn’t that more true of news channels?

Yes, and regional channels. That is where you would see a lot of chaos. Also, the easy access to capital, through equity or debt, has allowed all kinds of people to come in. If you didn’t have capital available this easily, then you would be forced to take a closer look at your business model.

Q. But wasn’t easy access to capital arrested after the slowdown?

People have short memory. Even today, you get loans easily, you can still do IPOs and the likes. Many are creating assets in the hope that someone will buy them out. People create regional channels thinking national players would buy them. Some created national businesses waiting for international media companies to acquire them. Today, India is a large and exciting growth market, especially for media. Not much is happening in the US and Europe, you cannot go to China if you are in the media business and you cannot go to Russia because it’s such a tricky media market, so where do you go? Hence, we are seeing many examples in India of people creating media businesses in the hope that some company would come and buy them. They keep building portfolios, not worrying about losses because they see these losses as temporary; someone will come and flip those losses into handsome profits.

Q. Where does IBF come in the picture, when you talk about profitability?

IBF has a role, but you should appreciate that IBF is an industry body whose powers come from members’ willingness to collaborate and support. Generally, most members are willing and open to collaborate, but there are some who have no wish to come together on critical business issues. The moment one key player does not come along, the whole consensus begins to fall apart and the IBF’s ability to make an impact is diluted. It’s a maturity issue and a personality issue. As I told you, business rivalry in broadcasting is getting carried too far and is getting translated into personal disagreements and dislikes.

Q. We are also seeing problems between agencies and broadcasters.

Well, to be candid, one sector that needs business discipline is media agencies. In their rush for aggregating volume and growing in size, media agencies have knowingly or unknowingly brought down value for broadcasters and for themselves. In the end, they are not delivering value to advertisers as well, as they are just trying to buy cheap. There are agencies that are doing business at .5 per cent or 1 per cent, and some I am told, at negative rate of return. Then these agencies come to broadcasters and make strange and meaningless offers for various kinds of incentives.

Q. But despite the tough relationship, the industry has grown...

The industry has grown due to the huge appetite for content and the entrepreneurship of the creative and broadcasting community. Those are the two big things that are responsible for driving industry growth. There is a genuine challenge facing us, given the low value of television inventory today. If media agencies don’t partner in correcting this value at reasonable points, the industry will see restricted growth. Media agencies themselves ended up playing a huge part in bringing down the value of advertising inventory on television. They must realise that this has a direct implication on the quality of content.

There is much broadcasters can do in order to take this industry to another level, but they don’t because they cannot afford it. Except for cricket and some key players in the Hindi general entertainment category, such as Star Plus and a few others, nobody is investing in content, because the economy does not allow it. Take the example of news broadcasting -- everyone is concerned about the quality of news, but do we appreciate that the quality of news is bad also because the news economy is bad. News channels cannot afford to send a team to cover the United Nations or the war in Afghanistan. So, they are sending people to the streets nearby, and picking their news from there.

Q. The agreement between the IBF and AAAI too has lapsed and needs to be renewed. When is that happening?

We are working towards renewing that, but broadcasters’ interests must also be considered. The issue of outstanding is just not fair. When the broadcaster has aired the ad, then on submission of the bill, the amount agreed and due must be paid. If you want some time, it should be at the courtesy of the broadcaster, it cannot be demanded as a right. When we go to the market and buy something, we have to pay immediately, it’s not that one can purchase now and pay when he can. The attitude of payable when able has become the norm right now, and that is not acceptable.

Q. Had you had these conversations with the AAAI? Do they understand it?

We are having these conversations with them. I believe there is a theoretical appreciation of broadcasters’ position. That being said, unless the big agencies don’t take some concrete steps in this direction, I don’t see a very easy relationship between IBF and AAAI.

Q. The other subject that has become hot right now is audience measurement with the release of MIB’s TRP Committee report. In fact, you too have been quoted on saying that daily and weekly measurement leads to reckless behaviour.

Before I answer, I want to first congratulate the Minister and Dr Amit Mitra for having come out with such a comprehensive report on television ratings. I don’t think the problem is of measurement but the dissemination of data. Weekly release of data leads to reckless behaviour. When newspapers have data coming twice, and now quarterly, in a year, why should television be daily?

Q. But these are two very different mediums...

So?

Q. Television is that much more dynamic...

Weekly ratings create a short-term focus in content units, whether it is within the channel or outside. We need to have a deeper connect with the consumers rather than the tactical behaviour we see today. Consumers definitely don’t benefit from weekly release. I presume that whether it is media, government, regulator or anyone else, we are all here to serve consumer interest. Let us first acknowledge that weekly ratings do not promote or protect consumer interest. Then, who are we doing this measurement for? It’s not a vegetable that has to be brought out fresh every day. Weekly ratings release doesn’t serve any major purpose because television buying and selling does not happen on a daily or weekly basis. Every client has a campaign for longer than a week. I would like to point out again that this is not about gathering data on regular basis. You should gather data for every minute, get as deep inside the consumer behaviour as you can, but consolidate that. Release the information once in a month. Nothing will go away. The only thing that would happen is instead of worrying about Wednesday mornings, creative people -- writers, journalists, producers and directors -- would start worrying about building stories, building great brands and content with longer shelf life.

Q. From an advertiser’s viewpoint, there would be pressure for weekly or daily data...

The pressure should also be there for detailing. In fact, the bigger problem today is that the data is not rich. The sample size is another discussion and I don’t want to go into that because I am not an expert on whether that sample size is enough or not, but the information you get is only about how many people are watching and how much time is spent. I am all for getting deeper into consumer behaviour, the patterns of consumption, but why do you have to release it every week. Look at the kind of pressure it is creating on our content generating and creative talent -- that is not good. In a highly competitive sector like this, you should reduce the pressure, but the way the data is disseminated is pushing everybody to be more short-term in their approach.

Q. Clearly, the IBF has its hands full this year...

The IBF has a few things stated out in its agenda and you would see us pursuing a course that would help us achieve it. So you are right, it is going to be a very busy year.

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