Ad cap and the new industry dynamics

Ad cap and the new industry dynamics

Author | Abhinav Trivedi | Monday, Jan 13,2014 8:57 AM

Ad cap and the new industry dynamics

The fate of the 12-minute ad regulation on TV hangs in balance with news and music broadcasters opposing it. While the new dynamics are at work, big players such as Sony and partner channels in the MSM Group that were vocal against the timing of the ad cap, have now started following the regulation as some advertisers raised concern over the changing scenario.

In a recent conversation with exchange4media, NP Singh, CEO, MSM had said, “A few weeks ago, we have implemented the ad cap across our channels. All our channels are at 12-minute commercial time, as we speak today.” Talking about the ad rate hike, he said, “If you look at the industry at large, the ratio of ad to subscription revenue would be 60:40 or 65:35. Eventually, in a few years we expect that to be 50:50. Rate hike will happen over a period of time as far as our network is concerned. Just because we have restricted our inventory does not mean we will increase our ad rate suddenly. It never works that way. It will not be big rate hike immediately, but it will happen over a period of time.”

Rate hike in today’s scenario is not going well with the advertisers, who are struggling with weak global outlook, weak sales and subdued consumer sentiment. Some senior industry sources in the broadcast industry have revealed that HUL has been in disagreement over rate hike with channels such as Colors and Star and that commercial negotiations are been worked on. It must be mentioned that HUL withdrew its ads from Colors over failure of commercial negotiations.

“FMCG advertising has been the bread and butter for TV advertising. Because channels are increasing the ad rates in phases and in the current economic scenario advertisers cannot take it, the step of withdrawing becomes inevitable. This is an interesting phase when customised deals are happening,” said the CEO of a leading media agency in Delhi.

On the other side, some people in the marketing and broadcasting industry mentioned that all channels resorting to 12 minutes are doing so not because of the regulation, but because of the inconsistent ratio of supply and demand. Advertisers have shifted to other platforms considering alternate avenues in advertising, viz. digital, print, etc., as a weak economic environment cannot cater to increased inventory rates on TV.

In that case, certain broadcasters may not have enough advertisers as of now. Considering that there is a rate dispute between a major FMCG advertiser and top broadcasters and FMCG advertisers are the biggest contributors towards TV advertising, the development signifies differences of opinion among stakeholders. Observers say that these differences will persist till there is a final decision in March 2014 and this temporary phase of uncertainty will pass soon.

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