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Ad cap will create more chaos: Nandini Dias

Ad cap will create more chaos: Nandini Dias

Author | Nandini Dias | Wednesday, May 16,2012 8:47 PM

Ad cap will create more chaos: Nandini Dias

The broadcast business model in India is very different in comparison to international markets. In various other countries, subscription is the larger share of the revenue pie of a channel and hence the dependence of advertising revenues is much lesser. In India on the other hand, advertising revenues are mainstay for any channel. The move towards digitisation was seen very positively because it would have evened the odds in favour of the broadcasters.

However, one must critically look at the June 30, 2012 deadline and question whether it would in fact be met. The ground reality is that the supply of set top boxes is perhaps 20 per cent of what is demanded. If things continue as they are, and the deadline is not met, then subscription will not increase in the manner broadcasters are hoping. An ad cap will only make things tougher. The 10+2 cap is not new for television, it has existed for a while but it was not enforced, since market dynamics were not allowing it.

Despite that, there has been inventory pressure. Within the existing demand and supply of inventory, there is a significant problem of spots being dropped. In fact, one argument is that the larger the advertiser and hence cheaper the spot, the more are the chances of that spot being dropped.

To add to that, on an average, the TRAI ad cap is suggesting a reduction to almost half of the current available inventory. The only thing this will lead to is more chaos in terms of demand-supply. And it will have a cascading effect. When inventory come under more pressure, ad rates can get affected and the agreed CPRPs (cost per rating points) may not be met. What will happen to annual deals is another question. So, there is a lot more to this and I believe every channel will be affected equally.

What we will see is a relative phenomenon, the channels’ performance is still the same but relative index would have gone up. The mathematical equation, minus the cost, to build up the plan will be the same. So everyone will be impacted.

The bigger worry is for the medium itself. TV is supposed to be the most cost effective media and if this regulation had to go through and the expected pressures come in play, one may start looking at other media which would be far more effective. The likes of mobile, digital and press will gain in this whole bargain.

As told to Noor Fathima Warsia

Nandini Dias is the Chief Operating Officer of Lodestar UM

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