After almost two months of bringing out a consultation paper on ‘Issues Related to Advertisements in TV Channels’, the TRAI has released regulations in context to the provision of advertisements in TV channels on May 14, 2012.
The regulation of advertising on television consists of four broad areas – ad duration in one hour, which TRAI has specified to be a ‘clock hour’; the gap between ad breaks; not allowing part-screen or drop down ads and the ad volume to be the same as programme volume.
Various industry organisations have opposed the suggestions on most of these points, including regulation of advertising itself, citing ground realties in implementing these and the fact that advertising is a factor that should be decided by market forces and not by regulating authorities.
Even though an official statement is not issued by either the Indian Broadcasting Foundation (IBF) or the News Broadcasters Association (NBA) yet, it is understood that these bodies will oppose the notification, as the cap, which is stipulated to be 12 minutes including channel promos in an hour of programming, will drastically impact businesses of news channels and specialist genres such as movies, music and so on.
The 10+2 cap, which implied 10 minutes of advertising and two minutes of channel promos, is followed by a few channels, largely Hindi general entertainment channels, at present. Some broadcasters such as STAR India had also moved towards cutting down ad time on its Hindi movie and music channel last year – Star Gold and Channel V had dropped advertising by over 33 per cent in 2011. The Hindi movie genre had seen the likes of Zee Cinema and Max also reduce commercial time. The move had come on the back of the channels’ attempts to enhance consumer viewing experience and competitive dynamics.
The TRAI regulation on the other hand is seen as an arbitrary move that neglects the concept of a free market, where demand and supply would decide commercial time.
Advertising should not be regulated
Following the consultation paper of March 2012 on advertising, broadcasters had pointed out to the TRAI that there was a precedence of a Supreme Court ruling, which had held that the restriction on advertising space in newspapers would lead to reduction in its revenue, which was in violation of Article 19 (1)(a). The same rule should also apply to television.
The regulation also contradicts TRAI’s own ruling of 2004, which had stated that there should be no regulation on advertisements both on free to air and pay channels.
Another point to note was that ad revenues were not just a part of the business model of channels but their very sustenance. Current market dynamics, some created due to the lacunas that had existed in the television distribution system in India including caps on channel pricing, have not allowed channels to benefit from subscription revenues.
A channel’s ability to demand an advertising rate was determined also by television rating. Ratings can be adversely affected if viewers were switching off from the channel on the account of ad breaks, duration of advertising or intrusive advertising. In the longer run, this affects the channel itself and hence the onus is on the channel to provide a better viewing experience. The argument to this was that the likes of news genre, where all channels have similar content:ad ratio, which at present is more than twice of TRAI’s mandated ad time, leave little choice for the consumer.
Also, viewership patterns of different genres differ. A general clock hour computation for ad minutes in an hour will have adverse effects on all niche channels.
Many industry stakeholders – broadcasters and MSOs (multi-service operators) – have pointed out that the present focus should be on digitisation. Consumers would even have the option to view a channel without ads in the digital era and hence the regulation of advertising would not be required.
Digitisation would also ease the burden of carriage fee on channels and hence would allow channels to bring down content and ad ratio on the channel. Since the TRAI has made the regulation effective immediately, channels will face intense pressure on honouring existing deals or recovering costs incurred on the channel.
The focus of the hour should have been to push the digitisation agenda and this could have been followed up by further regulations in improving the quality of service to consumers.
Our typical marketing budget is usually 10 per cent of the topline spend