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TRAI ad cap can adversely affect economic growth: Ashok Venkatramani

16-May-2012
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TRAI ad cap can adversely affect economic growth: Ashok Venkatramani

The TRAI (Telecom Regulatory Authority of India) order on television advertising has come as a complete surprise and it has been issued without factoring in our responses to this challenge. There are huge implications that come from this. First, it completely upsets the business models of many channels and for mere survival, they will have to revisit the same. It does not factor the way the industry manages the ‘clock hour’. For example, news channels often have to skip ad breaks during major events as advertising during that time is inappropriate. If we can't carry forward our minutes, then it severely restricts our income and is not agreeable.

We would like our content to be on air throughout. In a sense, this is a requirement as per the role of a 24-hr news channel. And we should hence be able to monetise non FCT (Fixed Commercial Time) properties, but this is no longer permitted in the new advertising regulation. Genres such as sports too will have challenges on account of this order. Only placing ads when there is drinks break means saleable inventory goes down sharply – this can have huge repercussions.

We will have to study the order and its implications in greater detail before we can understand the full impact of it but the biggest blow, according to me, would be that the reduced inventory would lead to a steep rate hike. SME (small and medium enterprise) advertisers would be driven away and only the big brands can afford television now. Cost of brand building would go up sharply and this would lead to further slowdown in the growth of our economy. This is not a small thing, it is a dramatic change.

This rule will affect all genres in its wake – I cannot think of one television segment that will benefit from this. While there may be some channels that were following the 10+2 ad cap, if at all, as a genre, there is no domain that was following it. This reduction of inventory and clauses to curtail other revenue sources will bite every genre.

The news genre specifically gets seriously impacted by this order. News is a poorly differentiated genre and hence not all channels would be able command a price increase to match lower inventory. Also, given our compulsions on managing ad breaks, we will struggle to manage the clock hour especially during major events. This regulation upsets the business models of news channels.

As told to Noor Fathima Warsia

Ashok Venkatramani is the Chief Executive Officer of MCCS (Media Content & Communication Services) that airs channels such as Star News, Star Ananda and Star Majha, which will be renamed ABP News, ABP Ananda and ABP Majha from June 1, 2012

Follow Ashok Venkatramani @ashokv

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