Double Standards: Should ads cover increasing TV content cost?

Sunil Punjabi, AXN India Networks (L) and Anita Nayyar, Havas Media Group (R)

Increasing cost of content is being seen and cited across TV genres. The reliance on advertising remains, which means ad rates have to go up. Have ad rates gone up commensurately?

Sunil Punjabi (SP): Ad rates have gone up but not at the rate at which content (cost) has grown. There are two primary revenue streams - subscription and advertising. Apart from advertising, subscription too has to be commensurate to the increasing cost of content.

Anita Nayyar (AN): Channels are in the process of increasing ad rates by 15 to 30 per cent depending on genre, channel, and show, mainly to compensate future inventory cuts. In the past also the content cost has increased, however ad rates have not taken much of this increase as quality content offering by channels is a hygiene issue.

AN: Interesting and well-produced content always attracts viewership. However, it is not necessary the expensive content is always good and hence it may not necessarily and always attract proportionate viewership. For example, a soap like Qubool Hai on Zee TV delivers >3 TVRs and a high cost reality show like Dance India Dance also delivers a TVR of 3 to 3.2. Being a reality show, DID is expensive content. Bigg Boss 7, the much talked about reality show on Colors, delivers lower ratings than the regular soaps like Balika Vadhu and Sasural Simar Ka on the same channel. With Salman Khan anchoring the show (charges approx Rs 5 cr per episode) and inmates being paid to be part of the Bigg Boss house, the content cost is certainly high but does not translate in proportionate eyeballs. Hence, while on the same channel the expensive content creates impact, it may or may not create the necessary viewership. When it does attract viewership and creates huge impact, if you take the total cost of an episode and offload it to advertisers, does the viewership of a particular show translate into commensurate sales, the ultimate goal of an advertiser? With increasing costs, this benchmark will increasingly come into play for an advertiser who might choose to distribute his spend over the next rung of popular programmes.

What are the other reasons for ad rates going up? Is the hike (un)reasonable?

SP: The number of households where TV is reaching has grown significantly over the last three years. From the advertisers’ perspective, an ad spot which was earlier delivering X number of households, is now reaching more and more viewers. From the broadcasters’ perspective, the ad rates have to be commensurate to the increasing number of eyeballs that TV is now delivering, because of the increase in the base of the sheer volume of households itself.

AN: The impending inventory cap is primary, coupled also with the festive season. In the festive season, there is a normal increase of 10 to 12 per cent due to demand and clutter.

Can subscription revenues compensate for rise in content cost? By when will we see this happen?

SP: Digitsation gives the opportunity to come to a conclusive evidence of number of households. Beyond that, content will be able to drive ARPUs. Industry average for micro transactions is Rs 160 to 170 per household (per month). The digital platform is twice that value. The market is completely fragmented, and the mechanics are yet to unfold and implementation will still take some time. But yes, digitisation has opened up new doors, and will add to the revenue kitty for every broadcaster.

AN: Subscription will not compensate the hike in content cost. Distribution is a huge market with big money riding on it. Subscription will surely contribute but content cost needs to be controlled.

We will see the full effects of digitisation post December 2014 spread over 2015.

The article appeared in the issue of Campaign India dated 4 October, 2013