The Hindu Business Line : `No channel need guarantee viewership'

In the television media business, it is much easier to launch channels but far harder to sustain it and make money. — ATUL DAS, SENIOR VP, ESSEL GROUP

Mr Atul Das, Sr VP, Essel Group

With the broadcasting sector witnessing tremendous action, and the number of channels swelling to over 300, the heat is truly on early entrants like the Zee group. Business Line spoke to Mr Atul Das, Senior VP Corporate Finance and Strategy, Essel Group, to get his perspective on how the medium would evolve.

Excerpts from the interview:

Several channels are being launched across genres. With the proliferation of channels, will viewership get fragmented?

Viewership does get fragmented, but it also increases on an overall basis. People were watching less than one hour of TV two years ago, now they watch significantly more. But while viewership grows, with more channels, the amount of time people spend watching a particular channel, or a group of channels, gets shared. So then the content becomes important. If you have compelling content, people will watch it.

The low initial costs draw a lot of people into the business. This is unlike the print media business, where a minimum capital investment is required for starting the venture. In the television media business, it is much easier to launch channels but far harder to sustain it and make money.But the ability to create content and a branding profile that connects with a viewer — that could take five years or10 years. And then when the investment is seen in totality, it would look humungous.

Will not fragmentation of channels mean sharing the growth in the advertising pie?

If you look at the past, in the niche genre, we were the first 24-hour news channel. Most people then had questioned whether there was a need for such a channel. Subsequently, several channels have been launched in this genre and still the space has grown. The news genre today gets ad revenues upwards of Rs 500 crore. Previously it was multinationals and FMCGs that drove advertising. People have realised the power of television media. TV has taken a lot of ads away from print. On a cost per 1000 basis, television is still cheaper than print, because television reaches a lot more people than print. The fact that Indian literacy is so much lower than developed economies suggests that the share of TV of overall ad spends should be much higher.

Has the advertiser's bargaining power increased with more channels being launched?

They have had bargaining power. If you look at the change in the scenario in the last couple of years, we have doubled the number of cable homes from 35 million to 70 million. But advertising has not doubled in that period. That's purely because more channels have been launched and fragmentation has happened. The broadcasting industry is getting together and trying to demand a hike in advertising rates because the number of households that are now watching television has increased.

But some advertisers have bargained for cheaper rates because of a fall in viewership in the post CAS period...

That is a specific issue happening between a specific advertiser and a particular broadcaster. We have not faced that issue. It is purely related to market share and not a development on CAS. Our lead competitor in the category has lost significant market share, while we have gained viewership share, both in absolute and relative terms. The ability to price your product is linked to the share that you command. In this case, while our competitor has lost, we have gained. Those adjustments will happen.

As far as overall advertising bargaining power is concerned, it is linked to, even internationally, one common denominator — CPT, cost per thousand viewers or readers. TV is therefore more attractive, because it is cheaper on a CPT basis. So eventually the industry will be able to raise rates.

How is their bargaining power affected when it comes to high-profile events such as the World Cup or KBC? Is it difficult to manage their expectations?

It is much like an investor putting money in a mutual fund. There may be 10 and he puts it in one. He takes risks that the fund may not perform to expectations. When an advertiser puts money in a programme, he takes an informed decision, but there are risks involved. So if he de-risks by booking ad slots early and therefore locking into cheaper rates, he also assumes the risk of the expected viewership pattern not materialising.

On the other hand, if someone waits to book at the last minute, when he knows the viewership is good, he takes that risk of not getting a preferential price, as the broadcaster sells the remaining 5-10 per cent inventory at a huge premium. So that's part of the buying and selling decision of any planner. No media product has to guarantee viewership.

Given their bargaining power, do such failures of events have a ripple impact on your future ad rates?

These are one-off events where the pricing is much higher than a normal event. So those things (ripple effect) will happen, till it gets stabilised. Such things don't happen for normal properties. Cricket is something that is fairly high priced. A normal programme would get a TVR of 3 while cricket gets a TVR of 12.

The pricing is based on the hope that we will get that TVR of 12. The problem arises when we actually get a TVR of 3 instead, which is then the pricing difference begins to look steep. These are the risks that a media planner takes. It is the job of media planners to maximise their equity for the amount spent.

What is required to turn around a channel's fortunes? Are one or two successful programmes enough to ramp up advertising revenues?

It is not so narrow that you can just manage with one or two programmes — at least, not enough to be in the top two. If you have one popular programme, you will probably be in the mind-space. But to be able to draw a huge viewership, that can happen only with a vast set of programmes.

Is it important to manage a network of channels?

I think it lends a lot of strength. While channels are sold on their individual strengths, if you have a group of channels, you can provide clients a larger mixture of reach through regional audiences, niche audiences, at various points in time. You are providing additional options.

That does not mean you can hide behind a network where none of the channels do well. Each individual channel has to stand out in its genre or category. But you can always leverage your network well and get that 20-30 per cent extra.

Do you expect consolidation in this space?

Channel launches are a combination of two things. One, industry has done well. Second, availability of capital has been much more in the last few years. A lot of players who have been planning to launch in this space have availability of capital.

We have seen consolidation in this space — we took over Ten Sports. Sony took over SAB TV. I guess some players who are non-serious will be tested in the consolidation phase. The more serious players who have good management backing them will stand the test of time.

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