NDTV looks to tam(e) costs and ratings

After being in the news itself, and not just serving it up, broadcaster New Delhi Television Ltd, popularly known as NDTV, is looking at putting the controversy over its court battle with TAM behind it.

What needs the management’s attention is its financials, which have been under pressure. It has been reporting net losses in the past two years, even as revenues have recovered only partly from the severe decline of 2010-11. Reliance on advertising revenues has made for uncertain prospects, with the economy going through a roller-coaster.

NDTV believes that external factors will continue to be a big risk, even as it works on a plan to control its costs and become more efficient. Vikram Chandra, Group CEO, says the broadcasting industry is staring at one of the most significant transformations, thanks to the digitisation process that is underway.

Against this backdrop, and its ongoing war regarding TAM ratings, what will tell shareholders at the Annual General Meeting on September 27? Says Chandra: “NDTV is fighting its battles internally by taking steps to rationalise and cut costs and bring in efficiencies, and we have seen the results. But the real big fight now is over issues that are external. Investors need to look at the changes that are happening in the industry.”

Austerity drive

High employee costs and marketing expenses have been a problem in the past, but NDTV says it is working to cut back on overheads. “Overall, last financial year we had an operational breakeven. We have already undertaken steps to keep a control over our costs for several quarters. If you look at our support overhead costs alone they are down by nearly 27 per cent,” he said.

The Group has been able to bring down its net losses. Its consolidated net loss for the fiscal ended March 2012 stood at Rs 87.37 crore against Rs 173.89 crore for the financial year ended March 2011.

“The two single most important changes that will impact the industry are how digitisation pans out which will make news broadcasters less dependent on advertising revenues, and whether the industry manages to put a transparent audience measurement system in place,” explains Chandra. The broadcaster has hired Ernst & Young to make the company more cost-efficient.

According to reports, the company had recently sacked employees as part of its efforts to cut costs. NDTV said the process to cut costs is now over.

It has also taken steps to improve the design of its channels to sport a clean look and stand out from the clutter.

In the past, the company sold its general entertainment channel (GEC) ‘Imagine’ to Turner as it realised the market is going into a prolonged period of downturn and running a GEC would require cash. Turner, however, decided to shut the operations of Imagine.

NDTV believes that its decision to sell its GEC prevented it from becoming debt-ridden, and relieved of immediate pressures. Asked if the company is looking to sell NDTV Profit, Chandra says he will not comment on speculation. For now the company is on a wait-and-watch mode on how the industry scenario changes, with digitisation as well as television rating point (TRP) issues getting sorted out before it makes any plans to expand.

New media, global revenues

The company believes it has managed to create a strong presence in the new media space and is betting big on NDTV Convergence. The company saw 66 per cent growth in page views, which stood at 2 billion in the last financial year. Video views also stood at 2 billion minutes for the year.

“If we had a Web site of this size and scale in the US, we would have been making 20 times more revenues,” emphasises Chandra.

The company’s biggest step was launching its application to tap into the rising consumer trend of using the mobile phone to access news and entertainment content. “New Media and the mobile screen are the future, there is no doubt about it,” he said.

According to him, the other strength for NDTV is its clear connect with the Indian Diaspora based in 72 countries. In an environment like the Internet, which is transparent, NDTV has a strong presence and has achieved market leadership, he claims.

Digitisation

News broadcasters, just as other broadcasters, have been pointing to their over-dependence on revenues from advertising with very little revenues earned through subscriptions in the analogue cable scenario. The complete dependence on ad revenues is what has led to the constant race for TRPs, which also led to the deterioration in news content, media analysts point out.

While the problem of over-dependence on advertising revenues plagues the entire industry, yet it is far more challenging for news broadcasters. As Chandra says: “In this current environment, the dependence on ad revenues as well as the problem of high carriage fees are bleeding most of the news broadcasters.”

News broadcasters don’t have the size or scale of general entertainment channels to attract those kind of ad revenues. “Where in the world do you have major news broadcasters entirely funding themselves on ad revenues,” he asks.

NDTV believes that, with long-term digitisation, there will be rationalisation of carriage fees and the company will earn higher subscription revenues but how much exactly he says is difficult to estimate for now.

Most news broadcasters earn about 70-80 per cent of their revenues through advertisements.

Since subscription revenues are earned after deduction of the carriage fee, it is mostly in the negative for news broadcasters, which means the entire net revenues for broadcasters come from ads.

For NDTV, the carriage fee is 20 per cent of its overall revenues. It’s a mix that it hopes to change.

Read also: > NDTV's battle with TAM

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