The complaints are justified. Almost every broadcaster is over the 12-minute norm and some go up to 20-30 minutes at times. This takes away the pleasure of watching television, causing the consumer to either switch off or sulk and continue. So the notification has been greeted with joy by consumers.
That still does not take away from the fact that it is very badly timed and might actually end up harming both consumers and the industry. Here is why.
The reason advertising on television is going out of hand is that pay or subscription revenues are not delivering. Globally they bring in 50 to 70 per cent of broadcaster top line. In India this number is 15 to 20 per cent, and there are three reasons for that.
One, price caps limit what broadcasters can charge consumers and cable operators. The price of television signals has remained at an average of Rs 150-200 a month over a decade. It has actually fallen in real terms. Therefore, unlike multiplexes or newspapers, broadcasters do not have the freedom to price their content.
Two, revenue leakages. At an average of Rs 150 a month, India's 153 million TV homes spew over Rs 27,000 crore in cash. Of this cable operators get a little more than Rs 17,000 crore (the rest goes to direct-to-home, or DTH, a separate market). Barely 20 per cent of the money that cable operators collect reaches broadcasters; the rest leaks away.
Three, capacity constraints. The cable pipe in India has been jammed for more than seven years now, thanks to the rising number of channels fighting for space. So, instead of paying money to broadcasters, cable firms have actually been charging them hefty amounts in carriage fees.
These factors put pressure on revenues and costs and make broadcasters abjectly dependent on advertising. Since the market has become more competitive - over 800 channels and counting - advertising time has simply expanded. This even as realisations per 10 seconds have gone down and overall advertising growth has slowed. As a result, despite being the world's second largest television market, India remains one of the least profitable ones.
The answer to all these problems is digitisation. The ministry of information and broadcasting and Trai have spent almost 18 months now to ensure that it happens. After an amendment in 2011 to the Cable Television Networks (Regulation) Act, addressable digitisation is now mandatory. One-third of all television homes in India are already digital, thanks to DTH. By the end of 2014 all of them should be so.
Digitisation expands the capacity of existing cable pipes 10 to 14 times, removing all supply constraints, and also brings in 100 per cent transparency. Since each television home has a set-top box and is metered, the chances of revenue leakages and under-declaration go down. So subscription money will be shared more equitably. The most conservative estimate is that the impact of transparency alone should add close to Rs 8,000 crore to broadcaster top lines. This will happen after 2016, once 100 per cent digitisation is operational.
Once that happens, the nature of the game in the Rs 37,000-crore television business will change. From an advertiser-led, one-size-fits-all programming-led one to a viewer-led segmented one. The way to win in the digital world is by delivering programming that suits different audience types a la multiplexes.
A pay market with plenty of capacity demands that broadcasters pander to viewers, not advertisers. And that will mean cutting back on advertising inventory or not having any. Trai envisages this. That is why any channel that is only on digital is not under any price control, says N Parameswaran, principal advisor, consumer affairs, Trai.
Digitisation, thus, presents a golden opportunity to push up revenues by offering premium and niche programming and reducing dependence on advertising. That is a win-win situation for everybody - consumers, broadcasters and the government - because it gets taxes on a higher number.
Assuming that almost 100 per cent digitisation is operational by 2016, the broadcaster has no reason to not follow the rule. And then any penalty or suspension cannot be thrown out of court, either. That is the time to enforce the 12-minute rule.
By forcing the issue now, Trai and the ministry of information and broadcasting might end up jeopardising the single most useful piece of media legislation in recent times.
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