Why on earth would anyone want to launch a news channel in India? Going by the latest TAM Media Research figures, there are 122 news channels in the country, the highest in the world. They are fighting over an ad pie that has been stagnant between Rs 1,800 crore and Rs 2,000 crore for two years now. Worse still, the viewership of news channels shrank by one whole percentage point nationally between 2008 and 2010. Of the five listed TV news companies, only Zee News and TV Today made post-tax profits in March 2010. Most of the unlisted ones, except perhaps for Star News, are barely recovering their operating costs. Yet, many more news channels await permission to launch.
Where is this business headed?
“Nowhere,” quips Ashok Venkatramani, CEO, MCCS, the holding company for Star News and other channels. He may well be right. Advertisers have been downgrading news. “Earlier news was meant to offer a credible environment to convey a message; today credibility is a big question mark,” says C V L Srinivas, managing director, Starcom MediaVest Group. “Consumption is not driving this growth in channels,” says I Venkat, director, ETV (Eenadu).
The issue is not competition, argue broadcasters. The issue is non-serious competition. Many of the new players have come into the market because they want to use a news channel as a tool of influence, favour or threat. These could be builders, politicians or even large companies from other industries.(Click here for table & graph)
A cursory analysis of the list of 122 channels shows that roughly one-third are owned by companies or individuals not interested in building a news brand. “Many of the regional channels are just political vehicles,” says one industry insider. As a result, those who want to make money end up competing with those who have money to burn and no shareholder questions to answer. “Because of non-serious players, TRPs are not increasing,” says B Ravindra Nath, managing director, Shreya Broadcasting. It entered the market in 2007 with Telugu news channel TV5.
The Telugu news market is, in fact, a great case in point.
In 2007, there were five news channels in Andhra Pradesh. In January this year, there were 17. Many joined the fray because Eenadu and Gemini were doing so well. There came the private equity-backed TV9, the corporate family-backed TV5, the political family-backed Sakshi TV and the media owner-backed ABN News. In the first few years, from 2007 to 2010, the news ad pie almost doubled to accommodate these channels.
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But now, growth is slowing. From Rs 130 crore currently, advertising on Telugu news channels is expected to hit just about Rs 140-odd crore by March 2012. In a market where four more channels are expected, this will hardly sustain anything. The results are evident on air. “Standards are not what a news channel should have; there is a lot of content piracy and use of film content and a few of them resort to creating news sometimes when there is nothing much happening,” says Sanjay Reddy, senior vice president of Sun Network and business head of Gemini TV.
That, incidentally, is the story nationally too, especially in hyper-competitive markets such as Hindi. As a result, “rates have been stagnant or have gone down over the last two or three years. A few large advertisers are managing without news. Earlier they bought news as a frequency builder, now they use other genres like music and movies to do the same thing”, says Venkatramani.
In a normal business situation, there are three ways in which this would have been resolved.
One, there would be consolidation. But it is not happening. Take the example of Andhra Pradesh. “All the 17 (channels) are not surviving because of advertising. They have adequate funds so they will not sell out. Therefore, there is every possibility of an increase in operating costs,” says Reddy. That is exactly what is happening. Vynsley Fernandes’ Castle Media helps companies set up a news channel on a turnkey basis. He estimates that over the last two years, the capital expenditure to set up a language news channel has gone down to Rs 30-Rs 50 crore from Rs 50-80 crore. However, operating expenses have rocketed from Rs 15-20 crore a year to Rs 24-30 crore.
Two, there would be cost cutting. In the last two or three years, distribution and talent costs ( a huge chunk of operating costs) have more than doubled. Till digitisation takes place, distribution costs will remain out of control. So will talent costs, since everyone vies for the same pool of producers, reporters, technicians or anchors. “About 70 per cent of the operating costs in this business are not controllable, then what levers does one have to make money through cost cutting?” asks Venkatramani.
Three, there would be revenue augmentation, which shows some promise. For instance, currently 10 per cent of TV Today’s topline comes from international and domestic pay revenues. “If I can increase it by even 2X [twice], it will be a significant change,” says G Krishnan, executive director and CEO, TV Today Network. Star News is working on its mobile and online offerings. And media buyers approve. “Serious news seekers have started looking at alternate ways of getting news,” says Srinivas.
What also works is doing long-term deals for revenue stability. For instance, Maruti Suzuki spent Rs 40 crore or so on advertising on news channels in 2010-11. “In news if something happens then you [an advertiser] get disproportionate ROI [return on investment],” says Shashank Srivastava, chief general manager, marketing, Maruti Suzuki. So a deal over one or two years works best. Over that period, some event or the other, which gets a huge spike in viewership, is bound to bring the “disproportionate ROI”.
Also, some strong lobbying to make two policy changes could help. One, at present any channel that broadcasts news for even a few seconds is defined as a news channel. Actually, many channels broadcast several hours of pure entertainment programming every day. Just changing the definition will weed out the non-serious players.
Two, only 45 of the 122 news channels are members of the News Broadcasters Association (NBA) and are bound by its strict content code. The non-member channels are the worst offenders on content standards and piracy. Therefore, making a news channel licensee a mandatory member of the NBA would weed out a few more of the troublemakers.
What would really help tackle major problems is an autonomous media regulator à la Ofcom or Federal Communications Commission. However, this need has been ignored by all governments.
Despite the gloom, most broadcasters still believe that the fundamentals of the market – large audiences with growing purchasing power, a hunger for news and lots of unaddressed genres – remain sound. A lot of people still want to watch plain old news, reckons Barun Das, CEO, Zee News. He claims that in spite of a “zero sensationalism” policy, Zee News commands a premium from advertisers.
“It is a demand-supply thing. Every few years there will be some equilibrium,” adds Sunil Lulla, CEO, Times Television Network. “There is some slowness. But other revenue streams such as subscription and sharing feed with mobile operators will start kicking in,” says Krishnan. And so will consolidation. “Eventually, this will become a market with three or four players and 30 to 40 channels,” says Das.
If it does happen, it is hoped that the consolidation would be worth all the trouble.