Up close and local

The dilapidated New Delhi House building on Delhi's Barakham-ba Road is an unlikely location for a news channel.

So when you meet Vinod Mehta, the co-promoter of Total Telefilms Pvt Ltd, in his office on the 14th floor, he is quick to explain that the cramped space is meant for administrative purposes.

"We are negotiating for a good location to build fully automated studios and an office in another building in Connaught Place," he says.

Mehta and his editorial head Shailesh (he doesn't use his surname), a former Zee News staffer, are currently recruiting people and ordering equipment to set up a local news and infotainment channel for Delhi and its adjoining areas like Noida and Gurgaon which fall in the National Capital Region (NCR).

Much like Total TV, the top brass at S1, another wannabe news channel, is equally busy sorting out the 22,000 applications it got in response to its recruitment ad.

Says S1's chief executive and editor-in-chief Santosh Bhartiya: "We've hired a PR agency to help us sift through the applications. The channel should hit the small screen by the end of the year."

Media industry sources say that S1 plans to target the NCR audience, though Bhartiya is cagey about the channel's format. "All I can say is that S1 will be the human face of the national capital and we will have a countrywide presence." If S1 is indeed a local channel, Delhi will soon have at least two satellite channels that offer city news.

To be sure, S1 and Total TV may not be the only local channels to hit Delhi in the near future. A top Zee Telefilms executive confirms that the broadcaster is awaiting government clearance for its application for a city-specific satellite channel.

And the market could get even more crowded once Sahara starts its news channel for the NCR region. "We expect at least 6 to 8 city channels in India to be on air in the next one year," says M N Vyas, director at broadcast services company Essel Shyam Communications Ltd (ESCL).

Vyas should know. His company has been fielding queries from prospective clients wanting to uplink local channels. In fact, a Mumbai- based media house keen on a local channel is negotiating with him to hire ESCL's uplinking facilities.

For potential business in Mumbai, Essel Shyam is already planning to build a teleport in the city.

Clearly, it's time for television broadcasting to go local. City-specific satellite channels are set to proliferate in India's rapidly growing satellite TV market. And, surprisingly, it is not just national and regional broadcast companies that are eyeing the local TV business.

Non-media players are jumping into the fray: S1, for instance, is backed by the over Rs 2,000 crore real estate company, Senior Builders. Total Telefilms', on the other hand, is promoted by Om Prakash Chautala's close associate Vinod Mehta and his textiles exporter friend Anil Gaba from Panipat. The rumour that the channel is funded by Chautala himself is promptly dismissed by Total TV's editor Shailesh.

There are several reasons local channels look attractive. For starters, owning a channel suddenly seems affordable. The broadcasting end of the bill for a satellite TV channel has halved.

"Earlier, broadcasting comprised nearly 30 per cent of a channel's total cost of operations.

Today, it is between 10 and 15 per cent," says Vyas. So if you paid $ 20 million (about Rs 87.1 crore at the prevailing exchange rate in January 2002) for broadcast equipment, a transponder and uplinking 5 years ago, you can get by now with Rs 2-3 crore a year.

This has encouraged smaller businessmen with money to spare to leap into the television industry.

Besides, if you meet the necessary government stipulations, getting permission to enter the television medium is no longer tough either. "With the regulatory framework in place and institutions willing to finance TV projects, the sector is luring small, local players," points out a media industry expert.

But the most tempting part of the business, other than clout, is profitability. And in this respect, Hindi news channel Aaj Tak has shown the way. Aaj Tak tapped the local retail advertising market, besides encouraging small, unknown brands to go on air for the first time. Other news channels followed suit and today they generate over Rs 300 crore in advertising revenue.

The promoters of these city-specific channels, however, are lured by the nearly Rs 1,200 crore all-India retail advertising market. "Of this, Delhi enjoys the biggest share, followed by Chennai," says Sandip Vij, president, Optimum Media Solutions, the media buying and planning arm of Mudra Advertising. Total TV's Shailesh agrees with Vij. He believes Delhi's retail and local advertising market is worth close to Rs 500 crore.

"We expect hospital chains, restaurants, educational institutions and malls to be our advertisers," he says.

The local satellite channels, whether in the news or in the infotainment segment, are also eyeing the cable TV ad market. The all-India market for cable advertising (comprising scrollers promoting the local mithaiwala or palmist that cover half your TV screen) is said to be valued at around Rs 300 crore.

"It may not be large but it is something the local satellite channels think they can tap into," says Ravi Mansukhani, CEO, In Network Entertainment Ltd (INEL).

The company runs two cable channels "� "In Mumbai" and "CVO" for the Hinduja-promoted cable distribution network. "In Mumbai" apparently earns Rs 2 crore a year from advertising.

Needless to say, such numbers instil confidence among local TV players, enough for them to proceed with their plans full steam. Total TV's director Mehta, for instance, is planning to deploy 100 reporters to cover the NCR.

"Other than news we will have shows and other infotainment programmes," says Shailesh, promising that the channel will be a "happening" channel.

S1, meanwhile, has signed up with ESCL to set up its earth station near the Asiad Village in New Delhi. It is hiring 250 employees in the first phase and promises to launch a bouquet of specific interest channels within two years.

So will the local channels succeed? Vij does not think so, not for some time to come. Despite the size of the local advertising market, he does not see how these channels will manage to attract advertisers. National channels such as ETC and B4U as well as some national news channels offer extremely competitive ad rates, he says.

Often, it does not cost more than Rs 1,000 for a 10 second spot to get on to one of these channels. "How will the new local players compete with such aggressive pricing," he asks.

Secondly, good content can be expensive. While a one-hour news programme may cost up to Rs 2 lakh, an entertainment programme (fiction) costs between Rs 3 lakh and Rs 7 lakh.

If television channels create such expensive programmes, the advertising revenue may not be able to either support or sustain them. Local retailers have small and limited ad budgets, unlike national advertisers with huge ad spends.

So while local advertising means incremental revenue for national networks, they make their big bucks from the premium, national brands. The local networks will not enjoy this advantage.

"Besides it is difficult to imagine that local channels will be able to wrest viewers from the Star Pluses and Aaj Taks," says a Delhi based media planner.

The channel owners are quick to point to the US market where several TV stations co-exist in a single city. But media industry experts say that US cities are capable of generating both content as well as advertising revenue. "The social fabric in the US is very different.

People are concerned about local affairs and believe in community living, creating an affinity for local content. India lacks that local community culture," says Vij. So, while rural India may have a community living culture, it may not be a commercially viable market to operate in.

Sorting out the cable distribution tangle could be another major challenge for the local channels. Nearly 80 per cent of the cable network in India is still in the analogue mode and therefore cannot carry more than 70-75 channels.

"As a result, prime brand space is always at a premium and a carriage fee has become an industry norm," says INEL's Mansukhani.

Mansukhani says that "In Mumbai" manages to make money in advertising only because the channel is piggyriding on the Hindujas' cable network. But the new television channel promoters seem unfazed by such worries. Total TV's Mehta says that he has a good rapport with the cable operators and visibility should not be an issue.

Bhartiya, on the other hand, says that the distribution cost has been factored in, in the business plan.

Interestingly, however, even the sceptics feel that in the long term, the concept of local channels in India may work. "As we move towards digital platforms where space is not a constraint and other modes of delivery such as direct-to-home (DTH) emerge stronger, small, local players have a definite chance of survival," says Mansukhani.

"Theoretically, it is possible if Indian cities start generating higher levels of advertising and content," adds Vij. So eventually there may be a light at the end of the tunnel "� though the end of the tunnel may take quite some time to sight.