Unlimited advertising inventory has led to pricing pressure, benefiting only advertisers: Uday Shankar

Interview with CEO, STAR India

Uday Shankar, chief executive officer of STAR India, supports the Telecom Regulatory Authority of India (Trai)’s cap on advertisements at 12 minutes an hour, though news broadcasters have gone to the Telecom Disputes Settlement and Appellate Tribunal against the decision. The chief of the country’s largest broadcaster also backs the regulator’s move to fix the panel size for subscriber ratings systems to 20,000, going up to 50,000, in an interview with Surajeet Das Gupta and Manu Balachandran. Edited excerpts:  

Trai has imposed a 12-minute-per-hour cap on advertisements and this has led to strong protests, especially from news broadcasters, who see their advertising revenues falling dramatically.

First and foremost, it’s the outcome of a fundamental problem we have. We are heavily dependent on advertisement revenue, and because advertisement inventory was not regulated, despite a clear provision in the cable Act, everybody became lax about it and increased inventory. In the process, the victims have been broadcasters, as the rates of advertising have not gone up over the years. Any increase in revenue has come via inventory expansion. The main beneficiaries have been advertisers. And this has caused consumer annoyance. Some channels go for as much as 30 minutes an hour of advertisements. The real issue is whether Trai has the authority to enforce this. It feels it has the authority and has invoked that. The regulator did give a transition period of six months. Other broadcasters are ready, unlike news broadcasters.

Does this impact companies like yours, which are focussed on the general entertainment space?

There is a transition period for everybody. Almost everyone was broadcasting ads for more than the stipulated time earlier. There is a short-time transition pain, even for us. But fewer inventories will help in correcting prices. Pricing has been inconsistent and under pressure primarily due to unlimited inventory. Average pricing has not moved up in three to four years and that’s why TV advertising in India is still the cheapest in the world.

Trai has come out with guidelines saying the panel home size for the subscriber rating system should start with 20,000 and go up to 50,000. Currently, the best is 9,600. And many are saying to double this number would require between Rs 200 crore and Rs 300 crore. Who will pay for the huge cost increase?

Broadcasters have prepared for that number. If the data system is erratic, the victim would be the broadcaster. Because of commercial factors, interest groups and lack of understanding, the proposal did not move earlier. We have already decided in the Broadcast Audience Research Council (Barc) that the number of boxes needs to be improve dramatically and 20,000 is a good number to begin with. The aim is to increase it further. I welcome Trai’s recommendations, but I am not sure it is enough. Can you adequately represent the country with 20,000 boxes? Not understanding the consumer behaviour affects broadcasters and the ability to price inventory, and that’s why we like a bigger number.

But who will bear the high cost of this investment?

I don’t know why it should cost that much (Rs 200-300 crore). It’s just a box that has to be registered. In this age of information technology, I don’t know why there should be physical boxes. We can move to smart digital technology. If the cost is such a concern, we should find a technology to bring it down.

You seem to have come to a compromise with TAM and its measurement system?

We were disturbed that the entire media universe had been trapped forever because it was measured through percentages. Because of new channels, the numbers of viewers were going up, the actual number of people watching the content was going up, and the percentage delivery was always coming down, because of the fragmentation in channel launches. That was an issue and we have succeeded in resolving that. Now, TAM is publicly reporting the reach, which is an absolute number.

With TAM making the changes, do you need Barc?

You need to make a distinction. Barc will own the rating system. TAM will execute the system. TAM can be a part of Barc. But Barc will have to outsource it and invite bids.

The government has regulated the costs of channels for consumers’ benefit. Do you think this system has worked for broadcasters?

The inability to monetise one’s content is a serious issue. Look at the principle of pricing. For instance, in a certain genre, you can only price according to the neighborhood (same-genre) channel. Then what’s my incentive to invest in big events. If I have a film channel that buys blockbusters and there is another film channel that shows only reruns but gets the same subscription, what is my incentive to go buy Chennai Express for Rs 55 crore? How do I monetise it?

There have increasingly been concerns of the media’s freedom being challenged. Is that a concern you share?

Yes, I am worried. The whole desire for anybody and everybody to play regulator is a big concern. That is why people are not innovating content. A well-known film producer today told me that because of the ban on cigarettes on screens, we have decided not to have smoking scenes in movies. Channels show saas-bahu serials because if you have political drama, as in the US, I won’t be allowed to screen it because there will be protests.

Has the second phase of digitisation succeeded? Has it increased subscription revenues for broadcasters?

It’s too soon to declare success. But it hasn’t gone badly and many boxes have reached homes. The next phase is when everyone starts behaving and running the business on the concept of a digital business. That transformation will take some time, because people who have done their business in a certain manner will take time to adapt. The regulator has started consistently pushing the disciplining of business in a digital mode. Digitalisation cannot go back. But subscription revenue has not started going up, and I personally do not think it will go up so soon. There is a process. For 22 years, cable operators kept all the money. Now you tell them to give a part of it from tomorrow; their mindset will take time to change.