The Telecom Regulatory Authority of India (TRAI) has recommended it will restrict the number of minutes of advertising time that all channels can carry to 12 minutes an hour. Vikash Mantri of I-Sec tells CNBC-TV18 that broadcasters might find it difficult to compensate via higher rates versus lower volumes.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q1: Have you gone through the recommendations? How detrimental could it be for broadcasting companies?
A: I think this is clearly detrimental to the broadcasting industry and there could be a slippage of 3-5% of overall broadcasting revenue slipping to another medium. We believe there will be a huge change in advertising that would now happen between genres. Clearly, at least the general news channels were carrying a very heavy inventory in terms of volumes of minutes on a per hour basis and their advertising was volume and it might shift to other channels or other genres. It will be very difficult for the broadcasters to immediately get those significant rate hikes to make good the losses in the volumes of minutes here.
Q: Just to break it down for news broadcasters in specific, what would you say the impact on revenues could be aside from your overall sector impact?
A: In the prime time news, broadcasters go up as high as 18-20% of advertising time in our clock hour basis and now that has to be reduced to the 12% mark. Now they will be able to make good some of the advertising revenues through better tariffs and some of the news operators have already starting to do that. This could mean a 5-10% impact on overall revenues for the news broadcasting genre and it would mean they have to significantly ramp up their tariffs maybe by at least 45-50% in the near-term just to make good these losses.
Q: What does it mean for listed companies – Zee and Sun TV which derives a principle portion of their revenues from their flagship entertainment channels, regional or Hindi? What kind of impact do you see it having on those names?
A: It will be detrimental to advertising revenues and it could impact earnings in the range of 3-5% which in the near-term given if there is a slowdown and growth is focused by creating, getting in more inventory and volume that will take a bigger knock in the near-term.
For the general entertainment channels the regulation that you should have at least a 15 minute ad break between two advertisements will make it a logistical nightmare to place advertising between their key programs where one of the prime time slots will have just one ad break and that might be as long as four minutes or so as compared to two to three ad breaks they take currently. It will be a very difficult task in terms of logistics and planning of advertisement but we expect GECs to be able to raise tariffs to make good these losses in inventory here.