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Stricter implementation of 12-minute ad cap rule to hit TV industry hard

According to TRAI, no broadcaster can exceed 12 minutes of advertisements in an hour of a programme.

October 29, 2021 / 08:09 PM IST

The Telecom Regulatory Authority of India (TRAI) has approached the Delhi High Court for stricter implementation of a 12-minute ad cap on TV channels saying that they have received many complaints from viewers.

According to the regulator, no broadcaster can exceed 12 minutes of advertisements in an hour of a programme.

While TRAI had introduced the 12-minute ad cap rule in 2012, not many broadcasters adhered to it and now the regulator is looking at stricter implementation of this rule.

However, analysts say that implementation of the rule will hit the broadcast industry hard especially after the COVID-19 impact.

"In an hour, the cap allows for 10 minutes of advertising and 2 minutes of self-promotion. If this cap is implemented in a pandemic-affected environment, the television industry could face a massacre," Likhita Chepa, senior research analyst at CapitalVia Global Research, told Moneycontrol.

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Even N Chandramouli, CEO at TRA Research, a consumer analytics and brand insights company, said: "Since this (12-minute ad cap) rule reduces the viable billable minutes, revenues get impacted, adding to the pressure of low COVID advertising."

While TV advertising revenues have improved, they are yet to reach pre-COVID levels. It is expected that by end of FY22, TV ad revenues will largely reach the pre-pandemic levels.

In terms of COVID-19 impact on TV ad revenues, ad revenue dropped by 40 percent in the first half of 2020, with an advertising expenditure (ADEX) of Rs 8,084 crore against Rs 14,199 crore in the first half of 2019.

Chepa pointed out that advertising revenue accounts for 40 percent of the TV business, with the remaining 60 percent coming from subscriptions.

"Both of these revenue streams have been severely impacted by the virus outbreak," she added. 

When it comes to genres which will see more impact, Chepa said the news category may suffer a significant setback. Chandramouli noted that sports sectors take the majority chunk of the ad revenues. 

On news genre impact, Chepa pointed out that in recent months news channels' figures have improved as ad volumes recovered strongly in the third and fourth quarters, with 18 percent and 33 percent increase, respectively.

"During the year 2020, about 5,000 advertisers placed ads only on TV news. If the ad cap is implemented, all of these developments could suffer severely," she said. 

Along with genres, the category of channels that could see higher impact are free to air (FTA) channels.

"FTA channels rely completely on ad revenue as their sole source of income, which might be severely harmed if the cap is implemented," said Chepa. 

It is estimated that around 55 percent to 60 percent of the current set of TV channels are FTA.

The fate of broadcasters will be decided by the Delhi Court which will hear the matter next on December 23.



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Maryam Farooqui
first published: Oct 29, 2021 08:09 pm
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