In-depth: Six months after NTO, niche broadcasters see at least 25% fall in ad revenue

India's broadcast industry is still reeling under the impact of the Telecom Regulatory Authority of India’s (TRAI) new tariff order implemented around six months ago. 

Though it has affected the whole industry, the English entertainment and movies segments have been the worst hit due to fall in advertising revenue because of a shrunken subscriber base. While some experts, on condition of anonymity, pegged the decrease in the range of 45% for some channels, a few others said the damage is to the tune of 25% on an average.

Before the implementation of the NTO, the industry was hopeful that just like digitisation, it will help increase subscription revenue.

Since the pickups for the genre were restricted and the bundling and bouquets amounted for huge discounts, the broadcasters did not gain much. Having said that, there is an increase in subscription revenues but not as much as the drop in advertising money.

“All in all, the English GECs and movies channels are bleeding. For some of the channels, the drop in ad revenues and the rise in subscription revenues are so significant that subscription revenues are on a par with advertising revenues. But nobody will accept that subscription revenues haven’t grown as expected, and ad revenues are not expected to grow any sooner,” said an industry veteran.

Vivek Srivastava, President, Strategy and Business Head, English Entertainment Cluster, Times Network, said, “Till now, subscription and advertising have had about 25:75 contribution to the revenues. Currently, subscription revenues have grown but the gap between the two revenue streams is closing in, largely because the advertising revenues are facing serious headwinds from the market. The NTO, coupled with the economic slowdown, hampered the ad revenues, while better transparency is helping subscription revenue growth. Also, the DPO sector is getting more organised, as we speak.”

English universe on TV is shrinking because of OTT

The viewership numbers are dropping and the universe for the English genres have always been very small in the BARC India ecosystem. Not to mention that the situation has worsened after NTO. The overall genre has dropped by almost half and hence, advertisers are finding it difficult to invest in it.

Amit Shah, Cluster Head, West, North and Premium Channels, Zeel, said, “Any big change is ought to bring teething problems. NTO was no different as it initially brought in a period of flux at the ground level with consumers and distributors being in a state of sheer chaos. Largely, channel packs were being picked as per DPO suggestions. Now, with increasing awareness of the MRP regime, the subscription numbers are steadily growing, and so are the subscription revenues. English category caters to a unique set of influential and aspirational audiences. Premium brands across automobile, telecom, BFSI and FMCG, among many other categories, have over the years found a great fit with this category.”

Adding more about the differentiation with OTT, Shah said, “Especially since most of the English content available on OTT has the paywall limitation, brands find it difficult to partner with this content, restricting their exposure and reach. To reach out to our affluent viewers, they have partnered with us on impact campaigns to drive perception and recall. Hence, it goes without saying that TV is and will continue to be the best platform for advertisers to get associated with this quality content and target the relevant TG.”

It’s true that Netflix and Amazon Prime don’t offer any AVOD segments and hence, advertisers don’t have an option of encashing on the audience on these platforms. Vinita Pachisia, SVP, Carat India, has another opinion, “Even if Netflix and Amazon Prime don’t entertain ads, the other platforms like Sony Liv, Zee5, ALTBalaji, Voot and Hotstar are getting stronger and have an AVOD model too. These platforms are also making more original content, considering increasing consumption of online content.”

She added that these genres were getting affected because of OTT platforms much before NTO was introduced, after which the scenario has worsened. “So, for the audience who are consuming content on OTT, TV channels have largely become redundant. I don’t think subscription revenues would have gone ahead of advertising revenues. I don’t even think that subscription revenues would have increased any significantly.”

According to Pachisia, advertising has taken a hit, to the tune of 25-30% for the English channels, majorly because of NTO, coupled with the three big events — IPL, World Cup and elections that happened in the first quarter itself — which sucked up huge investment from the market. There isn't much money left in the market. Advertisers already planned for these events and might not want to risk any investment right now. Brands are waiting for the NTO to stabilise, which will take another 13-15 weeks.”

While the situation has been bad, the festive season is expected to inject some hope among broadcasters. The festive season spending increases by almost 25% on television and the English genre is hoping for some respite. 

Srivastava said, “NTO dropped the volumes of advertising. We are expecting these to spring back with the festive season. We are already seeing green shoots appearing from the advertising point of view. Not all networks have been able to adapt to the NTO very well. Some of us have been quite prepared to handle the flux in the market. It might be because many of these networks have Hindi GECs as their primary focus area, but for us, our EEC is the most important piece.”

Not everyone agrees that festive will bring any good news for this genre, though it might be a very short-term relief. Pachisia said, “The ad rates on English genres are significantly coming down and the genre is getting more desperate with time. Festive won’t be a big help too, since they will be used as frequency builders for obvious advertisers like FMCG, auto, jewellery and some others. This increase will only be for a month or so, not more though. Because of clutter that the festive advertising brings, these advertisers might use frequency to out-shout others. English news is still not affected much, but English entertainment and movies are the worst hit. News is pretty much guarded since it is very habitual.”

Change in strategies

With the changing ecosystem, the strategies have to be better targeted. Time and again, the broadcasters in the category have tried to revive themselves, by bringing content sooner, fresher and exclusively on their respective platforms.

We asked broadcasters if their strategies include going deeper in the Indian market, beyond the metros or to cut costs.

Shah from Zeel said, “English category has largely always been a metro phenomenon. However, NTO has homogenised the whole nation, in the sense that a person sitting in the mega cities and someone in the remote town of UP is paying the same to get an English movie channel. Also, the probability of them picking up the channel is the same. NTO has expanded our TG from the six megacities to all of India and these audiences are open to consuming high-quality English content. In order to reach these audiences, we crafted specialised campaigns for our channel brands and properties. Our ad campaigns like our MRP campaign #WhereIsMyChannel, BBC First campaign #ShakenAndStirred and the Venom Anthem reached out to a wider audience base.”

Asked whether there will be cost-cutting on programming costs, Srivastava said, “Acquisition costs will have to be rationalised, in the sense that we will look at value for money in a more stringent manner. But we are very clear that neither the channel brands nor the consumers should suffer. Our reach has been the least affected in the genre, and hence the cost of acquisition per user hasn't really increased for us. Most of the transition that had to happen on ground has happened. Minor tweaks will keep on for some more time, like people will keep changing and activating/ deactivating the packs.”

The trouble with the genre is that cutting down the programming cost brings a fear of losing subscriptions. However, given the current situation, everyone’s bleeding at the bottom line. How long will a channel have to hold on to this situation?

“This is not a time for any knee-jerk reaction. The focus right now is on getting back our subscription numbers and offering more engaging and entertaining content. Viewer is at the core of our strategies. Keeping in mind the viewers’ tastes and preferences to consume up to date and trending content, we have been fine-tuning our content curation to adopt a TV-first approach on Zee Café, where over 70% of our content is available only on Zee Café, and nowhere else (on any other platform),” said Shah.

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