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In-depth: How the new tariff regime will impact ad rates

Experts say niche channels will be at a disadvantage but FTAs promising a fixed reach will flourish under the new regime. Marketers feel ad pricing for GECs will depend on their entertainment properties and viewership fluctuation as channels getting dropped out will reflect immediately on the ad slot pricing, making media planning more difficult

The new tariff regime that came into effect late last month may end up reducing advertising rates for a select category of channels, which will put more stress on the already stressed bottom line of broadcasters.

Experts say major networks may see a dip in their viewership once the migration is complete by January 31. Any reduction in viewership will adversely impact the ad rates. The new regime empowers viewers to pick and pay for only those channels they want to watch instead of being forced to buy a bundle pack offered by operators.

Industry leaders feel that instead of the channel ad rates model, the programme ad rates of premier properties would be more prevalent as a standard.

BK Rao

“Media planning will become difficult as data will change radically every six weeks. So the planning has to change accordingly. One month a viewer is watching Star and then if there’s an exciting property on Zee, he moves there and drops the earlier channel,” said BK Rao, Marketing Head at Parle.

“Earlier, we would do a shadow plan for a year and as we come closer to the campaign, we would do a reassessment of the entire campaign plan and we would release. Now it will be short term as the advertisers and agencies will do the planning for six weeks and then monitor,” he added.

Industry experts and advertisers say the impact of the new regime would be most visible on movie, music, lifestyle and other niche channels that were earlier sold as part of a bundle.

Broadcasters will have to invest heavily on the content of these channels in order to attract consumers and advertisers. Earlier, a niche channel or long tail channels had an advantage of being offered in a bundle. However, now the broadcaster will face a disadvantage as such channels will be sold separately and attracting interest of consumers to pay for such channels would be difficult.

"GECs have their set programming and loyal viewers but channels dedicated for movies, sports and music will have to bring in differentiation. I think right now there are around 10 movie channels and to get viewers, they will have to get new movie titles. They can’t have similar movies as consumers won't go for channels that don’t offer fresh content. Also consumers don't think about what channel they watch while watching a certain movie. So movie and music channels have to differentiate to gain viewers," a media analyst said.

Advertising is also predicted to go through a paradigm shift as it will be dependent on the shows than on the channels. Popular shows and non-fiction formats such as Bigg Boss, Indian Idol, Khatron Ke Khiladi will have more traction from advertisers. Rao said there will be more pressure on broadcasters to maintain stickiness among consumers for a particular channel.

Rajiv Dubey

Rajiv Dubey, GM, Dabur India, said, "I feel people will watch programmes rather than channels. If a consumer likes Indian Idol or Bigg Boss, then he/she will watch that show no matter on which channel it is aired. So, those kinds of possibilities are there now in the future. A year or two down the line, there will be more of programme ad rates than channel rates."

While the new regime offers consumers the power to pick and choose, the advertisers are hitting a bump as they no longer have the spillover advantage. "The advantage of spillover will be lost, which is a bit negative. We take lot of music and movie channels, especially the second or third rung movie channels, more from the frequency point of view. We would select those channels thinking the consumer would settle on a music channel when there is nothing to watch. So, we would buy those channels at a low cost as they would get certain eyeballs. Now that possibility is no longer available," Rao said.

The inability of not having a spillover may also have an impact on the ad rates of such channels as they will witness a drop in the distribution numbers. “As the distribution model will witness a fall in numbers and reach, the possibility of ad rates hike is low. In fact, the ad rate might witness a drop as whatever advantage the broadcaster had because of the bouquet approach, where small channels were getting pushed, is lost. All those channels will be at a disadvantage right now. I don’t think there is a possibility of a hike in rates but definitely there is a possibility of a drop,” Dubey stated.

But on the contrary, a media analyst believes spillover will still take place on the basis of the genre. "It is difficult to say how it changes or impact, it is too early; but I don’t think spillover will go away completely. The spillover will get affected but not on a mass level. It will take place more on the genre level," the analyst said.

Unlike a secondary niche channel, the news channels, both general and business, are said to be slightly safer from the threat of dropping out. Since news channels have their set of loyal consumers, these channels might survive the axe. However, even they have to up their game in terms of programming.

Ramnik Chhabra

Ramnik Chhabra, Director Marketing, Motilal Oswal Group, said, “The business news channels won’t witness much of an impact as they have a loyal following and they are anyway offered in pack. The viewers of business news channels are more interested in the stock market and not in general entertainment. These channels are priced at the lowest digits, so the loyal consumers won’t mind spending that small amount. But now they will actually have to stand out on their own, solely based on the content they offer."

Experts also believe OTT may grab a lot of the audience of niche channels.

So how will ad pricing work and will FTAs gain more ad traction?

Asked how it would change the determination of ad pricing in the long term, marketers said it was too early to predict the impact of the new regime. However, Dubey said advertisers working on the CPM and RODP models would be at a disadvantage while those who are buying spots and fixed inventory would have an advantage on a short-term basis.

“The advertisers who go for fixed programme buying will chase the consumers and so they won’t be affected,” he said.

Rao said a new model might come up in the next four to five months on the back of free-to-air (FTA) channels.

Under the new regime, the operators have to offer 100 channels, which are mainly FTA, for a fixed fee. Since these channels will have a guaranteed reach unlike pay ones, the advertiser will choose to advertise on the former.

“FTA channels will be of good advantage because even though they will compromise on the subscription revenue, they will make money on advertising revenue. By default, FTA channels will have far more higher reach. They will attract advertisers and will gain on the advertising revenue," Rao said.

But a senior media analyst believes advertising rates won't witness an impact until BARC ratings are rolled out. “Till BARC comes out with the viewership rating, there won’t be much change. The advertisers will keep a set amount till things settle down. It would be similar to digitisation. Even when there was a BARC viewership blackout, advertisers had set aside an amount for the channels,” the analyst said.

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