12-min ad cap: TRAI should end strangulating the industry by regulations: Broadcasters

Amid the ongoing row over NTO 2.0 comes an old bone of contention between the Telecom Regulatory Authority of India (TRAI) and the Indian broadcasters – the 12-minute ad cap that the regulator wants the TV channels to adhere to. The decade-old issue, which almost remained in cold storage till recently, has now been revived with TRAI moving the Delhi High Court against, what it termed as, “excessive advertisements” by news channels.

Broadcasters obviously are not happy with the TRAI move. The overriding feeling among the TV executives and industry analysts is that the regulator is unnecessarily interfering in matters beyond its domain.

Resenting the fact that TRAI’s very formulation is problematic, a broadcast industry analyst preferring anonymity said that under the quality of service regulation TRAI can do anything for consumers. “The Supreme Court upheld it already in 2018. A lot of television channels depend on advertisements to survive. Pay-TV channels take money from consumers and advertisers. My view is that they can be regulated. But what about FTA channels? The attempt to exercise control in this regard doesn’t make any sense at all. If you control advertisement, you are effectively controlling economic growth,” he said.

According to him, TRAI does not have anyone from the broadcasting industry, which should change.

Questioning the necessity for having carriage free of Rs 4 lakh, he said, “Nowhere in the world will you find this system of carriage fees. I pay for water, not the pipe. We all know how Blackberry was once hauled up in this country by citing some archaic, British-era Telegraph Act. The situation is almost similar now. TRAI should end strangulating the industry by regulations. Regulations should help the country grow, not cause obstacles. We should take cue from Europe. Regulators there better understand the industry and formulate policies accordingly.”

He further said that GECs have sports channels with different inputs costs. So, it is not possible to have single pricing for all channels.

According to him, TRAI should have a pragmatic approach. “TRAI was essentially meant for the telecom sector. Do they control tariffs in the telecom sector? Then why do it in the broadcasting sector? You should refrain from pricing in the TV industry. TRAI is saying it received complaints from consumers. But where is the complaint? Regulation should not be at the cost of the industry.”

Harjeet Chhabra, Co-Founder at Two Nice Men Mediaworks, lamented that these are not exciting times for TV with pressure on subscription. He added, “There is already a sign of continued pressure on subscription revenue with a lot of cable cutting happening. For channels that thrive primarily on ad revenues, limiting the ad gap as well would push to increase their yield per 10 seconds. That means they would have to in turn pass that on to the advertisers. A lot of these channels would find it difficult to justify being part of the media plans with increased rates and hence affecting their survival.”

A senior TV executive, on condition of anonymity, said that all these actions would eventually destroy the television industry. He felt that the ad cap will ultimately affect TV channels in an adverse way. It will help digital media to grow at the cost of TV.

“The average per hour inventory in most channels is more than 12 minutes. Now, what is going to happen is that the ad inventory will shrink. And when the ad inventory shrinks, the prices will go up. Essentially, the cost to the advertiser can potentially go up as a result. And it will be to the extent of the excess inventory that people sell. News broadcasters sell a lot more, about 20 minutes or so. And when the rates go up in an inflationary situation like this, with the margins squeezed, how will the advertisers react to that point in time? Because it will be a regulatory-induced price increase. So, they might choose other vehicles. They might find that it is effective to do through digital or print. And that will cannibalise into the television advertising revenues,” he maintained.

So, on the one hand due to the regulatory reasons the reach of the channels is falling. While on the other hand, with the inventory being reduced in some ways the regulatory system is destroying the industry, he added.

“You can’t regulate so much. Then you should regulate the cost of content also. You can’t say that we will regulate all the pricing, but the cost can be whatever it is. People are here to do business. You can’t keep putting the screws on the revenue tap and expect people to be surviving like that. And especially when digital is coming in a big way challenging the industry,” he argued.

He countered TRAI’s contention that it is acting upon the consumers’ complaints that there is too much advertising on the TV with a simple example.

“Suppose I go to a mall and I say ‘Look I don’t want to go there because there is too much advertising’. See, it’s good to have regulation, there is a market force at play. That brings us to the point of regulation. And here TRAI is regulating only one aspect, which is pricing, inventory and everything related to revenue and leaving everything else open. So, what are the drivers for the industry? The industry players don’t have control on the pricing and inventory. And they are still expected to manage their business with the reaching falling and the consumer paying more for the channels. I don’t know how it makes sense,” he added.

According to him, the regulator should be doing all the hygiene that is required to ensure that there are no malpractices. “One of the problems facing the industry is addressability. How do you improve it? How do you improve the technology deployed to the end customer in terms of experience? And how do you ensure that TV is ready to compete with other media? Today, there is OTT. And if you keep regulating TV, people will go away. And it seems TRAI does not understand the business. You can’t create regulations which erode value for any of the stakeholders. It’s like broadcasters are supposed to reduce revenue without increasing the price? Who will agree to it?” he asked.

“If you are regulating the industry, you should know how it operates and your actions cannot be destroying the industry,” he concluded.
The matter has been posted for hearing on December 23, 2021. It is difficult to predict the outcome of this case as in the case of NTO 2.0. It is likely to be a protracted legal battle with the matter reaching up to the Supreme Court, like one of the industry insiders say.