Wednesday, June 19, 2013

TRAI’s ad curbs to trip smaller, news broadcaste​rs

TRAI’s recent regulation of limiting ads per hour to 12 minutes is a landmark in many ways. It will be implemented in a phased manner and full compliance is mandated from October 1, 2013. Even though digitisation has been a success in terms of seeding of boxes, inflow of subscription revenue is in a nascent stage. Hence, broadcasters, especially smaller ones and news broadcasters who continue to remain dependent on ads as the predominant source of revenue, will be hurt the most by this regulation. An indirect impact could be reduction in carriage fees by these broadcasters to MSOs as their profits come under pressure. Similarly, smaller advertisers may not be able to bear the burden of increased ad rates and may be compelled to shift to weaker channels. Overall, we expect TRAI’s regulation to pose risk to near term ad revenues as all broadcasters adjust their ad inventory and hike prices gradually to cushion the impact. However, because of increase in collective action by major broadcasters (ad rate hike, withdrawal from TAM), strong market share and relatively lower ad duration (versus smaller broadcasters), the impact on stronger networks like ZEE and Sun TV is likely to be limited.

As per TRAI, ads on TV channels should be restricted to 12 minutes per hour (10 minutes of ads and 2 minutes of promotions) as they affect the quality of viewing. Broadcasters have agreed to comply with this regulation from October 1, 2013. The entire regulation is expected to be implemented in a staggered manner. Currently, as per Mr. Shailesh Shah, Secretary General, Indian Broadcasting Federation (IBF), per hour ad time works out to just over 11 minutes per hour if a full-day average is taken.

Several finer aspects of the ad regulations will be clear in due course. There is no clarity on what exactly qualifies as promotions. Classification of teleshopping programmes and movie trailers as ads or content is unclear. However, broadly, it is clear that Hindi news broadcasters will be impacted the most as they will have to curtail their ad duration per hour from (19+3) minutes to (10+2) minutes. Though print and digital may benefit from the spillover effect, regulating ad duration on TV also raises the question whether other media like print and radio will also be subjected to ad caps.

Monday, June 03, 2013

DEN Digital subscribers Reach 5 Mn

DEN Networks Total digital subscribers are 5mn. The company added 2mn subscribers in Phase 1 and 3mn in Phase 2. DEN added 1.07mn subscribers in Q4FY13. Phase 3 seeding in a major way will start from Q3FY14. Management expects good traction in view of Phase 3 and 4. Also, adjoining cities of Phase 3 and 4 are being targeted even now.

TRAI’s regulation to rent out STB will help increase consumer base in Phase 3 and 4. This will also increase affordability at the bottom of the pyramid. However, it still needs to be seen how the process is implemented. Also, cash flow for cable players will become better in this.

DEN is planning to enter the broadband market by investing USD50mn from fund raising proceeds. It will be targeting Tier I and II cities initially, and based on the success in these markets, it is planning further expansion.

DEN is looking to digitise 6mn subscribers. Hence, till end of Phase 3, investment requirement will be INR6bn. Also, in FY14, investment in broadband will be INR1.5bn and other capex requirement will be INR500mn.