Television

'Peak fragmentation affecting rev growth' : Zeel executive director revenue and niche channels Joy Chakraborthy

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There are early indications that the advertising economy is slowing down. With many parts of the world awash in economic gloom, there are forecasts that guide India‘s television advertising revenue market to a below double-digit growth this fiscal.

Zee Entertainment Enterprises Limited (Zeel) executive director revenue and niche channels Joy Chakraborthy believes the sports segment will see a degrowth while the Hindi general entertainment channels (GECs), caught in a four-horse race, will lose their pricing power.

Though advertisers are exercising caution in spending, rate hikes are taking place in certain genres like movie and regional channels. Even in case of Hindi GECs, certain programmes can get rate hikes.

In an interview with Indiantelevision.com‘s Sibabrata Das, Chakraborthy talks about peak fragmentation affecting revenues and what the industry needs to do to beat growth blues.

Excerpts:

Zeel posted a measly 0.5 per cent rise in first-quarter ad revenue over the year-ago period. So are we heading for an ad slowdown due to stresses in the global economy or is it is due to a fall in ratings of the flagship Hindi general entertainment channel Zee TV?

Advertisers are exercising caution in spending. They are entering into quarterly and shorter term deals; not too many annual deals are happening. We will be hit both by a possible slowdown and a fall in viewership of Zee TV. But at the same time, we have the highest GRP-to-revenue conversion.

Major spenders like FMCGs have said that they will be slashing their ad budgets as their profit margins are getting squeezed. How deep will the television advertising economy be hit?

There is a concern, but at the same time many of the FMCG companies are launching variants. If HUL states that it is slashing its ad budget, frankly speaking it is no more a scare. But what could be disturbing is that we are seeing a drop in high-yielding inventories filled by telecom, banking and finance and real estate companies. We are hoping that like telecom which came in a big way a few years back, we will see a new category emerge. India being an emotional country, a single strong wave can lead to a turnaround.

But don‘t FMCGs account for 55 per cent of the total TV ad pie?

It is not that FMCGs are going to retreat. They are redeploying their ad monies. While their spends on cricket and Doordarshan are getting reduced, they are increasing their allocations to GECs, regional markets and other genres. And if HUL and Marico cut their spends, ITC and others will up them. There is too much competition in the category.

Will broadcasters be able to implement effective ad rate hikes?

Broadcasters have almost filled up their ad inventories. Perhaps, what has increased is ‘float deals‘ (whenever inventory ia available, channels give them to clients at a marginal discount rsate) given to FMCGs. Rate hikes, however, are taking place in certain genres like movie and regional channels. Zee, for instance, will see ad revenue growth in Marathi, Bangla, Kannada and Andhra Pradesh markets. Even in case of Hindi GECs, certain programmes can get rate hikes. Celebrities, for instance, attract a premium.

‘Advertisers are exercising caution in spending. But if HUL states that it is slashing its ad budget, frankly speaking it is no more a scare. What could be disturbing is that we are seeing a drop in high-yielding inventories filled by telecom, banking and finance and real estate companies‘

In case of Hindi GECs, we are moving from a three-horse race last year to a fight among the four at the top with the resurgence of Sony Entertainment Television. How is this going to affect the genre?

As we move to a four-horse race, Hindi GECs will lose their pricing power. The genre will see growth but there will be revenue fragmentation. Media agencies will be in a better bargaining position.

How hard will Zeel be hit considering that its flagship channel Zee TV will most likely continue to be placed No. 4 during the festive season?

It does worry us. But in case of a slowdown, advertisers like to hedge their bets. The comfort zone for them could be that Zee TV wouldn‘t fall further; it can only go up. And the difference between the top-rung GECs is mainly one show. After Jhansi Ki Rani fared well during its run at the 8 pm slot, its replacement Shobha Somnath Ki has not been doing well. We are relaunching that show.

Let‘s also not forget that advertisers and agencies are not opportunists; they do not dump the ship but value long term relationships and the network strength.

Will Zee TV, which contributes about 40 per cent of the network‘s ad earnings, see a degrowth?

We are seeing strong growth in many of our channels. In fact, eight of our channels have posted peak monthly revenues in August. But, yes, there will be some impact if Zee TV loses GRPs.

Considering that there is a slowdown and the GECs are caught in a fight among four at the top, what is the growth forecast for the television sector?

Television will grow at 10-12 per cent this year, faster than print which will crawl at 2-3 per cent. But there is still a lot of ground to cover. We believe the television ad revenue size is Rs 107.50 billion compared to print‘s Rs 119 billion.

Another abnormal thing this year is that the Dussehra and Diwali festive season falls in the same month (October). Television has limited inventory. If this would have stretched over two months, the sector would have gained.

A proper picture of the growth pace will, however, emerge after we get the trends in November and December.

Sports was a big revenue driver in FY‘11. Will it sustain that momentum this fiscal?

Sports will see degrowth. Sports broadcasters earned a combined ad revenue of Rs 15 billion in FY‘11, buoyed by the World Cup and the Indian Premier League (IPL). But this fiscal their ad revenue will be under attack because of India‘s debacle against England. The India-West Indies series was affected as some of India‘s stars were not playing. Seeing the performance of the Indian team, the Champions League Twenty20 is obviously facing the music.

Sports broadcasters only focus on property-based selling. They should also strategise on RODP (run of day part) and ROS (run on schedule) selling. We are doing that in a big way.

How difficult is it to push hard for revenue growth in such a cluttered television market even for niche genres?

The biggest problem in the television industry is that fragmentation is peaking. There are 18 music and 15 English entertainment channels. Where is the money going to come from? Revenue gets affected because of fragmentation.

Zee is in a fortunate position as it has the largest bouquet of channels. The niche channels have also built a brand equity over the years. We are seeing 10-15 per cent growth in this segment. But for new channels that are to come up, there is no bandwidth on both analogue cable networks and DTH platforms.

You are not happy with the way distribution is evolving?

The underreporting of subscriber numbers is hurting the industry. Broadcasters are feeling the pinch with content costs climbing, as ad sales is still funding the television business. Whatever a broadcaster earns as pay revenue goes out as carriage fees. The cable TV sector needs transparency.

Is slowdown good in that sense as it will act as an entry barrier for more launches?

Slowdown is good in a way as it will ensure that networks with sustaining power will gain. The No. 1 and No. 2 players will take away most of the monies. Costs will also get corrected as companies try to protect their bottom lines.

But at the same time there is one player every year who spoils the market. In the movie channel space, for instance, Viacom18 drove the acquisition price insane last year. This year Star is doing it.

Do you see an opportunity for leading broadcasters like Zee to get smaller networks outsource their ad sales?

Personally, I feel there will be media-selling consortiums, led by big networks. We are evaluating partnerships in markets where we do not compete.

The time has also arrived for us to dig deep into the regional markets. We have formed a retail team and they are tapping such clients.

How beneficial has it been from a growth perspective as you have been handling the ad sales of television as well as print with DNA under your belt?

Print is very scheme-led, there are too many hidden deals, and no timely research is available. The circulation gains can‘t be monetised immediately. But in print you can do a lot more innovations. Print and television buyers are totally different in mindset but the basic business principle remains the same.

DNA has benefited from Zee‘s deep relationship with media agencies. Zee, on the other hand, has been able to gain access to a wider breadth of clients. We would have benefited more from the synergies if we had not lost GRPs (gross rating points) and our channel positions were healthier.

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