10-min ad cap: TV channels may jack up ad rates

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SummaryAs a result, broadcasters are likely to jack up ad rates by at least 10-15%.

The mandatory enforcement of 10-minute cap for commercials per hour of programming for broadcasters from October 1 is expected to dent broadcasters’ revenue by 8-10% in the short term. As a result, broadcasters are likely to jack up ad rates by at least 10-15%.

All the 620-odd registered and operational television channels in the country have to implement this order, as directed by sector regulator, Telecom Regulatory Authority of India (Trai) .

In value terms, experts say around R500-700 crore worth of advertising revenue would need to be re-worked into the 10-minute ad slots, as opposed to 15-20 minutes at present. “This re-adjustment could spread over the next two quarters. However, there would be partial correction due to corresponding increase in value of advertising deals,” said a chief executive of a leading entertainment channel, requesting anonymity.

Trai has capped on-air advertising time for all broadcasters to 12 minutes per hour from October 1. Of the 12 minutes allowed for commercials, two minutes are for running in-house channel promos, leaving only 10 minutes for other advertising. All broadcasters have opposed the order, while news channels have challenged it in court.

News broadcasters got some relief till November 1 after the News Broadcasters Association challenged the order before the telecom tribunal.

While the latest report by CII-PwC on the entertainment and media sector pegs the TV industry’s ad revenue at R12,700 crore, it warns of a negative impact of the 12-minute ad cap as ad revenues, contribute almost 60-70% to their toplines.

“The short-term impact on toplines could be limited, but due to long-term advertising deals, the full impact of this order may only be seen next year, by which time even ad rates are expected to go up,” said Smita Jha, leader, entertainment & media, PwC India.

But news channels are apprehensive. A senior sales executive of a leading news channel said if the Trai order is upheld in court, news channels will be impacted the most, forcing them to hike ad rates. “In short term, Hindi and regional channels will face the heat,” he said.

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