Why TRAI need not interfere with BARC structure

August 6, 2020 10:02 AM

TRAI’s thrust on improving BARC’s current governance structure by recommending a restructuring of the board’s composition, and offering to make itself party to it, is possibly a case of overreach

BARC is the very driver of top dollar in advertising.BARC is the very driver of top dollar in advertising.

By Lloyd Mathias

An interesting theory often surfaces in economic and political discourse, one that goes by the name “the cobra effect”. The theory is said to have originated from a peculiar anecdote that dates back to the time India was under the British colonial rule.

In British-ruled Delhi, the government was apparently concerned about a rise in poisonous cobras. To counter this menace, the government offered a reward for every dead cobra. This move paid off initially, with a large number of snakes being killed in lieu of the bounty. Soon, ingenious people began to breed cobras simply to make money off them. When this news reached the government’s ears, it was forced to revoke the reward program, prompting cobra breeders to set the worthless snakes free. The government’s efforts boomeranged, and the cobra population only rose further.

That is the primary basis of the cobra effect – when trying to fix a problem can make the problem worse by having unintended or overlooked consequences. Could India’s telecom regulator, in its attempts to remodel India’s sole audience measurement and TV ratings agency – the BARC – fall prey to the cobra effect? There is a fair chance, especially because there may be nothing to really fix in the first place.

At the outset, one must remember that it has taken multiple exhaustive consultation papers and seven years of wrangling between stakeholders over its shape and form before the BARC bore fruit in 2015. In the five years since it replaced TAM Media’s rating business, BARC’s output has been accepted as the most efficient currency of “What India Watches” by all its stakeholders – the Indian Broadcasting Federation (IBF), the Advertising Agencies Association of India (AAAI) and the Indian Society of Advertisers (ISA). Unlike the frequent uproar over TAM data, neither broadcasters nor advertisers have raised any high-pitched debate over the “credibility” or “transparency” of BARC data or ratings – the premises on which TRAI has sought an overhaul. If complaints have been made privately, as TRAI refers to “certain stakeholders” in its recommendations, it should specify the nature of complaint and the complainant. Without that it may as well be hearsay, and makes its desire to “structurally reform” BARC seem questionable

It is crucial to understand that BARC is the very driver of top dollar in advertising. Advertisers scrutinize BARC’s TV ratings every week to decide on where to put their money when buying ad spots. This trust has been steadily earned over the past five years, and there is nothing to suggest advertisers, who effectively underwrite this medium, are losing faith in it. On the contrary, in the first four full operational years of BARC (2016-19), TV advertising grew by 32%. In 2019 alone, advertisers spend a staggering Rs 32,000 crore to buy advertising seconds across over 800 channels. Why would they unless they believed BARC’s data?

TRAI’s thrust on improving BARC’s current governance structure by recommending a restructuring of the board’s composition, and offering to make itself party to it, is possibly a case of overreach. For one, the regulator’s role is to balance interests of broadcasters, service providers and consumers. BARC, on the other, is a data-driven scientific company whose currency is valuable only to its stakeholders; it has no direct relationship with consumers. Secondly, one of BARC’s greatest strengths has been its ability to self-regulate through equal representation by all three stakeholders in the company board structure and Technical Committee, which together form its governance structure.

What is completely avoidable is the recommendation to move away from a single TV ratings agency. From the UK’s BARB to France’s Mediametrie, most countries have unflinchingly reposed their faith in a single ratings agency. Markets where multiple ratings agencies once existed – USA and Canada – have reverted to a single agency. So where is the evidence that India could benefit from multiple agencies? To encourage several data collection and ratings agencies and limiting BARC’s role to publishing ratings and framing the methodology and audit mechanisms for the latter is disregarding its effort to get into the trenches and get its hands dirty. The cobra effect? Multiple agencies would open the door to inconsistencies in data collection and confusion over audience estimates. Funding multiple high cost systems in the audience marketplace would increase transactions costs and disincentivise investment in technology and research.

Another facet that deserves appreciation is BARC’s focus on uplifting the quality of TV audience measurement. By leveraging the best of technology, BARC samples 200,000+ individuals across 45,000 homes on a real-time basis. While an increase in sample size is desirous, even at its current size it is the largest audience measurement panel in the world. While BARC is looking to up the sample size to 55,000 by year end, the recommendation to increase the sample to 60,000 by year end and 100,000 by 2022 has to be gauged in terms of incremental gains. After all, BARC data comes at a significant cost. In a world turned upside down by the coronavirus pandemic, both broadcasters and advertisers are struggling to loosen purse-strings. So who will pick up the tab of expanding the sample size and incidental operational expenses?

It is time that TRAI engage in some introspection. Taking BARC back to the drawing board over its established practices could involve huge cost and time and strain technological systems and human resources trained to do this specialized body of work. This, in turn, would threaten the agency’s contribution to the economy. By catalyzing advertising spends, BARC has been instrumental in aiding the growth of the broadcasting sector which accounts for 45% of revenues of the M&E sector and supports 5.2 million jobs. After five illustrious years, it is imperative that the attempt to reinvent BARC does not go down as another example of the cobra effect.

The author is an angel investor and business strategist.

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