12 minute per hour cap on TV advertising

Published by MBA Skool Team, Published on November 21, 2013

In the month of Mar 2013 the broadcast regulator of India, Telecom regulatory authority of India (TRAI) enforced a 12 minute per hour cap on advertising on all TV channels, the release also said that the channels will now have to inform it of the volume of advertising they carry on a quarterly basis following the notification of the Standard of Quality of Service (Duration of Advertisements in Television Channels) Amendment Regulations, 2013. The decision is expected to come in force from 1st Oct 2013 onwards although recently the telecom tribunal, TDSAT, has stayed the implementation of the cap on ad time till November. As per the decision TV channels would be allowed to display advertisements 10 minutes of commercial ad breaks an hour and devote two minutes for in-house promotions. Various stakeholders to the issue are – Consumers/viewers, broadcasters, marketers, advertising agencies, government, media other than TV, etc. All of them are differently affected by this decision and hence have different opinions and viewpoints regarding the same.

image:scottchan, freedigitalphotos.net

Let’s have a look at the key stats as per DNA at present on an average a TV channel runs 25 minutes of advertisements a day and if we assume a 30 second slot for an advertisement than there are approximately 1200 ads a day TRAI with this notification aims to bring down this number to 570 ads a day and now if we subtract 6 hours of dead slots a day(12am to 6am) we would be left with not more than 430, this drastic decrease is expected to result in a huge demand supply mismatch.

For the consumers it is a win-win situation first they would not have to watch long adverts and wait for a long time in between breaks of their favourite TV shows and at the same time they will also get to watch more content as now the air time for content gets automatically increased, also with this the prices for air time for advertisements is bound to increase which means that marketers would decrease the length of add films and hence viewers would not be forcefully exposed to longer add films which they may or may not like. Hence they are expected to be very happy with the same. But this should be taken with a pinch of salt as decreasing revenues might force broadcasters to increase the subscription charges which would hurt the consumers.

For the purpose of discussion broadcasters can be divided into two groups- large broadcasters having channels top rated channels in the category, having more than channels and smaller ones. From a bird eye’s view it seems that the decision is expected to affect both the groups equally and that in terms of revenue according to a DNA a TV channel on an average run 20-25 minutes an hour, reducing this limit to 12 minutes will affect the revenues drastically. But on digging deep into the matter we can find that the effects on the groups are different. Broadcasters who have more than one channel and also own top rated channels would be able to inflate the prices of air time on premier channels and would be able to divert the excess demand on their other channels and hence according to critics are most likely to earn higher revenues. This according to some was precisely the reason why broadcasters association IBF withdrew its appeal against the ad cap from disputes tribunal TDSAT. On the other hand for small and medium broadcasters and news channels it may prove to be bane as according to them they do not hold enough bargaining power to increase the prices of air time. As per an article in TOI Eenadu director J Venkat alleged that “It is apparent that this (ad cap) has been done at the behest of the big networks”. Another concern which both small and large operators but may affect small operators more is that having a 12 minute cap would mean that the channels would need to show more content in order to fill the gap which many of them say they might be unable to due to the lack of resources.

As far as the marketers are concerned they would have to reconsider their advertising budgets as not only would they be getting less air them it would also be costly for them, this may affect FMCG products more in the long term because not only does the industry faces low margins and stiff competition but it also depends on route learning which is to show advertisement repeatedly so as to build recall due to lack of differentiation. But at the same time due to less number of advertisements the effectiveness of an advertisement is expected to increase the situation also poses a new challenge in front of the marketer who would now have to be more creative in order to communicate the same message to the consumer is lesser time as the TV advertisements would need to be shorter in order to reduce the expenses.

Lets us now consider the case of advertising agencies, they face a risk of decrease of demand as the small and medium size enterprises may choose to decrease their advertising spends or some of them may also opt to look for some other method for advertising their products and at the same there is an expectation of growing thrust among the marketers for short add films which would require the creative think tanks to innovate so as to build recall amongst the consumers for products. But still at the end of the day the effect on this sector is expected to be severe as unlike broadcasters the probability of them being able to increase the prices is very low.

This may prove to be beneficial for media forms other than TV such as print, radio, social, etc, with TV advertising getting costlier many marketers may choose other forms of media other than TV for promoting their product the radio industry has already been able to revamp itself with the advent of multiple FM radio channels becoming popular amongst the masses, also we have seen growing innovation in the print ad industry with the advent of new techniques such as 3D ads, etc being used by companies in the recent past. These forms of media may become a favoured medium at least for the small and mid tier companies who may not be willing to divert high chunks of their revenues to advertisements.

To conclude we can expect to see more innovation and creativity in the advertising world which is already focussing on effectiveness of promotions.

The article has been authored by Manu Gupta, FMS Delhi

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