Feature | TV channels review ad rates to revive revenues

Early in February Sun Group announced increase in ad rates. Post which, immediately ZEEL (Zee Entertainment Enterprises Ltd) announced that it will hike its ad rates by 10-18 percent. While this seems to be the trend for the year, the channels are citing reasons like increasing cost of talent and production and also revenue need gap to strengthen distribution and reach.

The channels have decided to hike rates saying it is only equivalent to the value they provide their advertisers. But the biggest of all announcements came when Star India Pvt. Ltd., announced new advertising rates for its bouquet of channels, up by 20% effective April 26, 2011. The increase in ad rates will be effective for all the channels under the Star Network and which includes- STAR Plus, STAR One, STAR Gold, Channel [V], STAR Jalsha, STAR Pravah, STAR World, STAR Movies, STAR Utsav; Asianet, Asianet Plus, STAR Vijay, Suvarna, National Geographic Channel, Nat Geo Wild, NGC Music, NGC Adventure, Fox History and Entertainment, Fox Crime and Baby TV.

While announcing the increase in ad rates, Sanjay Gupta, COO, STAR India Pvt. Ltd. said, "Given that Star Network is the No1 Network right now with 16.1% share overall and also the fact that we as a network believe in providing innovative and high quality content so as to add value to our stakeholders and hence an ad rate hike is justifiable. We have not increased our ad rates for the past two years and now as our business has grown in value and size we had to do a quick review of our ad rates."

Gupta also added that the cost of production and talent had gone up nearly by 25 to 30% over the last two years and hence a logical review of revenue parameters was much needed.

As Star Network announced the hike, the ad rates for clients on prior agreements with the Network will not see an increase in the rates and will continue to work on the same rates as committed to earlier. On the other hand, the network will also be backing the increase in ad rates with a strong programming line-up, across the GECs Star is looking at promoting more path-breaking and innovative content like Just Dance, 1000 Ghanta (Star Jalsha) and Survivor that will entertain the viewers later in 2011. As for the English channels the Network is vying at providing more locally produced content, as a beginning to this Star World will soon see the launch of India's Most Desirable with Simi Garewal. Gupta told Adgully that while the programming strategy is in place Star Network also plans to strengthen its distribution and as HD seems to be the buzzword the network will look at strengthening ties with digital providers.

Joining the bandwagon is the channel that has seen tremendous growth by harping on comedy and a complete family entertainment genre. SAB TV will gradually be increasing ad rates this year as the market share rises at its own pace. Anooj Kapoor, Executive VP & Business Head, SAB TV, said, "Advertisers have given us a 400% growth on revenues over the last three years. We are looking at reviewing our ad rates and its a function of how we progress now in 2011. The fact that we have grown 400% with the same inventory on channel means that we should have increased our ad rates by four times. And we shall continue to hike our rates because now we are amongst the top GECs. As and when a channel grows in value a hike in ad rates is very natural. So our inventory remaining constant we want to increase our revenues, and we can probably do that by gradually increasing our ad rates."

So is the ad rates hike justifiable on the basis of reasons like increase in production cost and TV ratings and how have the advertisers really reacted to it?

Debraj Tripathy, Chief Operating Officer, MediaCom, says, "Any increase in ad rates that is not backed by an increase in ratings is hard to justify. Moreover advertisers are not receptive at all."

When asked if TV is still that an important medium for advertisers and will just TAM rating suffice to justify reach, Tripathy says, "Television is an important medium for certain categories of advertisers, even though other media are gaining in importance. TAM ratings is the key metric used to decide investments in television as a medium. However, for niche brands targetting the upper end of the customer base DTH figures are considered."

As also more and channels go HD, ad rates hike seems as natural as the cost asked for quality. Talking about the future of HD in India, Tripathy says, "The installed base of HD ready TV sets is very low. HD now as well as for some years to come will continue to appeal only to a niche viewer base, mainly residing in urban India."

So as air-time biggies of the idiot-box announce their ad rates, it will be interesting to see how does the new innings shape up. Besides it has been common knowledge for a long time now that channel heads have believed that the value earned out of high quality content has been a very meager share to their own revenue earnings. So maybe a review of ad rates is much needed to make themselves stand tall in the revenue considerations. | By Prabha Hegde [prabha(at)adgully.com]