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Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
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ADVERTISING
Is TRAI in the right to regulate TV ads?
Consumers have hailed it but broadcasters feel TRAI’s advertising cap on tv smacks of regulatory overreach. But what forced the regulator’s hand and what will be its impact?
 
The television and advertising industries have come down heavily on the norms issued by the Telecom Regulatory Authority of India on limiting the number or frequency of advertisements on television. Taking note of viewers’ complaints on too many advertisements on television spoiling the viewing experience, TRAI has issued a notification to regulate the duration, frequency, timing and audio levels of advertisements. As per the TRAI’s notification issued on May 14, free-to-air channels should not carry ads exceeding 12 minutes an hour (this includes 10 minutes of commercials and two minutes of self promotions) and pay channels not more than six minutes of ads per hour. For live telecast of sporting events, ads should only be carried during actual breaks. Any part-screen or drop-down advertising has also been banned. Also, TRAI has mandated that at least 15 minutes of programming is required between two consecutive ad-breaks. For movie channels, this duration has been set at 30 minutes. These regulations will come into force as soon as they are published in the Official Gazette of India and will apply to all channels, including free to air, pay channels and local cable channels.

Although these restrictions have long been there on the rule book, they have existed more in the breach than in the observance. Currently, broadcasters follow the 12-minute rule in terms of an actual commercial break, but allow ads that scroll up and down the screen far exceeding the permissible limit in the process. The advertising rules are even more flagrantly thrown to the wind in the case of movies wherein a three-hour movie screened on television is stretched over five hours. Says Devendra Parulekar, Partner, Ernst & Young: “Without doubt, the television viewing experience is bad in India.” He blames the top four-five general entertainment channels for not adhering to existing norms by running around 14 minutes of advertising in a clock hour, in gross violation of the permissible limit of 12 minutes – 10 minutes of ad commercial and two minutes of channel promotion time. “Besides, during film climaxes, the ad breaks’ frequency goes up and volume levels on television break the sound barrier when the ads come on.” Even news channels cock a snook at the ad stipulation. According to a survey carried out by the Centre of Media Studies, the duration of ads in six major news channels over the last four years has been 35% of the prime time slot (7-11pm), against the allowed hourly limit of 20%. In fact the maximum yearly average is as high as 47.4%.

 
It’s no surprise then that in light of these violations, the current TV advertising environment in India has come in for much consumer criticism. So can TRAI be blamed if as a regulator it feels that regulating TV advertisements has become a necessity and steps have to be taken to improve and enhance the viewer experience? In fact, there is nothing new or novel about TRAI's notice to broadcasters. The notice has come in response to many complaints it had received against illegitimate advertising by news channels. In TRAI’s words: “The advertisement revenue has been a substantial portion of the overall television industry revenues. Perhaps, this has led to the tendency of pushing more and more advertisements in television programmes in both pay and FTA channels. The increasing duration and distracting formats of advertisements have, however, adversely affected consumers’ viewing experience. This has been reflected in numerous consumer complaints and opinions being expressed at various fora.” Some consumer organizations have even put forth the argument that since they pay subscription fees for viewing pay channels, there is little justification for these channels to show advertisements. In January 2011, an NGO, Utsarg, filed a petition against the news channels with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on this very issue, which finally culminated in the fresh notice issued by TRAI.

Broadcasters, however, are not amused at what they perceive to be a case of gratuitous meddling and an unwarranted move at heavy-handed regulation. They fear their main source of revenue will be badly hit. Currently, advertising constitutes about 60-70% of the revenue for TV broadcasters. If the latest move by TRAI to cap advertising time on TV programmes comes into force, it would impact advertising revenues of broadcasters by 15-40%, according to industry estimates. Ad revenues in the television industry currently account for Rs.11,600 crore, a majority of which is cornered by the 163 pay TV channels operating in the country at present, according to consultancy KPMG. Subscription revenues contribute another Rs.21,300 crore. However, due to “leakages” in the broadcasting system, pay channels depend more on advertising than on subscription revenues. Close to 80% of ad revenues go to pay channels. If the ad time drops, ad rates will go up but that looks unlikely to be the case at present when the economy in general and the advertising industry in particular are facing strong headwinds from several quarters. According to market estimates, TRAI’s advertising limitation would skim off off nearly Rs.5,000 crore of the Rs.11,600 crore ad revenue a year, that too, at a time when spot rates for television advertising have already dropped considerably, dragged down by a downcast economy and intensifying competition among channels.

No wonder then that broadcasters have taken up the cudgels against TRAI’s move. According to Paritosh Joshi, CEO, Star CJ and Director, Indian Broadcasting Federation, “TRAI has no business to meddle with the duration of ads. The objective of each channel is to make profits and it should work on the principles of free market.”

          
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