Ad cap issue becomes a hornet’s nest

After the IBF announcement of its decision that all its members would shift to 10+2 ad cap as stipulated by TRAI in its quality of service regulations for addressable systems the Indian Society of Advertisers (ISA) has sent a formal notice to the Indian Broadcasting Foundation (IBF) on the ad cap issue. A notice sent by ISA Chairman Hemant Bakshi states: “Members of ISA have brought to the notice of ISA that they have received letters from some members of IBF about their proposal to impose an ad cap self-regulation and, thereby, ration inventory available to the members of ISA on the channels of these IBF members.”

The notice further states that the ISA has taken a very serious view of this issue, “which is wholly uncalled for and is brought up by some IBF members with ulterior motives to make undue gains”.

Readers may remember that in the matter of News Broadcasters Association and others Vs. the Telecom Regulatory Authority of India, TDSAT had, vide its order dated August 30, 2013, directed that till further orders, TRAI shall not take any coercive measures against the appellants or its members to make them abide by the impugned ad cap regulations and further directed the matter to be listed on November 11, 2013.

Also in a very recent case four music channels namely Mtunes, Masti, B4U and 9X networks have approached TDSAT against the ad cap and the matter will be heard on 21 October. So they need not follow the ad cap till then.

It is believed that some more broadcasters including Sun TV are planning to approach TDSAT to get a temporary relief since TDSAT appears to have a liberal approach in allowing broadcasters to violate the 10+2 ad cap regulation for some more time. Since this ad cap is already a Cable TV Rule notified in 2005, TDSAT will not be able to change that as the amendment if any has to go through the parliamentary procedure. However, broadcasters may gain some more time to abide by it.

ISA may be right in sending the notice since it involves a contractual matter, the fact is that either today or tomorrow broadcasters will have to follow law. They may decide to compensate advertisers or find a mutually acceptable solution is another matter.

The ISA notice adds, “Advertising on network channels is a part of monthly brand media plans and the act of some of your members in reneging the subsisting contracts will lead to under-deliveries of media plans, causing business losses and hardship to our members. It is wholly wrongful and arbitrary on the part of some of your members to take unilateral action in reneging on subsisting contracts on account of purported self advertising cap.”

“These members of IBF are looking to unilaterally pass the entire cost and burden of self-imposed ad cap onto the advertisers, without any discussion and agreement. We find this approach of such members of IBF incorrect and unjustified,” the notice further states.

The notice also points out that during the earlier issue of audience measurement reporting, IBF had agreed that unilateral decisions will not be taken by them and any concern that its members may have will be resolved through dialogue and would be mutually agreed. “The present conduct of some IBF members is contrary to what had been agreed by them in the recent past,” it adds.

Clarifying ISA’s position on this, the notice states, “We will advise our members to abide by the law and the judicial pronouncements. Any unilateral decision that some of your members take to renege on the existing contracts under the so called self-regulation while the matter is sub judice would virtually amount to showing contempt of TDSAT’s order.”

TRAI in the mean time has decided to stick by its decision to implement the regulation from October 1. It has been revealed by a TRAI official in an interview with the media that the regulator will take legal recourse against any violation of the ad cap regulation starting 1 October 2013. According to the official, “most of the channels have agreed to comply by the regulation. These regulations are in place since 2005. They have been flouted all these years. It is now that TRAI has put this segment under the umbrella of quality of service. The ad limits are not different. They have been there for a long period of time; hence, there is no question of any such excuse.”

As far as the IBF members are concerned, mainline GECs are still divided over the 10+2 ad cap implementation from October. It is learnt from highly placed industry sources that Star Plus, Zee TV and Colors, and the respective networks they belong to, have planned to go ahead with the mandated ad cap. On the other hand, Sony and its network, MSM Group, may oppose the ad cap.

Although the implementation of ad cap would necessarily imply that there would be increase in the cost of inventory of the channels, it is learnt that the advertisers and marketers are not buying that logic. India’s festive season is round the corner and it is time for major marketers to advertise heavily, but low sales and gloomy economic scenario is not allowing them to cater to increase in the ad rates.

Consequently, experts predict that for some time, television would lose ad revenue to print media. Major advertisers are locking most inventory slots with GECs at earlier prices only.

The divided stand among broadcasters is likely to produce a ripple effect in the industry.  As individual broadcasters are dealing with the TRAI order in their own way, an industry consensus over the issue is unlikely as of now.

Cable Operators Federation of India has already written to TRAI and I&B Minister not to be lenient with broadcasters since neither the ministry nor the regulator have shown any soft corner for LCOs and independent MSOs many of whom have lost their business to big MSOs aligned with pay channel broadcasters as the DAS regulations have treated them shabbily. Their revenue share has been reduced drastically although their responsibility has been increased.

Mrs. Roop Sharma, President, COFI, says that a total Digital Migration for the whole country within an impractical timeline of two years is bound to create tremors in the industry for all stakeholders. Why should the broadcasters be left out of the net. According to her many more imbalances are going to take place in the near future as consumers are still not getting what the government promised from digitisation and they have been forced to pay more than double for lesser services. Many broadcasters will shut their shops when subscribers are allowed to get their choice.

Experts believe that the mainline GECs are likely to benefit most out of the ad cap implementation, and hence, except Sony, which is already facing viewership decline as per TAM ratings, most of the GECs would be following it sincerely. Since there is no possibility of rate hike, most of GECs are ready to incur short-term loses against long-term gains.

In all this milieu no one is talking of the consumers for whom these regulations were framed. ISA, IBF, NBA all are talking of their diminishing profits and want the laws to be flouted but these were the very people who always pushed the government to implement digitisation without giving any extension to the MSOs or LCOs. So much so that broadcasters even intervened in any court case where LCOs wanted a relief against the impractical regulations that were likely to finish their existence.

Source: http://cablequest.org/news/national-news/item/3308-ad-cap-issue-becomes-a-hornet%E2%80%99s-nest.htmlSource: http://cablequest.org/news/national-news/item/3308-ad-cap-issue-becomes-a-hornet%E2%80%99s-nest.html