Free TV channels proliferating; here’s why

With BARC’s rural data, the business sentiment for FTA (free-to-air) channels is improving. So much so that some broadcasters are now turning their pay channels into FTA, while others are launching such channels from scratch. What is the potential of this market?In a cost-sensitive country like India where ‘free’ acts as a magnet for the otherwise flickering consumer, television broadcasters are latching onto the typical ‘Indian’ mentality if you will, by offering Free to Air (FTA) channels. Technically a freemium model, there were hardly any FTA channels till a few years back, with the scenario largely dominated by Doordarshan and its various extensions. These channels mainly targeted the rural audience with low purchasing power, and lack of viewership measurement further forced the broadcasters and advertisers to look away from offering their channels free of cost to the audience. Ratings agency BARC India heralded a change by reporting rural viewership data for the first time. BARC India has a reach of around 153.5 million TV households representing All India and all modes of signal; out of which 77.5 million are urban and 76 million are rural TV households. This has given an impetus to broadcasters and advertisers alike to identify and target the markets and consumers they want to, as a result, providing an opportunity for more FTA entertainment channels.

With BARC highlighting the viewership that was not being captured earlier, one can clearly see the extent of penetration of FTA channels. Identifying the potential of this vast market and seeing a whole new untapped chunk of audience, many broadcasters refined their FTA channel strategy. As a result, in recent times, one has seen either some pay channels giving up subscription revenues to adopt an advertising-led model or have new launches, especially in the Hindi movie genre.

One has always seen that with better measurement, the confidence to invest advertising monies on a platform increases. So what potential does the FTA market have?

Movies, news, GECs — the three musketeers

The three genres that have benefitted from rural ratings are Hindi movie channels, news channels and general entertainment channels. This only indicates this audience’s appetite for content.

Neeraj Vyas, senior EVP and business head, Sony Max, Max2, Max HD and Wah states that rural markets now account for 52% of the universe and contribute to 74% of the viewership for FTA channels available on Doordarshan’s free direct-to-home (DTH) service, DD Freedish. “It is an opportunity to cater to rural and small town India. The benefit is that one achieves a much wider reach,” he says. With viewership contribution as high as 70% and above, broadcasters have been quick to formulate their FTA strategy. Three of the top broadcast networks have recently launched their FTA movie channels namely, Sony Wah from Sony Pictures Networks India, Rishtey Cineplex from Viacom18 and Star Utsav Movies from Star India. The broadcasters mention that there was a clear need gap in this category since 25% of the total viewership came from movies, but the Hindi movie genre share is a miniscule 5%. In fact, currently only 7% of viewership of DD Direct comes from movies while 60% viewership comes from GECs. Similarly, the Hindi general entertainment genre too has witnessed a shift. With rural data, FTA channels like Zee Anmol, Star Utsav, Rishtey, Big Magic etc saw a spike in ratings, propelling them to top the charts. Most of the FTA GECs air re-run content from their pay siblings even as pay channels identify the rural appetite and develop storylines to cater to the masses. Observing the trend, Mallikarjun Das, CEO, India at Starcom Mediavest Group, comments, “50% of TV households are in the rural market but the entertainment options for them are limited. In general entertainment and movies, there is an opportunity for channels to create an FTA model and not lose revenue as re-run content will not cannibalise the urban revenue.”

Interestingly, some of the FTA GECs did try to dabble with a subscription model earlier, including Star Utsav and Big Magic, but had to lay off the plans as they would have had to sacrifice wide reach for high costs of distribution and low subscription revenue. Ashwin Padmanabhan, COO, Reliance Broadcast Network, states, “Our effort with Big Magic has been to establish the channel as a light family entertainment destination. As a strategy, we felt it was better to be across distribution platforms, thus the decision to go FTA.” What the inclusion of rural ratings has done is, increase the importance of DD Freedish, as more and more players look to hop onto the platform for increased reach. Presently, Freedish carries 80 channels, which is expected to go up to 250 channels as a part of the12th Five Year Plan. However, some channels like Sony Pal, which are classified as pay channels, are also available on Freedish to cash in on the massive reach of the platform, technically not making it a pureplay FTA channel. But the biggest demand for space on the platform could come from news channels. Rural ratings reveal higher consumption of Hindi news channels as opposed to English news channels, and as a result, many Hindi news channels have already turned FTA, and the ones that are not do not generate much subscription revenues. But going FTA might have an impact on content as players may not be able to invest back into quality programming. Paritosh Joshi, CEO, India TV, agrees that the editorial business needs to generate revenue outside of just ads and turning FTA is a short-sighted way of looking at things, but the channels are getting desperate in a bid to attract eyeballs, and thus, revenues. For India TV, its reach in HSM rural, CS 15+ years at a 13 week average is 19.5%. “Any sensible business model in TV includes subscription and ad revenues,” says Joshi. “Ad revenue is something one can’t depend on but everybody is getting desperate. The current thought of news broadcasters is that by turning FTA, the ratings will go up and as a result they will generate more ad revenue.” It is this very thought that forced two big news channels – Zee News and NDTV India – to turn into FTA channels recently. In fact, Zee News gave up a big chunk of its subscription revenue to turn into an FTA channel. “Although it is an easy distribution strategy, it doesn’t generate much money right now. The competitiveness in the space has forced us to turn FTA as well. Most of the channels in the space are already FTA, so pay channels like us were already losing viewership,” rues Ashish Sehgal, COO, Zee Unimedia, which oversees ad sales and other revenue opportunities for the group across entertainment, news and print verticals.

While smaller news networks could get affected by being solely dependent on advertising revenue and no other channel within the network to compensate for the loss in revenues, bigger networks like Zee and NDTV have much more strength to bear the brunt of this move. Concurring with the thought, Rahul Sood, head, affiliate sales and distribution, NDTV, says, “It will have minimum revenue impact on us as we have other pay news channels of the group to offset this move. Having said that, there is not much choice for news broadcasters unless the pay TV system improves with digitisation setting in completely and ARPUs increasing.” He adds that almost 35-40% of viewership for all NDTV news channels comes from rural markets.

It’s all about the eyeballs

Industry experts state that inclusion of rural data is unlikely to immediately impact ad spend allocation as advertisers look at viewership trends within specific target markets and not at overall ratings. However, it enables advertisers who were so far allocating media budgets to target rural audiences without any concrete data, to take data-backed decisions. Anita Nayyar, CEO India and South Asia, Havas Media mentions, “The planning and buying has become more focussed and fine tuned. Although there hasn’t been a major shift in allocation of ad spends, advertisers know exactly where the money is going and who they are spending it on. Going ahead, we could see inter-changing of ad spends between the pay and FTA channel within a network.” As a result, most of the news broadcasters are upping their ad rates as they see advertisers turning their eyes on capturing the under-penetrated rural markets. For example, India TV has seen an approximate 50-60% hike in ad rates over a period of two years due to increased visibility. Zee News, which turned FTA on June 8, has increased rates by 30%. “Brands are trying to drive growth and the opportunity lies in rural markets. In fact, for mainstream FMCGs, 35-40% of the sales are derived from rural, so it is a critical market. People are looking at a rural media plan now and in the next six months we can expect more change,” adds Das. But advertising clients and agencies still focus more on urban audiences. The bulk of the buying is still done on the basis of urban numbers but this will have to change. “As BARC implements more and more meters, the rural viewership is bound to grow and hence there will be a scenario where optimal pricing for rural impressions will have to be concluded,” states Vyas. “In due course, the true value of these rural impressions will have to be agreed upon by the advertiser.” Our effort with Big Magic has been to establish the channel as a light family entertainment destination. As a strategy, we felt it was better to be across distribution platforms, thus the decision to go FTA

Ashwin Padmanabhan, COO, Reliance Broadcast Network.

Ad revenue is something one can’t depend on but everybody is getting desperate. The current thought of news broadcasters is that by turning FTA, the ratings will go up and as a result they will generate more ad revenue. Paritosh Joshi, CEO, India TV.