TV News Industry: Money to be made?
Let me begin from where the story started. The very first instance after which the term ‘profitability of news’ came into vogue was in the 1960s in the US. In an era when Walter Cronkite’s rigorous standards of journalism were practiced, Don Hewitt of CBS felt news was just another programme on TV whose success depended on its viewership ratings. Besides being presented with probative and authentic information, people needed to be told a story that entertained them. His formula was put to the test in 1968, with a show called ‘60 Minutes’. It not only became an instant hit, this longest-running prime time bulletin also ended up earning CBS News well over $2 billion from the time it began! Thus was born the concept of news as a profit centre.
This illustration may seem like an all-American affair, but it provides a crucial lesson which became a leitmotif in the chapters of broadcast journalism worldwide. That news could be infotainment and that it could bring in money. The satellite boom came to India over two decades later. The stupendous success of private channels with an audience, used to a prosaic diet of Doordarshan programming, led to an influx of a vast number of players, who perceived the industry to be a veritable goldmine.
How has the story back home been so far? Proliferation continues - there are 75 24-hour news channels today - leading to fragmentation of the market in which profitability remains the prerogative of a select few. What could be the reasons behind this trend:
a) Who cares? : Haven`t you noticed that the Indian media industry could possibly not care less for profitability? We go gaga about growth in TRP numbers and rush to announce our lead in viewership rankings. While this may give a marketing head or an Editor enough reasons to smirk, should we not concede that this is not the sole criterion of success?
b) For TV news business, profitability may not be a motive at all: There is a possibility that a business house may want to launch a news channel, perceived to command power and respect, to gain a foothold in influential centres or to aid another objective.
c) Over dependence on advertising revenue: World over, subscription is the main revenue earner of a company, while adverts are the secondary source. In India the scenario is just the opposite.
d) Lack of digitalization: Carriage fees remains one of the largest cost heads. Media houses give higher pay outs in hope of conversion of a significant revenue potential. However, it is a simple supply-demand equation at play with 520 channels vying for 50 odd frequencies that an average analogue platform based TV set can show. Maybe, we all would have to live with it till we achieve substantial digitalization.
e) Irrational euphoria: Till a couple of years back any TV media business, including news, was making a lot of money, unfortunately on the planning excel sheets. That euphoria sent all cost heads, including salaries, soaring to an unsustainable level. Well, the economic recession has brought in much needed rationalization in the media industry, though there`s a lot of ground to be covered.
So, what’s next? If one were to roll out a path for the way forward, two broad areas would require immediate attention:
a) Operational efficiencies: There is a need for rationalization of costs. Say, carriage fees could be decided based on the equation of incremental ad revenue that can be generated leveraging increased viewership, which must be a desired multiple of the money paid of carriage. Salaries could be derived from the budgeted costs for skilled manpower than being some X factor on the balance sheet. Besides, cost leadership can plausibly be a consequence of network strength. When economies of scale come into play, depreciation of costs follows.
b) Redefining the revenue market: I am convinced that there is advertising money out there waiting for an innovative concept. A good idea can always be monetized provided it is the exact fit to the client’s need. Particularly during recession, an advertiser needed that one more reason to sign the dotted line. Tailor-made solutions proved to be that delta extra. The scenario viz subscription revenue is also slowly changing. By 2014, the share of broadcasters in the total subscription pie is expected to rise to 27 % from the current 18%.
As per industry estimates, our current media spend per capita is just $ 4, which is far below the world average. UK’s spend is $ 251, US’ $ 491 and Japan’s $ 343. While it may be difficult to bring up the figure dramatically due to our large population, we can aim to at least reach China’s $ 27.
Digitalization would help enormously to this end. According to a report of Media Partners Asia, India will have the largest DTH subscribers by 2012. From an installed base of 17 million in 2009, the number of DTH subscribers will reach 45 million by the year 2014. The digitization of TV platforms would inevitably pave the way for transparent distribution of revenues.
The wheels of change are already oiled and turning and the next few years are likely to be the most interesting to watch. With the Indian media behemoth opening doors to boundless possibilities, the most efficiently run and innovative news network will not only survive but thrive in this make or break game. What I can see is that the TV news industry would be dominated by 3 or 4 networks with each possibly having 50+ channels. Just an average Rs 2-3 crore profit per channel would be exciting enough!