News channels woo cable chiefs to increase reach
A fleet of 20 cars was similarly gifted in recent months to key cable chiefs in other cities too by the company to improve its reach, reports Gurbir Singh.india Updated: Feb 01, 2007 21:53 IST
The head of a major cable network in Hyderabad rides around in a Ford Ikon gifted by a news channel network as part of its efforts to reach more eyeballs.
The Hyderabad cable-wallah is not the only one. A fleet of 20 cars was similarly gifted in recent months to key cable chiefs in other cities too by the company to improve its reach.
It's about a year since there was a mad scramble to launch news channels, but for most players it is not pay dirt they are hitting.
The sharp competition for a share of the advertising pie, skyrocketing costs and a huge distribution bill in the form of carriage fees has taken its toll.
Those who thought these channels were doing rip-roaring business should take a harder look.
Times Now, that has just completed one year, is believed to have lost Rs 30 crore in the first 12 months of operations.
The financials of Zee News, now an independently listed company, too makes interesting reading.
Zee News Ltd, that includes the group's 6 news channels - the Hindi Zee News, Zee Marathi and other regional news channels - recorded an income of Rs 166.5 crore for the 9-month period ending December 31, 2006.
Expenses were steep too at Rs 153 crore, leaving a wafer thin net profit of just Rs 9.3 crore.
The launch of two new channels - Zee Telugu and Zee Kannada - forced a hefty loss of Rs 35.6 crore and ate into the profits of the news network Look at it another way: For FY 2006, the flagship Hindi channel Zee News made a net profit of just Rs 1.8 crore on a turnover of nearly Rs 36 crore.
Zee Akash Ltd, that operates the recently launched Bengali channel '24 Ghanta' and in which Zee News holds 60 equity, took a loss of Rs 4.2 crore.
If this had been consolidated with Zee News, the company's net profit would have been virtually wiped out.
NDTV, in the red, has seen a further inexplicable slide. Though turnover rose for the 3-channel network to Rs 198 crore for the 9-month period ending December 31, 2006 from Rs 154 crore for the corresponding period in FY 2006, the net loss nearly doubled to Rs 7.05 crore from Rs 3.95 crore for the previous nine months.
TV Today, promoter of the successful Aaj Tak Hindi channel and English 'Headlines Today', has performed better than the others but its margins too seem to be under pressure.
While income grew 23 to Rs 141 crore for the 9-month period ended December 31, 2006 from Rs 116 crore for FY 2006, net profit was up just 12.5 to Rs 18.8 crore for the 9 months.
"Distribution costs are up, costs of gathering news are rising sharply and consumers have become more demanding," said Times Now CEO Sunil Lulla.
Lulla is not willing to reveal the losses his company, Times Global Broadcasting, has made in its first year of operation - "they are mainly investments" - but he feels break-even will take "atleast 2 to 3 years."
"The main killer is carriage fees," said a former news channel executive preferring anonymity. The 'unofficial' cost of placing a channel in prime band to make it more accessible to viewers has played havoc with the bottom lines of news channels. For bigger networks like NDTV and TV Today, the deals with cable operators costs them upwards of Rs 30 crore a year, while for single channels like Times Now it is around Rs 15 crore.
Will CAS make a difference? Too early to say since CAS is only a small segment in just 3 metros, according to Lulla. But Sameer Manchandana, CFO of CNN IBN's Global News Broadcasting felt over time it would create a level playing field. With a digital feed that allows for uniform clarity of as many as 200 channels and cable networks barred from playing placement games, carriage fees may become redundant.
The one good news for news channels is that the television advertising pie has substantially grown from Rs 5,400 crore in 2005 to Rs 6,600 crore in the last year - a 22 growth. The trend from the past 5 years shows that the growth rate will ramp up even further. More significantly, though there is a relatively small viewership for news television, advertisers are willing to spend proportionately more on this segment of television.
The end-2005 TAM Media data shows that as a percentage of viewers, Hindi News accounted for 4.2 %, English News - 0.3% and Regional language news - 1.6%. Total news viewership: 6.1. Compared to this, over the last 5 years, advertising spends on television news platforms have steadily grown from 4-5 % to nearly 12 % currently.
The downside is that there are 47 channels competing for the pie, and it is obvious not all of them will survive.