Television software: Future, content

Suresh Krishnamurthy

IT IS show time for television software producers. Fresh content generation for television channels may not have reached feverish pitch yet, but it has certainly been hotting up the last 12 months.

Fuelled by the demand from satellite television channels -- both mainstream and regional -- fresh programming graph is sloping upwards and is set to zoom. Especially as channels are now setting apart a greater proportion of their expenditure budget for fresh programming. This is a reaction to the ever-intensifying competition to attract and retain viewers.

Other factors that have aided this transformation in the status of the television software industry include the phenomenal success of fresh programming in the private sector channels and DD Metro. This given the private channels the confidence to attempt novel programming, translating into bigger budgets for television programmes.

Another factor that has rapidly narrowed the gap between the numbers of viewers commanded by the national network and the satellite televisions is the enhanced penetration of cable television into homes. The viewership ratings of the successful programmes broadcast on satellite TV is now at least half that of a successful `hit' on the National Network. Significantly, these viewers have a greater purchasing power compared to Doordarshan's viewers.

The outcome is an increase in advertising spend flowing into the satellite television broadcasters. And a portion of such higher revenue inflows has inevitably filtered down to fresh programming.

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Ficci-Andersen Study

Reflecting the improved prospects for the television software industry, a study of the Indian entertainment industry by Federation of Indian Chamber of Commerce and Industry and Arthur Andersen indicated that the revenue projections of the television software industry would increase from Rs 1,680 crore by the end of 2000 to Rs 9,000 crore at 2005-end -- a compounded annual growth rate of 40 per cent. This study also indicates the scope and potential for export of television software.

However, it is quite clear that the projections represent an optimistic scenario. In fact, the study was made when media stocks were flying high and this sentiment appears to have touched the study. For the projections (these are not reasonable estimates) made in the study to materialise, the economy has to grow rapidly, followed by increasing advertising spend and greater penetration of cable TV. There are signs that the Indian economy can only grow at a modest rate and, therefore, the growth of the television software industry cannot continue to be rapid for five years.

Nevertheless, while the projections of the FICCI-Andersen study may never be achieved in the time-frame projected, they should be viewed as indicating the latent potential of the television software industry to grow. If not 40 per cent, the rate of growth in the value of the television software industry over the next ten years or so can still be at levels far higher than the economy's rate of growth. The long-term prospects for the industry certainly appears bright.

A number of television software producers have used the industry's positive situation to tap the capital market to finance their growth. Companies such as Balaji Telefilms, Cinevista Communications, Creative Eye, Pritish Nandy Communications and Television Eighteen India are all listed. United Television and New Delhi Television can be said to be waiting in the wings to get listed.

Industry structure

Television software demanded by the channels can be broadly categorised into entertainment, news, business and sports. Much of the industry is now accounted for by entertainment programmes. Also, the entertainment segment is growing at a rate higher than the other categories. The money flowing into news and business programming is growing sedately, given the restricted viewership for these programmes, and consequently the lower share of advertising spend.

The entertainment segment is extremely fragmented with a host of producers jostling for space. This segment is dominated by Balaji Telefilms, which programmes across a range of channels on a scale unmatched in the industry till now.

A distant second is United Television though its portfolio includes non-prime-time including programming for children.

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However, UTV also produces a few programmes for channels outside India, such as those in Malaysia. Apart from Balaji and UTV, other producers are relatively small. Their fortunes are tied to one or two channels and do not have a presence across a range of channels.

For business and news production companies, the field is restricted to a few players. Television Eighteen has now established itself as the premier business programme company. TV18 also has a stake in the broadcasting platform -- CNBC India. In this respect, TV18 has to be treated partly as television software producer and partly as broadcaster. In news programmes, New Delhi Television in English and Aaj Tak in Hindi have a dominating presence.

Content types

Television software producers can supply content to the channels under two types of agreements -- commissioned and sponsored. In sponsored programmes, the time slot is sold by the channel to the content-producing company. Apart from generating content, the company would then have to market the slot to advertisers on its own or outsource this activity to a marketing company. In the second type, the channel commissions the programme and a pays a fixed price. The marketing of the advertising time slots is done by the channel itself.

The pay-offs on these two kinds of programmes are quite different. If a programme is successful and is able to score high on the television ratings, the pay-offs for a sponsored programme could be phenomenal. Just one such programme could rake in the moolah for the television software company. However, if the programme fails, then the adverse outcome could be equally spectacular.

For a commissioned programme, the television software company would get a base, minimum price. Then if the ratings are good over an extended run, it would get incentives. According to industry sources, the quantum of such incentives could be 10 per cent for a successful programme. The bottomline is that a substantial portion of the increasing revenues in the case of commissioned programme accrues to the television channel and not to the software producer.

However, there are two positive outcomes in the case of a successful commissioned programme. Since the original contract is typically for 52 weeks, any new agreement after that period would involve a steep rise in the base minimum price. Channels are also unlikely to grudge paying fancy sums for a successful programme. Another positive fallout is the possibility of more programmes being commissioned from the producer.

Another aspect to this sponsored-commissioned divide is that of the rights to the content. In sponsored programmes, the rights to the content rests with the producer. In commissioned programmes, the rights rest with the channel. In this case, however, the potential for exploitation of rights appears limited now because of the ever-increasing demand for fresh programmes. As such, the loss of rights inherent in a commissioned programme may not prove to be a substantial loss for the producer.

The trend, however, is for channels to go in for commissioned programmes, at least in the case of mainstream channels. In the next few years, there is the possibility all programmes in all channels would fall in the commissioned.

Television channels view managing the advertising-mix for a given time slot as their core business and are unlikely to outsource that activity to others, especially considering the intense competition for advertising revenues. Content producers for their part would be better off focussing on what they do best -- producing content.

In the case of Doordarshan and regional channels, however, prime time programming still continues to be sold as time slots for now. Thus, care must be exercised in assessing the impact of such programmes on the financial performance of the companies. The extreme pay-offs involved in the success or failure of such arrangements have the potential to alter the financial performance of these companies.