12/01/2021

Opinion: Our ‘media viability crisis’ (Part 1) — Is it getting worse?

* 10-minute read *

“Later part of this decade could be extremely testing for the (news) media industry. We are looking at a massive decline in television advertisement revenue and it’ll affect all of us”, I said addressing a rather large crowd comprising mainly of broadcast journalists, at the launch of a research publication that I authored in February 2015.

This statement was a reflection of alarming indications I had observed during my research work. 

The research report was the first of its kind study deconstructing and analysing structural issues within Pakistan’s media economy. It pinpointed the fault-lines, and suggested course-corrections to various stakeholders to minimise the fallouts from the impending implosion of the broadcast journalism industry — an unfortunate event that could impact all the stakeholders associated with it; working journalists included.

One of the key suggestions made in the report was in response to the lopsidedness of local media-economy which is tilted unfairly in the favour of media-intermediaries and against the content producers and the broadcasters.

The report recommended that the latter needs to immediately start cultivating alternative revenue mechanisms, and push for potential infrastructural changes and technological upgrades that could allow them to experiment with alternate and more innovative business models. In simpler words, it suggested that the content producers and broadcasters should immediately start working towards reduced dependence on advertisement revenue which is currently the largest, and in most cases the only, revenue stream for the media by limiting the role of media-intermediaries and gradually moving towards business-generation through direct payments i.e. service-based and subscription revenue.

The report, to my surprise, received at best a lukewarm response from the media community.

“How is media business our problem”, asked a rather senior media professional present at the launch event. “It is the problem of media owners (broadcasters). We shouldn’t trouble ourselves with their affairs and focus only on producing good journalism”, he concluded in a definitive tone. What followed was an hours long tug-o-war wherein I tried to push the idea that what affects our media industry is bound to affect all of us, and most of my colleagues countered it by saying “not our business”.

Fast forward to 2021, Pakistan’s television advertisement revenue has been constantly falling for three years in a row. This downward trend was first observed in 2017-18 — much earlier than I had originally predicted and anticipated. Presently, according to the latest figures by Aurora (a subsidiary of Dawn media group), we are down to nearly 50% of the television advertisement revenue in a little more than 3 years.

It was around the same time in 2018 that we started hearing the reports of delayed salaries even in the leading media outlets, followed by massive layoffs by news organisations regardless of the size of their businesses. Some of them even had to permanently pull the plug. 

A simple correlation between the declining television advertisement revenue and the massive layoffs in the industry is enough to conclude that the media-economy, in fact, does affect all of us, including the working journalists, and thus it is our business.

What went wrong?

Until the year 2017, the television advertisement revenue was experiencing an average yearly growth of approximately 10%, and with that the media industry was quite naturally ‘booming’. The pieces of ad-revenue pie for nearly all of the media organisations were becoming larger every year. Leading media outlets had quite literally doubled their yearly ad-revenues in the past 10 years. 

In 2016-17, we stood at the highest ever recorded television advertisement revenue of Rs.42 billion per year, according to the data from Aurora Fact Files. Considering this massive growth in the advertisement revenue, companies like MAGNA predicted a 14% growth in Pakistan’s ad-spend in 2018 and expected it to reach approximately $917 million — very close to the $1 billion mark.

Starting 2017-18, the growth trend was quite literally reversed. Several factors could have contributed to the decline, but I feel there are three leading causes.

First; one of the biggest factors is the overall slowdown of the economic growth in the current government’s tenor, impacting the overall ad-spend of Pakistan.

 

It is evident from the data produced by Aurora that there has been a constant decline in Pakistan’s cumulative ad-spend since the current government of Pakistan Tehreek-e-Insaaf took over in 2018 — 7% decrease in 2017-18, 18% decrease in 2018-19, and 13% decrease in 2019-20.

However, in my view, the figurative roots of our media crisis go much deeper, and the incumbent governments of the past have had either a direct or indirect role to play in it, especially considering the fact that the responsibility of strengthening, and creating an enabling environment for independent and viable media lies upon the governments.

Considering that television is the mass-medium of the country, and naturally broadcast journalism is the most popular form of journalism, most responsibility of ensuring an enabling environment for media entities to flourish and grow lies upon Pakistan Electronic Media Regulatory Authority (PEMRA), a body formed on the pretext of “improving peoples’ access to mass media” and “enlarging the choice available to people of Pakistan in the media for news and current affairs”.

An example of these enabling actions is the provision of technological infrastructure for the broadcast media that enables and encourages revenue generation, and promotes media’s viability.

However, PEMRA has largely failed in providing sound technological infrastructure even for the  fair transmission and relaying of all licensed media entities, let alone providing upgrades that could allow broadcasters to experiment with direct revenue, such as subscription based services and pay per view, and other innovative business models.

As a result, essential services that are widely used in the world, such as Direct to Home (DTH) and digital cable, remain absent in our media market. To top that, there doesn’t seem even seem to be a foreseeable action-plan for their implementation.

In short, currently a vast majority of our media, news and entertainment included, is being relayed through a decades old transmission system in ‘SD quality’, severely limiting the possibilities of experimentation with innovative business models, and considering the fact that PEMRA is tasked with the job of enabling tech-based infrastructure for the broadcast industry, the story is self-telling.

In rare instances when PEMRA actually initiates a development process, such as for digitalisation, there are other roadblocks to deal with. For instance, it’s important to mention here the lost opportunity of successful implementation of a DTH regime (initiated by PEMRA and challenged by the broadcasters) which could have potentially brought in a substantial amount of external investment, even in the news sector, and could have boosted the local media economy.

Meanwhile a quick glance at the ‘status of digital switcher’ on the International Telecommunication Union’s website strengthens this view. Even in 2021, Pakistan remains one of the countries with “no information” on the country’s digital switch over status, or even any foreseeable plans or policy for its roll out.

This lack of technological infrastructure for media in Pakistan has severely limited direct revenue generation for entertainment media entities as well, as opposed to say India, where entertainment content is mainly relayed either through Over the Top (OTT) platforms, or through subscription based services; both streams are monetised directly.

Even entertainment channels in Pakistan, such as Hum, Geo Kahani and ARY are largely relaying ‘free to air’ content, essentially limiting themselves to ad-based revenue alone.

Whereas a quick glance on our neighbouring India’s media market reveals that that’s not the case with the Indian entertainment outlets. Sony Television Network in India, for instance, charges a subscription fee for each of their channels, hence generating ‘direct revenue’ in addition to the ad income — a feat impossible with Pakistan’s analog transmission system.

 

 

There are examples of arrangements in some other countries, for instance, Canada, where the large media distributors have to pay a part of their revenue to community media broadcasters. However, they seem to be impractical for South Asian markets. For instance, a 2013 research found that broadcasters with ‘pay channels’ in India believed that “cable operators under-declare the number of households serviced, and thus siphon off about 80 percent of the over Rs 200,000 million (US$ 3,600 million) collected by them”.

Second; PEMRA, or the lack of the vision of incumbent governments alone aren’t responsible for the ongoing media crisis. In my view, media owners and cable operators — a.k.a. the broadcasters and the media distributors — two of the largest media stakeholders have a substantial role in resisting some of the actions that could have given the media industry tools to survive.

This conclusion is grounded in the past actions of these stakeholders groups (such as resistance against DTH), and the fact that the ‘digital switchover’ of Pakistan’s media will substantially change the media landscape, enabling transparency in a number of industry elements, and will have an impact on the positioning of both of these stakeholder groups.

Starting with the cable operators: official sources indicate that there are nearly 2200 ‘licensed’ cable operators in Pakistan, whereas there continue to exist a large number of hyperlocal unregistered (illegal) cable operators as well. Currently the only form of local ‘subscription revenue’ goes in the lieu of carriage charge, or more commonly known as ‘cable fees’, and safe estimates suggest that upward of  Rs.60 billion is collected every year by cable operators — more than all of Pakistan’s ad-spend combined.

An important point to mention here is that most carriage-fee-based income of unregistered or ‘illegal’ cable operators becomes a part of undocumented economy, i.e. out of tax net.

To sum it up, Pakistan’s media is currently operating in an environment where content producers — a.k.a. the broadcasters — can only produce ‘free to air’ content through ad-based revenue which amounts to Rs. 26 billion, while the cable operators — a.k.a. the media distributors — are earning direct revenue in lieu of carriage fees, and with substantially low transparency and tax coverage, amounting to (an estimated) Rs. 60 billion per year.

Naturally, the media distributors are resistant to the digitalisation, which may, among other things, encourage better governance and promote financial transparency, and hence more tax coverage.

More importantly, the digital switchover process might encourage mergers of small and unregistered (illegal) cable operators into either existing larger conglomerates, or new companies registered under law, and as a result substantially decreasing the undue control of cable operators on the broadcast content.

And finally, a successful digital switchover might tilt the media economy in favour of broadcasters in-terms of (possibly) reduced carriage fees, and enhanced returns from the subscription market.

Thus, the resistance from cable operators isn’t surprising.

Coming to the broadcasters: considering that the cable digitisation enables maximum returns for broadcasters in-terms of higher subscription revenue, and helps in diluting distributors’ control over broadcast content, the resistance of broadcasters towards DTH (a part of digital switchover), on the face of it, is incomprehensible.

For instance, in our neighbouring India, the whole idea of television digitalisation was to maximise the returns from subscription market in the favour of broadcasters.

However, in my view, a deeper analysis of the local media landscape suggests that ‘status quo’ suits most of the broadcasters, and instead of gunning for higher subscription revenue (an unchartered territory), the big guns of the industry would rather stick to the ‘known evil’ i.e. the ad-based revenue.

To understand this reasoning, it’s important to understand the evolution of Pakistan’s broadcast industry. Ever since the inception of private broadcast media in 2002, the industry has survived solely on ad-based income. After nearly 20 years of survival through various highs and lows, the big guns of the industry have perfected the ‘art’ of generating ad-based revenue, some of it at the cost of integral structural changes within their outlets, for instance, focusing on the cities that generate highest TRP, and resultantly highest ad-revenue.

DTH and other forms of television digitalisation can substantially damage this ‘status quo’, especially with the presence of new and more resourceful players in the mix (such as DTH investors), and so naturally, there continues to be a resistance.

And third; traditional media is evolving into new forms globally, and while the process is slower in Pakistan, we are surely observing the impact of this ‘convergence of mediums’. A simple indicator of this convergence is the constant rise in Pakistan’s digital ad-spend against all odds, including the national slowdown of economy, and even the pandemic.

According to the data collected by Aurora, Pakistan’s digital ad-spend has been constantly increasing for the past 6 years, and with an average growth of more than 40%, it has now reached to more than half of Pakistan’s current television ad-revenue. The chart below shows a slow but steady ‘digital’ takeover of Pakistan’s linear television ad-revenue.

Broadcasters in specific, and the media industry as a whole in Pakistan (except a handful), in my view, have remained largely oblivious to this changing dynamic, and until relatively recently, the digital content was seen and treated as the ‘side-kick’ of ‘mainstream’ media content. In many media outlets, the practice continues, wherein there are ‘digital desks’ to repurpose television content for consumption on either YouTube or social media outlets.

There also seems to be a reluctance on the part of most traditional broadcasters in-terms of big investments on digital media ventures. Most of them, as mentioned above, rely on repurposing television content for YouTube and Facebook, which in-turn is giving rise to another challenge that I’ll discuss in a future op-ed.

Conclusion

Having discussed, in my veiw, the three leading contributing factors to Pakistani media’s viability crisis, the answer, unfortunately, to the question posed in the title, is, yes. Our media viability crisis is getting worse, and sadly there isn’t much being done by any of the key stakeholders of Pakistani media industry to address the fallouts. If the trend continues, the crisis is likely to get progressively worse in the years to come.

There are, however, course corrections that, if taken immediately, could help minimise the damage and the symptoms of this crisis. More on that in part 2 of this article.

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