In the television news business, free lunches for channel employees are over, literally. The practice of serving on-the-house (Haldiram) snacks at NDTV at 6 pm has been discontinued. News channels in the Network 18 portfolio are also mulling cutting back on the food bills which run into lakhs of rupees. The news broadcaster offers dinner and breakfast to the channels' night-shift employees.
To be sure, food is not at the core of the cost-cutting exercise that the television news companies have embarked on. They are on to serious savings on manpower and news gathering expenditure as well as on distribution and sundry other costs. The targets are stiff. An executive at BAG Network's Hindi news channel, News24, says that most news channels will have to look at curbing costs by 15 to 30 per cent. In fact, Network 18, in an internal mail, has sought a 15 to 20 per cent cut in news operating costs.
Checking expenditure is critical now as advertising is already on a downswing, though CEOs insist that the real impact will be felt in the next quarter. On condition of anonymity, an advertising sales executive admits to a 15 to 20 per cent decline in news channel advertising. Agrees HDIL-owned news channel Live India's CEO Sudhir Chaudhary: "Diwali was lacklustre unlike previous years when many more sponsors had lined up."
Raj Nayak, CEO, NDTV Media, is not surprised: "Several news channel-focused advertisers such as those in the real estate, automobiles and financial services (banking, mutual funds, IPOs) sectors have already pulled out. So have the oil companies. The general entertainment channels are less affected as the FMCG sector is still advertising."
Channel sources say that the payment cycle of all news channels has also been impacted. "The 90-day credit from advertisers seems to have extended to 180 days now. Cash flow is an issue," observes a Hindi news channel head.
Clearly, expansion plans are on hold as the immediate goal is to survive and tide over the next six months. Star News CEO Ashok Venkataramani says that it's foolish to think that the current climate won't affect news broadcasters. "I suspect growth rates will not be the same. Any prudent management will tell you to cut costs and plan for a rainy day. We are also taking the standard steps," he says, refusing to share details.
For a start, channels are re-negotiating their distribution deals. Some of the new channels had sealed placement deals for between Rs 30 crore and 40 crore for a year. "Now there's no money to pay for the prime bands and they are asking cable operators to downgrade the frequency," says a distribution executive at a premier Hindi news channel.
Nobody is divulging their manpower rationalisation drives either.
Builder Madhur Mittal who runs Voice of India admits that the channel has asked people to leave, but claims that the numbers are not significant. Network 18 has put a freeze on fresh recruitment. A leading media sales outfit has asked its top executives to explore the possibility of reducing staff.
Channels have also been forced to restrict their election coverage expenditure. Typically, news channels spend between Rs 4 million and Rs 1 crore (Rs 10 million) or more on election coverage per state. Not this year. Insiders say there will be fewer or no exit polls and fewer cameras and reporters per state. Some are willing to tie-up with regional channels for live feeds instead of sending their own teams.
Currently, not for individual channels but for the news channel category as a whole, the day-to-day cost is ahead of day-to-day revenue. So, do CEOs foresee a shake-out? Haresh Chawla, Network 18's CEO, comments reluctantly: "We will know the real situation only after two months. Major channels will not close shop. Those whose funding is not logical, may shut down. Yes, there is a tough year ahead."
Agrees G Krishnan, executive director, TV Today Network: "This will be a period of consolidation wherein all the news channels will go through a reality check in terms of their business model. Any industry that has seen exponential growth is bound to go through a phase of consolidation."