Pakistan media’s mysterious financing
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It takes Rs. 40 million per month, for a privately-run, news channel in Pakistan. Apparently, advertising is the only source generating income for privately owned TV channels. The windfall from advertising industry, in case of top 32 channels, is at best Rs. 592 million. At average, every channel earns Rs. 1.7 million per month from advertising. Either the shortfall is compensated by mysterious sources or the electronic-media bubble is heading for a big burst.
In fact, Pakistan cannot be considered a sound Media market because there is not enough growth in advertising to sustain it. The ratio of advertising expenditure to GDP is about 0.19% - the total advertising expenditures in fiscal year 2008-2009 were Rs. 26.96 billion according to a Gallup survey and the total GDP was around Rs. 14,156 billion according to Economic Survey report for the same fiscal year. In the neighboring India, the same ratio for year 2008-2009 was 0.47%. 70 percent of goods and services purchasing power in Pakistan is constituted in small and medium cities which are nearly 80 percent of total television audience. The remaining 30 percent purchasing power is exerted by the 20 percent of television audience in metropolitan and big cities [1]. Last few years were quite promising and positive for the media industry especially for electronic media though annual advertisement growth is far less (8% in 2008-2009) as compared to annual growth of total media industry which is 120 percent approximately. Global economic recession and the alarming law and order situation in Pakistan have resulted in lowest increase in advertising expenditures in the last five years [2].
In the year 2008-2009, the television industry got the lion’s share of 55 percent of the total advertising expenditure, while print media followed with 26 percent. According to research organization Aurora’s (owned by DAWN media group) annual report 2009, the total media advertisement revenue was Rs. 24.63 billion. Aurora’s figures differ from Gallup’s who reports that there was only 1 percent increase in total ad-spend in 2008-2009 as compared to last year (from Rs. 24.36 to 24.63 billion). The total ad-spend increased by 31 percent in financial year 2006-2007, and 18 percent in 2007-2008. According to Aurora’s figures, print media still holds 37 percent share in total advertising budget while the TV is on top with 54 percent [3].
As mentioned in the beginning, in fiscal year 2008-2009, TV ad-spend increased by 24% to reach Rs. 14.807 billion as compared to previous FY according to Gallup survey report. Aurora did not provide any details about break up of TV ad spend in response of our request but according to another renowned firm MediaBank, TV advertising revenue remained Rs. 13.374 billion with 14% increase from last FY. Since there is not much difference between these two figures, we will graphically show break-up of TV ad-spend per channel here for Rs. 13.374 billion:
This graph reveals very important factors. 96 percent of TV ad revenue was taken by 32 channels. The remaining channels which are around 50% of total number of channels functional in Pakistan got only 4 percent. Another notable fact is that PTV Home and PTV News are owned directly by federal government and are terrestrial channels along with ATV; previously owned by government and now by a private company. Terrestrial channels claim some 16 percent of revenue. Consequently, more than 80 private channels are contesting for 88% of total TV ad-spend revenue. Moreover, satellite channels’ ad revenue increased by 23% and terrestrial channels’ decreased by 18% as compared to previous fiscal year 2007-2008. On the other hand, Gallup claims that satellite channels accounted for 74 percent from total revenue with an annual increase of 36% while terrestrial channels accounted for 26% with annual increase of only 0.1%.
All in all, total television ad-spend remained around RS. 14.807 billion in fiscal year 2008-2009 [4]. In the same fiscal year PEMRA awarded 46 new FM radio licenses, 16 TV channel licenses, 232 cable distributorships and two landing rights for TV channels [5]. Five TV channels started broadcasting that year, compared with 15 in 2007-2008 [6]. Currently, PEMRA charges around Rs. 2.5 million for issuing a TV license excluding Rs. 20,000 as initial charges [7]. Moreover, it costs 70 million to 1 billion rupees to establish one TV channel in the country as per estimates based on interviews with industry officials.
The total TV ad-spend of Rs. 14.807 bn is distributed among almost 60 private fully functional TV channels and two major state-run channels at the moment [8]. State-run PTV Home and PTV News get 8% and 4% from this total revenue respectively which leaves Rs. 13.03016 billion for 60 private TV channels. Meanwhile, 96% of the ad-spend goes to 32 major channels while the other 28 channels get only 4 percent from this pie (Rs. 592.28 million). Among these 28 channels, seven are news channels and remaining 21 are general entertainment channels.
If we assume that this amount of Rs. 592.28 million is equally divided among 28 channels then every channel will get Rs. 21,152,857 per year, hence Rs. 1,762,738 per month. Factually it is not possible by any means that one TV channel can be run with money as low as Rs. 1,762,738 per month ($20,935). There is no other legal source of income for TV channels in media market as the market does not generate any subscription revenue [9]. A senior official of Dawn TV informed Viewpoint on condition of anonymity that total monthly expenses to run a news channel are around Rs. 40 million. Another senior official from ARY network further verified these numbers and informed that its costs around Rs. 20 to 30 million per month to run an entertainment channel. Keeping in view these all facts, it is not possible for Pakistani media market to thrive for long period and we can predict that bubble will burst soon and many channels will have to shut down their services. According to the break-even point theory, any firm needs to meet its fixed costs in order to keep its operations running. Below break-even point, a firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs [10]. In above mentioned case, most of media firms are not even able to meet their fixed costs and sooner or later will have to leave the market.
In order to inspect the claims made by both ARY and DAWN news officials, let us examine the only financial data available from a media house: Hum TV. Hum TV (Eye Television Network) is a semi-public corporation and according to the financial report of 2008-2009 [11] its total expenses for the fiscal year were Rs. 78,397,045 with Net Revenue of Rs. 1.117 billion approximately. Eye Television Network is one of major media corporations in country and secure almost 9% from total ad spend with its four channels. In the beginning of year 2008-2009, it owned two channels. The third channel (Style360) started operations in August 2008 while the fourth one (OYE) was launched at the end of this fiscal year. So we can safely claim that during the whole period of 2008-2009, three channels were in operation. This fact leaves us with calculations that total expenses per channel per month for Eye TV Networks are about Rs. 22 million, keeping in view the expenses mentioned above. In the meantime, remember that all four channels share higher management, technical facilities and distribution resources. These calculations substantiate the claims made by officials from DAWN and ARY TV.
Most of the Pakistani media industry is owned and controlled by private firms and individuals, so it is not possible to access any financial information on scientific grounds, but with some exceptions. Revenue sources, expenditures and financial values of these media houses are an inaccessible secret which is nothing but another ‘ugly secret’ of our society. Everyone knows something, but no one dares talk. It is evident that a few channels are being financed by mysterious sources else if any economic rule is applied, some of the channels must have been closed down by now.
Notes:
1. Cyber Letter Gallup Pakistan [online]. 2009 June; Available from: URL: http://www.gallup.com.pk/newslist.php?id=MEDIA
2. Gallup Pakistan's Annual Advertising Expenditure Data [online]. 2009; Available from: URL: http://www.gallup.com.pk/GallupPakistanAdSpend.php
3. Gallup Pakistan's Annual Advertising Expenditure Data [online]. 2009; Available from: URL: http://www.gallup.com.pk/GallupPakistanAdSpend.php
4. MediaBank. Annual Subscription based Report. http://www.mediabankpakistan.com/
5. CSF Achievements. Ministry of finance Government of Pakistan [online]. Available from: URL: http://www.competitiveness.org.pk/subpage.php?pageid=55
6. Annual Financial Report 2008-2009. Available from: URL: http://www.eyetv.com.pk/financial/2008-2009/Financia_Report_2009.pdf
7. For further details: http://www.pemra.gov.pk/satellite_tv.html
8. Annual Report Eye TV 2007-2008. Available from: URL:http://www.eyetv.com.pk/financial/2007-2008/ANNUAL/2007-2008-annual.pdf
9. Crampton T. Salman Iqbal on ARY and TV in Pakistan [online]. 2007 Oct. 02; Available from: URL: http://www.thomascrampton.com/media/salman-iqbal-on-ary-and-tv-in-pakistan/ Asia subscription TV figures higher than ROW combined . Available from: URL: http://www.digitaltvnews.net/content/?p=11224
10. William JN, Haka SF, Bettner MS. Financial and managerial accounting. 13th ed. Chicago: Irwin Professional Publishing; 2001. p. 844-845
11. Annual Financial Report 2008-2009. Available from: URL: http://www.eyetv.com.pk/financial/2008-2009/Financia_Report_2009.pdf
 | Riaz ul Hassan has been actively involved in Social Media studies since 2006. He has held diverse editorial positions in different literary magazines including Ravi and Patras. Currently studying in Sweden and plans to pursue his PhD in the field of Social Media. Riaz graduated from Government College Lahore and has worked at the same institute for about one year as lecturer. He has keen interest and involvement in arts, theater and Social Media studies. |
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