Thailand's biggest legitimate pay-TV provider has begun airing commercials attached to international programming for the first time, in a move that observers say is a step towards the day that advertisers will be allowed to buy airtime from the company directly.
While United Broadcasting Corporation (UBC) will not earn any money either from advertisers or the international channels which have sold the ads it is now running, it's likely that the move will help bring about a change in the law that would eventually allow UBC to charge for advertising.
UBC has previously allowed ads on channels like BBC World, MTV, National Geographic and Discovery to pass through to viewers watching in hotels, but residential subscribers have had the ads blocked and replaced with static slides. The change, agreed with the regulatory body MCOT, took effect on October 1, so all UBC viewers now see the ads.
UBC has 464,000 subscribers in Thailand, but its signal is illegally retransmitted around the country, so the actual number of households viewing could be closer to two million. UBC says the decision to pass through the ads is consistent with current industry practice.
Goldman Sachs media analyst James Mitchell says the move will put UBC in a stronger position to negotiate with the international channels -- which also include CNN, Cartoon Network and the History Channel -- on the cost of providing content, given that they in turn will be able to promote themselves as having a bigger reach. Initiative Media managing director Wannee Ruttanaphon says passing through the ads is a bonus for all advertisers using the international channels. "Some advertisers will want to target upper-income consumers, so there are benefits for them, and for those who want a mass audience," she says.
Pacific Asia Travel Association spokesman Ken Scott, whose industry is one of the biggest advertisers on the international channels affected by the move, says it represents "a good day for freedom of information and the right of consumer choice".
Mitchell says UBC's long-term strategy is to bring about a change in the law to allow UBC to sell airtime on its own channels. "Once it has advertising on these channels, it's easier to argue there should also be advertising on its own channels," Mitchell says, adding that it is inevitable that UBC will one day be allowed to run paid-for advertising -- probably within three years. This would potentially increase UBC earnings by 20 per cent.
Paid advertising has been banned on pay-TV in Thailand in the belief that consumers should have content funded either by a subscription fee or by having to watch advertising, but not both. Thailand is one of the last Asian markets to maintain this view. Ruttanaphon agrees that despite the current state of flux in the status of TV regulations in Thailand, UBC will one day be allowed by the National Broadcasting Commission to sell its own airtime: "I'm sure it will happen. It all comes down to money."
In the immediate future, though, the main benefit for UBC may simply be that it no longer has to go to the trouble of blocking out the ads. It is unlikely that it will attract many new subscribers simply because it shows ads now rather than the static slides. UBC says that because it is not making any money from the ads it is now passing through, it is not in a position to lower subscription fees as a result of the change.
Group spokesman Vasili Sgourdos says the potential revenue from advertising, should it be allowed in future, is "not as significant as some might think", estimating it would probably only make up five to 10 per cent of total revenue.
"We continue to make increased investments in programming and have experienced increases in other costs, due to increasing energy prices," he says. "Increases in fees (for consumer subscriptions) are only a last resort for the company and we do our best to absorb as much of the cost increases as we can. Allowing UBC to advertise in full and earn revenue may help absorb such increases and potentially invest further in content." Additional reporting by Gunjan Prasad
