Dear Sire, would you be so kind as to spend cUSD3.5b in advertisements, each year might I add, to reach 762mn viewers, of which, about 220 odd million tune in for prime-time TV watching ⁽¹⁾.

Sure, but how should I decide where to advertise?

Sir, we have an excellent well-document process where we measure watermarked channels based on a sample of about 44,000 households ⁽²⁾.

That’s great, but don’t you think the sample size is just too low, especially considering that the ad spend per sample is huge; won’t it create incentives for manipulation?

But sir, this is a huge improvement over the last system. Back then, TAM only had about 2,000 meters and their competition INTAM used to report diametrically opposite ratings.

So, what happened to INTAM?

Well, TAM acquired it! ⁽³⁾

Alright, but with such advancements in digital technology, there has got to be a better way, right? What about all the DTH and internet TV users—there are almost 125mn of those! Aren’t they a better sample size ⁽⁴⁾?

May be sir, but how can we invade the viewers’ privacy!

If the Target Rating Point (TRP) scandal this week wasn’t on your radar, the above dialogue aptly summarizes it. A large part (if not all) of the INR270bn odd television ad revenue is decided based on the data captured by those 44,000 meters. Given that a network earns close to 70% of its revenue from ads (balance 30% from subscriptions), these ratings become currency for survival. Unlike election exit polls (also relying on a small sample size), which purely seek to entertain, TRP decides where ad spends will be directed. Politics and the facts of the case aside, to us, these details are intriguing.

Cultural parasitism and belief bias: Given the intellectual firepower housed within top spenders in the advertisement market, one wonders as to why a more scientific decision-making model has not emerged yet. The best approach is a totalitarian one—i.e., get the actual viewership data. Here, technology has advanced, but not everyone in India can afford to install a system that communicates two ways (signal sent to households and households relaying it back). In its absence, one would have wished for a large enough sample size. A 0.02% sample size (44,000 samples of c200mn households with a television set at home ⁽⁵⁾) is dramatically low to be a representative.

This TRP system has stayed pervasive, in part, because of what’s called cultural parasitism, and in part, due to belief biases.

Cultural parasitism happens when an ideology parasitizes the mind and changes the host’s behaviour. This is then passed on to others. Therefore, a successful ideology (the only kind we hear about) is not configured to be true; it is configured to be easily transmitted and believed. In context of the issue at hand: “Following TAM (and its successor BARC) ratings is how things have always been done. When I joined freshly from B-school, my seniors did it like that, and we are simply following.”

In belief bias, an argument that we would have normally rejected for being idiotic seems perfectly logical just because it leads to a conclusion that we approve of. Or we judge the argument not by how strongly ‘it’ supports the conclusion, but how strongly ‘we’ support the conclusion. In our case, people who really have the power to make the change and improve the system are happy with how things currently are. Why improve something that is already working in your favour?

What were you thinking was the iconic line by Scott McNealy, erstwhile CEO of Sun Microsystems. Sun, the darling of the stock market during the dot-com bubble in early 2000s, hit valuation of 10x revenue. Scott had this to say, “at 10x revenue, to give you a 10-year payback, I have to pay you 100% of revenue for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at USD64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”

Cultural parasitism had engulfed the investment community during the end of the 20^th century. It had changed the behaviour of not just investors in tech stocks, but almost everyone started believing a certain hypothesis. Sun was later acquired by Oracle at a fraction of peak valuations. This leaves us wondering as to how much of cultural parasitism already infects us in the current bull market. The ideology of ‘buying what is improving at any price’ seems to be transmitting easily these days. It started during the lockdown with Healthcare and FMCG, which have underperformed markets since. It later moved on to rural-focused stocks, and most recently it seems to have moved to technology stocks in India. Rotations in sectoral performance have always been a part of our markets, but the relatively extremity seen in the market’s behaviour these days is more recent.

Resources:
(1) https://www.livemint.com/industry/media/tv-records-762-million-viewers-per-week-in-2019-despite-nto-barc-study-11584735703190.html
(2) https://www.barcindia.co.in/technology#datacollectionprocess
(3) https://timesofindia.indiatimes.com/business/india-business/TAM-Intam-to-merge-TV-rating-services/articleshow/1293872190.cms
(4) https://indianexpress.com/article/opinion/columns/tv-fake-trp-barc-ratings-s-y-quraishi-6718823/
(5) https://www.financialexpress.com/industry/number-of-homes-with-tv-sets-grows-by-7-5-to-197-million-says-barc/1259631/