Shailesh Kapoor: The Science Of Failure Management

11 Jan,2013

By Shailesh Kapoor


Studies from across the world suggest that 70 percent of product launches end up as “failures”. In the entertainment industry, the failure rate is even higher. Only about 20 Hindi films in a year manage to rake in profits, out of more than 200 films that are produced every year (many of which don’t even get a release). About 40 fiction programmes launched in the Hindi GEC category in 2012. Of these, 21 are already off-air, and at least six others are scheduled to go off-air in the next four weeks. Among the remaining 13, only eight can be considered as having contributed anything significant to their respective channels – a success rate of 20 percent only.


“Failure” is a grossly under-rated concept. We analyse “successes” in great detail. Why did this work, what clicked, what was the big insight? Learning from one success, and using that learning to create another, is an age-old method. A significant amount of our television research work involves channels commissioning us for an understanding of their competition’s successes.


But when it comes to failures, the general tendency is to move on. Diagnosis of a failure is not a happy task. And I don’t say this from a research perspective only, but at a wider, business level. A key aspect of failure analysis is ascertaining a “cost of failure”.


Let’s say a channel launched a new daily serial in a slot that was delivering 3 TVR at its peak about one year ago, but subsequently had slid to less than half of that number, warranting content replacement. Suppose the new show “fails”, settling at less than 1.5 TVR about two months post launch. The channel would have started considering a replacement already, even though they may give the new show another few weeks – one last push.


Assuming that the ‘one last push’ doesn’t deliver, and the show is taken off-air around six months from launch, what is the cost of failure?


There are various components to this cost, depending on how you look at it. These components are not “additive” in nature, i.e., some of them may represent the same monetary consideration as another, but are conceptually different.


1. Revenue loss: if the prime time average TVR on the channel is 2.2 TVR, then the new show operating at 1.5 TVR will operate at a 32% lower revenue number, in turn affecting the channel’s revenue by a potential 2%.


2. Production cost: A straightforward cost of producing the programme. For six months (130 episodes for a Mon-Fri fiction daily), this can be upto Rs. 26 crore. Of course, similar investment would be required to produce a successful show too. But then, the investment would give returns there.


3. Marketing cost: The 5-15 crore spent on the programme’s launch is direct sunk cost if the programme fails.


4. Human Resource cost: At least 3,000 hours of human resource would be invested in a programme that runs its course over six months, across departments. A large part of this time would be senior and middle management’s, who would have rather used it for quality work in the strategy or brand area.


5. Morale cost: Nobody speaks about this much, but there is a huge confidence dent a failure can give. It works at two levels – personal and collective. At a personal level, programming executives are likely to be most affected, being in charge of the content hands-on. But at a collective level, everyone will tend to face the low, especially the department heads. My empirical research suggests that almost 80% of department heads who quit (or being asked to quit) in the last three year in the television industry in India did so within two months of a major failure (or a string of relatively minor failures).


How does one put a number to the morale cost? It’s not easy, but for me, six-months pay cheque of the entire department whose head quits is a good idea. That’s what it can take for them to bounce back and work at full potential again.


6. Equity erosion cost: This is the most under-rated and yet the most important component of the cost of failure. And evidently, the least analyzed too. A failure, especially when it follows another one, can lead to confidence attrition amongst consumers (also the advertisers to some extent). Channels work hard to earn a loyal base of viewers for themselves. Over time, failures can disillusion these viewers and make them question their loyalty for the channel, albeit in sub-conscious ways. Unless the trend of failures is reversed, it can escalate very fast into brand rejection, when even good content stops delivering because consumers have rejected the platform at large. Imagine the opposite – when everything works so well that even an odd failure is given a generous ‘it-happens’ pardon by the viewers!


Benchmarking models in brand studies can convert equity scores into viewership, and hence, turnover estimates. A drop of 1% in equity can potentially cause a drop of upto 2% in the turnover over time, but also vice versa.


Put all this together and you realize that the cost of failure of a program is a lot more than physical cost of production or marketing. Building failure evaluation metrics can change the way we look at our failures. And hence, at our successes too!


Shailesh Kapoor is founder and CEO of media & entertainment research and consulting firm Ormax Media. He spent nine years in the television industry before turning entrepreneur. He can be reached at his Twitter handle @shaileshkapoor




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