The Hindu Business Line : Is the picture dimming?

As the slowdown takes its toll on most industries, it is now going to be the turn of the broadcasting industry to face the blues. The ad inventory utilisation of broadcasters is expected to be affected. While ad spends from industries as diverse as FMCG, insurance and telecom have been sustaining the general entertainment channels (GEC), niche channels and even news are expected to feel the effect of the slowdown sooner than later.

“Over the next 6-12 months, inventory utilisation is going to drop for most broadcasters due to the subdued business environment across the country. Business sentiments have turned negative post September this year and most companies are in the process of minimising their discretionary expenditure and this includes their advertising expenditure which could lead to a revenue slowdown for broadcasters,” states a report from Edelweiss Research.

In fact, TAM Media Research has put out numbers to substantiate this trend. The ad volumes in television for most categories have dipped between October and November. While growth in ad volumes has surged the highest for a category such as personal care (under FMCG) at 56 per cent, ad spend growth rates for the rest of the categories have been negative these two months.

According to Kevin Vaz, Executive Vice President (Ad Sales), Star India, “About 50-55 per cent of the ad spends come from the FMCG industry where ad spends have not been affected. Besides, there would be additional ad spends of 7-9 per cent from the telecom industry and another 7 per cent from the insurance sector. These three industries are on the growth path and our GEC channel has been the least hurt by the downturn.”

At the same time the reduction in ad spends is imminent and the broadcaster is preparing itself to face the future. “The slowdown is imminent and we have to come up with better ideas and give better value to our advertisers. We have to try to be different and come up with innovative solutions for our clients,” says Vaz.

Apart from the FMCG category which has maintained, if not hiked, its ad spends, new and emerging categories such as insurance and telecom have relied on sustained advertising to build their brands in an emerging market.

As Sujit Ganguli, Senior Vice-President & Head (Marketing), ICICI Prudential Life, states: “Life insurance is a long-term business and it is critical to stay connected with consumers throughout their association with a company. We need to communicate how we can help them meet their changing long-term financial needs. Further, the market conditions in which we operate also change. It becomes important then to guide consumers on how to manage their investments needs in that scenario.” The insurer’s latest campaign talks about what consumers should do during volatile market conditions. Continuity in communications helps reiterate the benefits of long-term financial planning and of staying invested in a life insurance plan. Hence, it is critical to continue to advertise even during these this market condition, he adds.

Unlike the GEC channels which attract a premium, advertisers might find it easier to shift to a cheaper genre such as news in times of a downturn. “News is a cheaper channel compared to a GEC channel. Usually brands use a GEC channel to build reach and advertise on news channels to build frequency of coverage. News channels are normally meant for mass and low-cost products and are always cheaper for any advertiser,” observes Barun Das, Chief Executive Officer, Zee News.

All the same profitability will be affected for channels of all kinds. As the report from Edelweiss Research states, “In the case of broadcasters, GEC players will find it difficult to maintain their margins, failing to bring down production costs in tandem with revenues. News channels, on the other hand, will still be able to manage their content by developing more programmes within the studio and reducing external location shoots.”

Das of Zee News elaborates: “There will be some slowdown in growth due to slowing in ad revenues, but we expect to deliver as per our guidance and grow higher than the market growth rate. Our original guidance was projected revenue growth of about 25-30 per cent year-on-year. While our revenue growth in the first two quarters has been in excess of 50 per cent (last quarter as revenue growth was 60 per cent YoY), we are not revising our guidance as yet since we wish to observe how the industry moves in the coming two quarters.”

Besides, the recent strike among television producers in Mumbai has led the GEC players to air re-runs on prime time. Joy Chakraborty, Chief Revenue Officer, Zee Group, said: “In the last two quarters we have done very well but now we are feeling the pressure. There has been a slight reduction in ad spends and since November, when the programmes were repeated due to the strike, there has been a slowdown in advertising although we held on to our ad rates. But now with the strike ending we expect the original load to pick up, bringing back the programming to its peak levels for our GEC channel Zee TV. At a group level we expect ad spends to grow between 25 and 30 per cent. The mass volumes will continue to come from our GEC channel. Most categories have been re-visiting their ad spends. At the same time television has been lucky and has been relying on industries such as FMCG and insurance where consumption has not slowed down.”

There is fear of consolidation within the GEC space as too many channels are now fighting for survival. As Tarun Mehra, Marketing Head, Zee TV, observes, “For GEC channels, the expansion phase is over and now we will see a scenario of consolidation. Most of the new GEC channels will have to figure out the cost of doing business and the returns on investment.”

New channels such as Viacom 18’s Colors, while riding high on the television rating points of their leading shows, will also feel the pressures on their business. Rajesh Kamat, CEO, Colors, in a recent interview with BrandLine said, “So far the business has been good but if this global trend continues it would definitely hurt. The television industry is currently estimated at Rs 8,000 crore and GEC channels make up about 40 per cent of this. The pie has been growing at 20 per cent and the impact of the current economic slump still needs to be assessed by the industry.”

Analysts claim that while the GEC space is generally suffering and has stagnated (due to the strike), Colors is the only channel which can continue to command a premium in this space. According to Nikhil Vora of SSKI Securities, “Riding on the success of Colors, IBN18 has emerged as an attractive general broadcast property. Within a few weeks of launch, Colors toppled Zee from the number two position and is inching closer to displace Star Plus. The success of Colors would soon translate into advertising revenues, business economics as indeed valuations,” he says in a report.

Meanwhile, newly launched niche channels such as NDTV Lumiere are feeling the pinch but not blaming the slowdown in the industry for it. “Being a niche channel, it is the exorbitant carriage fees by cable and DTH operators which is responsible for the business plans going awry. The bottlenecks are mainly on the reach and distribution which new channels like us are facing,” says Sunil Doshi, Director, NDTV Lumiere. At the same time niche channels can afford to attract a particular set of advertisers looking for a specific audience. As Shantonu Aditya, Executive Director, UTV Global Broadcasting Ltd (UGBL), observes, “Niche channels have loyal audiences unlike the GEC genre where there is no viewer loyalty. Advertisers are looking for such channels which deliver and cater to a special set of audiences.” UGBL is the broadcast arm of UTV Software Communications and recently launched a bouquet of five channels including Bindass, Bindass Movies, World Movies, UTV Movies and UTVi.

However, the launch of new channels has brought down the cost of advertising in recent times. “Television is still the cheapest in terms of cost per eyeball. We are convincing our clients to take another look at buying into the efficiency of this medium,” states Rohit Gupta, President (Network Sales), Multi Screen Media. With decline in ad spends for categories such as automobiles (-36 per cent) and financial services (-32 per cent), television is still holding on to its core spenders from the FMCG industry which still believes in building its brands through the medium.

Related Stories:
TV ad volume up 28% during Jan-Sept 08
Cell phone services top TV ad volumes in January-March
Durables majors stick to ad budgets despite slowdown
Broadcasters get ready to beat slowdown blues

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