“We are already seeing a clampdown on outdoor spends,” he adds. “However, the situation this time has been aggravated by other factors. The economic slowdown combined with the monsoon season has resulted in a dip in outdoor spends.”
What is the extent of the dip? “Well, advertisers spend an average of 10% of their ad budgets on outdoor media. This should slide to 7-8% by next year,” Shah says. The top 20 cities in India are likely to feel a higher impact than the so-called tier-II cities as the cost of media is much lower there, he points out.
Shah, however, maintains that while occupancy rates are likely to be hit, rentals may not fluctuate or drop too much even in metros since new guidelines for OOH media are expected soon. In a city such as Mumbai, for instance, restrictions on billboards near heritage sites, coastal zones and open spaces will mean a lot of outdoor media spaces that came up in the past few years will be pulled down.
These guidelines are also expected to standardize billboard sizes, etc., and therefore, media owners are likely to balance their revenue through whichever sites they are left with, says Shah.
On ad rates, Yash Gala, managing director of Zenith Outdoors Pvt. Ltd, says suppliers are holding on to prices in the short term, though they are sure to be affected in a market with falling occupancy rates.
“Traditionally, the monsoon season has always meant low occupancy. But over the last few years, the industry has not seen any slump,” he points out. “The other perception is that some of the ad spends had been diverted to the Indian Premier League, but occupancy hasn’t picked up after it got over. So, the overall economy, market sentiment, and fewer public offerings, etc., are not good news,” says Gala. “The next two months are crucial and will define which way the economy turns. We’re waiting and watching at the moment and haven’t revised rates as yet,” he adds.
Media buyers such as Chandradeep Mitra, president of Mudra Max at Mudra Communications Pvt. Ltd, however, believe rates could be substantially impacted. “Unlike television, outdoor tends to be at the periphery of all clients’ media plans and the rates fluctuate continually between demand and supply,” he says. “There are some categories such as travel, and airlines that are cutting down on outdoor as a result of rise in input costs. Other categories that will do the same include real estate, retail and financial services, since they are hit by interest rates.”
“Outdoor as a medium could lose some of its bargaining power and could become 20-30% cheaper,” says Mitra, adding, “the festival season is critical which would show us a clear trend one way or the other.”
Rathnakar Rai, managing director at Primetime International Services Pvt. Ltd, says the cuts would be minimal, although real estate, financial services, insurance and auto firms are likely to cut back on outdoor spends. Telecom will however continue to advertise heavily outdoors, he says.