Demonetisation: TV channels may lose Rs500 crore in ad revenue

Brands postpone advertising campaigns scheduled to air in November and December due to a slump in consumer spending in the wake of the demonetisation drive


Typically, the October-December quarter is the most active quarter in terms of advertising spends. Photo: Priyanka Parashar/Mint
Typically, the October-December quarter is the most active quarter in terms of advertising spends. Photo: Priyanka Parashar/Mint

You’re likely to see fewer ads on television following Prime Minister Narendra Modi’s ambitious move to scrap Rs500 and Rs1,000 notes.

Television channels in India to lose Rs500-600 crore in advertising revenue as brands postpone advertising campaigns scheduled to air in the months of November and December due to a slump in consumer spending, according to a media buyer estimate.

“There is a knee-jerk reaction with brands wanting to cancel or postpone their activity. There is disruption in offtake of consumer goods & FMCG (fast moving consumer goods) products, which I would like to believe is short term. There has been a slowdown in new business coming in as most advertisers are also clueless as to how the market will evolve and respond,” said Raj Nayak, chief executive of the Hindi general entertainment channel Colors, operated by Viacom18 India Pvt. Ltd in an emailed response to queries. Nayak is also president of the lobby group, The Advertising Club.

M.K. Anand, chief executive and managing director at news channel Times Network agreed that the slowdown in advertising volume will be led by consumer goods brands, also the largest advertisers on television. However, he sees the impact of demonetisation on advertising to be short term. “There is going to be some temporary dip in advertising activity primarily in the FMCG sector. But that will, I think, get mitigated by sectors such as e-commerce etc. Over the short term, we will see the effect on ad sales in November and maybe December,” he said.

Ashish Bhasin, chairman and chief executive of the advertising group Dentsu Aegis Network South Asia, added that FMCG and consumer durable companies will cut back on marketing expenditure since their sales have been impacted.

Typically, the October-December quarter is the most active quarter in terms of advertising spends. However, the last six weeks of this quarter will definitely be impacted this time, said Bhasin.

“Usually, 35-40% of the (annual) billing comes in this quarter. But that’s unlikely to happen this time around,” he added.

A top executive at a big media agency agreed. “There is a liquidity crunch in the market. Advertisers have asked to postpone their November campaigns to December, mostly in the case of FMCG brands,” the executive said, declining to be identified.

While the dip in advertising revenue will be felt across news and entertainment channels, the larger television networks may fare relatively better, Nayak said.

“We have requested most of our clients not to panic or react in haste. Our relationships with our clients are long term; so, while there is an impact, it is the smaller players who are getting hit hard,” he said.

Nayak feels this dip in advertising may not stabilise before February-March. “We are hopeful that things should be normal within the next 3-4 months,” he said. However, Bhasin added that it would all depend on the consumption economy. “It depends on how long will it take for the money to come back into the hands of the consumer.”

On 8 November, the government scrapped currency notes of Rs500 and Rs1,000 denominations to eliminate black money and the growing menace of counterfeit currency notes. India has one of the highest levels of currencies in circulation at over 12% of gross domestic product and of this cash, 87% is in the form of Rs500 and Rs1,000 notes.

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