Mumbai: The stretch of highway that leads from Mumbai airport and sweeps across the Mahim causeway is usually studded with colourful billboards advertising the latest television serial, film, insurance product or mutual fund. But of late, the drive into town has been getting a little drab—many of those billboards are blank, as fears of a slowdown appear to take hold.
The outdoor media industry has seen a 30-40% slump, with fewer takers for billboards in the major metros such as Mumbai and Delhi. An extended cricket season, lower advertising from telecom and financial services firms, and new norms speeding up the payment of service tax have led to poor hoarding rentals. The slump also comes amid the monsoon season, with the rains acting as a dampener.
According to Yash Gala, managing director of Zenith Outdoors Pvt. Ltd, a part of the Gala Group, the last few months have been exceptionally bad, because of a long cricket season and ad budgets having been diverted to television channels. Last year though, the out-of-home (OOH) industry was a beneficiary of the sport—the Indian Premier League (IPL) advertised heavily on billboards.
Lean period: The outdoor media industry has seen a 30-40% slump, with fewer takers for billboards in major metros such as Mumbai and Delhi. Pradeep Gaur/Mint
Contributing to the downturn, two big users of outdoor media—telecom and financial services—have been holding back their spends. Telecom constitutes 20% of all outdoor advertising, and financial services 10-15%. While the first has been troubled by the investigation into second-generation spectrum allocation, the second is usually active only between September and March.
There’s been a nearly 80% pullback from telecom operators, said Mandeep Malhotra, president, Mudra Max OOH, a part of the Mudra Group.
Although OOH is said to be less than 8% of the total advertising market in India, it was expected to grow in double digits. Instead, the billboard industry may see revenue decline by at least 10-15%.
The advertising and media report by the Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG released earlier this year said OOH revenue grew to touch Rs 1,700 crore in 2010 and is expected to reach Rs 1,900 crore this year. The overall Indian media and entertainment industry grew from Rs 58,700 crore in revenue in 2009 to Rs 65,200 crore in 2010. Revenue is expected to grow 13% to Rs 73,800 crore this year. This includes television, print, radio, OOH, film, music, animation, gaming and digital advertising.
According to Zenith’s Gala, billboards are the first to get hit in a slowdown. Traditional media such as print and television feel the aftershocks. “In 2008, we (outdoor industry) were feeling the resistance and tremors as early as April, which was unusual because everything fell apart only in October 2008. So, to my mind, the outdoor industry has always been a good barometer of sorts,” said Gala.
Paritosh Joshi, a Mumbai resident and advertising sales expert, has noted the empty billboards between the airport and Dadar.
“I wouldn’t call it a slowdown, but yes, the advertisers seem to be on wait and watch mode,” said Joshi, also chief executive of home shopping channel Star CJ Network India Pvt. Ltd. “Whatever little outdoor advertising is happening is coming from television channels and cinema. Consumer products are few and far between.”
Beginning July, the outdoor media companies will have to pay their service tax within 14 days of completion of services or seven days of bill generation, compared with the 90-day payment cycle earlier.
“There are huge delays in payments on the part of media agencies and advertisers; sometimes they are delayed by more than six months,” said Indrajit Sen, vice-chairman of the Indian Outdoor Advertising Association (IOAA) and chief executive of Laqshya Outdoor.
The revised tax rules are leading to rows between media owners and advertisers, and that’s perhaps one of the reasons why the billboards are going blank, Sen said.
IOAA has floated a new set of guidelines for media agencies to drive payment compliance. The body is also seeking to establish a Credit Control Council (CCC), which will address defaulters and have nominees from among the agencies. Penalties will range from withdrawal of credit facilities to embargoes on the release of any display by the defaulting agency.
According to Malhotra of Mudra Max, traditional outdoor may also be slowing down as more money gets pumped into mall campaigns, as this is more measurable—footfall numbers are available and there is a greater guarantee of consumer interaction.
Malhotra expects the next quarter to see a 20% drop in business, and then a recovery in the third and fourth quarters.
Gala, meanwhile, is pinning his hopes on new film releases in August to revive the industry. He says, however, that August and September, the run-up to the festival season, will be the real test for the industry. “Normally this period sees 95% occupancy in outdoor sites,” he adds.
Not everyone’s pessimistic. Amit Goel, national head of Prime Market Reach Pvt. Ltd, said categories such as real estate, infrastructure and education continue to remain buoyant.