Our interaction with leading media planners suggests that the Indian ad market is facing considerable pressure due to the deteriorating economic environment.
This view is validated by our understanding of estimates of leading industry bodies that are facing a scale back in ad spend from sectors like BFSI, auto, real estate, and hospitality.
Consequently, we believe that the growth rate of the Indian ad industry may drop to below 10% levels from over 18% enjoyed during the last three years.
Television, which accounts for 41% of the domestic total ad spend, is expected to grow at ~5-7% because of the ad spend on IPL and continued preference of leading customers like consumer industry, telecom, insurance, and entertainment, for this medium.
Print sector is likely to emerge as a key beneficiary of the ad budgets planned by major political parties in the backdrop of the impending elections; the ad budget, estimated to be over ~Rs10bn for all parties, will be largely incurred on newspapers and Out of Home (OOH).
However, curtailed ad spends by key customers such as real estate and auto sectors would result in a flat growth for the print sector. This would result in TV gaining market share from print for the second consecutive year. OOH is expected to suffer on account of lack of addressability.
According to industry players, rising risk aversion is forcing companies to increasingly focus on cost per rating points (CPRPs); punishing broadcaster with falling GRPs while rewarding successful players.
Broadcasters, especially the laggards, have started offering discounts, whereas leaders such as Sun TV are still commanding rates as per the rate card.
Rising risk aversion is resulting in Zee TV getting severely punished for losing the GRP battle to Colors, thus facing steep cuts in ad spend since November 2008.
Print stocks are likely to face the heat from Q2FY10 onwards with considerable pressure on HT Media and Jagran Prakashan; the pressure is more likely to be on HT Media, since it derives almost 80% of its revenues from advertisements.
Leaders such as Sun TV, Zee News, and TV Today are expected to fare better in terms of ad growth.
Disclaimer: HT Media Limited publishes Hindustan Times, Hindustan, Mint and Livemint.com