Media firms prepare for advertising winter3 min read . Updated: 11 Nov 2011, 01:00 AM IST
Media firms prepare for advertising winter
Media firms prepare for advertising winter
Mumbai/New Delhi: A year that looked bountiful in January, and even in April, is now beginning to look stark for media companies, with poor sentiment and the slowing economy resulting in a fall in demand and, consequently, advertising.
Worse still, the Diwali season, which usually sees a spurt in advertising, didn’t seem to be as big as it usually does, and, over the past few months, average yields for most media companies have been on their way south.
“There is absolutely no doubt that this year yields are under pressure for most print and broadcast companies. It was not a great Diwali for many of the media firms," said Nikhil Vora, managing director of IDFC Securities Ltd.
“Advertising follows consumer behaviour," said Abdul Khan, senior vice-president at Tata Teleservices Ltd. “The high rate of inflation, rising petrol prices, etc., have made the Indian consumer go into his shell. He wants to hold on to his savings, and brands want to hold on to their ad spends. It’s a vicious circle."
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Media firms are gearing up for a cold winter, as economic uncertainty is prompting companies to revise their media spends and realign their strategies.
Yield is a measure of profitability used in businesses such as aviation, hospitality and advertising, where there is a finite availability of products or services that can be sold. According to media analysts, advertising yields have fallen 10-15% over the last three-four months.
Analysts and media executives expect advertisers to reduce spending over the next two quarters, as recession clouds loom over Europe and the US, and high inflation, rising interest rates and slowing economic growth at home dampen domestic consumer sentiment.
“Advertising follows economic growth. It all depends on how global developments impact India’s GDP (gross domestic product) growth," said Ajit Varghese, managing director at Maxus, GroupM India Pvt. Ltd, who expects advertising revenue to grow 12-15% over last year.
“It may not touch the utopian expectation of 18% and more, as some media owners had thought at the beginning of the year," he said.
The print media business has been affected by negative trends in other businesses that significantly contribute to its revenue, said Rajiv Verma, chief executive officer of HT Media Ltd, publisher of the Hindustan Times and Mint. Many businesses, including real estate, banking and automobiles, have been hit by poor sentiment arising from factors including inflation, high fuel prices and rising interest rates, he explained.
“A liquidity crunch is an economic reality around the world," added Verma. And overall growth for the industry has been lower than the forecast by the Ficci-KPMG Media and Entertainment Report 2011, he said.
The Indian Media and Entertainment Industry Report 2011, prepared by industry lobby Federation of Indian Chambers of Commerce and Industry (Ficci) and audit and consulting firm KPMG, predicted 14.6% growth in advertising revenue for television to Rs11,800 crore this year; it projected print media advertising revenue to increase 13.5% to Rs14,300 crore.
In reality, overall growth may barely reach 10%, said Barun Das, chief executive of Zee News, who added that Zee’s endeavour will be to outperform the industry average growth rate by 5-10%.
The slowdown presents a sharp contrast to the first half of the year, when demand for a variety of products, including cars and houses, seemed to be on the rise. The volume of advertising on TV news channels increased 34% between July and September over the corresponding period in 2010, according to TAM Media Research, which monitors television viewership and advertising trends, after growing by 32% between April and June. Print advertising volumes grew 17% in the nine months to September over last year.
The coming quarter looks challenging for most media companies, which will have to streamline and cut costs, said Pandey of Star News.
The liquidity crunch is for real, said L.S. Krishnan, business head of Sakaal Media Group. “People want to hold on to cash. They are not buying or investing as a result of the bad news all around, and that’s compounding problems," Krishnan added.
The fragmentation in the industry hasn’t helped, he said and added, “And there’s a lot less advertising to go around".
Bennett, Coleman and Co. Ltd, which publishes The Times of India and The Economic Times that compete with Hindustan Times and Mint, declined to respond to queries from Mint. In an emailed response, Ravi Dhariwal, president (print) at the firm, said he couldn’t respond because these are confidential matters.