BackMedia firms face headwinds as advertisers cut back on budgets
Media firms face headwinds as advertisers cut back on budgets
PremiumDifficult times: A file photo of a newspaper vendor in New Delhi. For newspapers, the advertising squeeze comes at a time when newsprint imports are adding immensely to their cost burden. Photo: Priya
New Delhi: Indian publishers and broadcasters—both television and radio networks—are staring at tougher times as advertisers cut back on budgets for brand marketing and promotions in the face of deepening economic gloom.
Advertising expenditure growth rates that were projected earlier this year by media agencies and consulting companies are being revised down in an economy that expanded at the slowest pace in nine years in the three months to 31 March.
Television channels, for instance, had been expected to clock 12% growth in ad revenue to Rs13,000 crore in 2012, according to the media and entertainment industry report released in March by the Federation of Indian Chambers of Commerce and Industry, or Ficci, corporate lobby and consulting firm KPMG. That estimate may now be over-optimistic.
“The sector will not grow more than 8% to 10%," said Jehil Thakkar, partner and head of the media and entertainment practice at KPMG’s India unit.
That, in turn, is prompting advertisers to spend less on brand marketing and promotions. Ad revenue brought in an estimated Rs30,000 crore for the media industry across print, broadcasting and digital platforms in the year to 2011, up 13% from the previous year, according to the Ficci-KPMG report.
In 2011, television advertising grew to Rs11,600 crore from Rs10,300 crore while print revenue rose to Rs13,940 crore from Rs12,600 crore. Digital media saw 54% growth from Rs1,000 crore to Rs1,540 crore in 2011, the report said. WPP media agency GroupM’s total advertising expenditure estimates, however, are higher— Rs33,772 crore for 2011 and Rs37,838 crore projected for 2012.
“Advertising expenditure is a hyper indicator of the market," said Rahul Kansal, executive president (brands) at Bennett, Coleman and Co. Ltd (BCCL), publisher of The Times of India and The Economic Times, among other titles.
“When companies are bullish they open their purse strings freely," Kansal added. “When bearish, they manage costs and reduce marketing spends in the short run."
Print has been the worst hit. Ad revenue for newspapers and magazines had been predicted to expand by 8% according to media buyers and 10.7% according to the Ficci-KPMG report. Media specialists now say the sector will be lucky if advertising revenue does not contract.
“Flat would be a better description of what growth would be like for newspapers," said Kansal.
“No growth is not such a bad thing at a time like this. Most publishers will be happy to maintain last year’s income levels while some may see their advertising revenues decline," said R. Rajmohan, publisher of Open, the magazine published by Open Media Network Pvt. Ltd.
FM radio operators are feeling the heat as well. Although Radio City, run by Music Broadcast Pvt. Ltd, said it has increased advertising rates, “there is a feeling of a slowdown," said chief executive Apurva Purohit.
Entertainment Network (India) Ltd’s Radio Mirchi saw advertising revenue growth slump from 20% in the fiscal year ended March 2011 to 8% in the following year, according to Prashant Panday, chief executive at the radio firm.
The gloom in the economy and among consumers and advertisers has been accentuated by a stream of negative news, including warnings about a downgrade of India’s sovereign ratings by international credit assessors Standard and Poor’s and Fitch.
A 21% slide in the value of the rupee against the dollar over the past year has made imports more expensive while Wholesale Price Inflation remained high at 7.55% in May, reducing room for the central bank to reduce interest rates.
“Profit margins of companies are squeezed and they’re wondering if making a song and dance (read advertising) about brands would help when consumer sentiment is low," said Harminder Sahni, managing director at retail consultancy firm Wazir Advisors Pvt. Ltd.
Makers of consumer packaged goods such as home and personal care products and white goods such as refrigerators and washing machines don’t want to waste money and are looking for highly targeted media options, whether it is Facebook, niche television properties or publications. “They are not carpet-bombing," Sahni added.
Bigger print advertisers such as real estate, banking, finance and insurance companies are conserving their money while a few others have, over the years, migrated to other media such as on-ground activities and digital.
“Some traditional newspaper advertisers such as automobiles, telecom and even education have moved bigger chunks of their budgets to television," said Sudha Natarajan, the outgoing chief executive officer (CEO) of Lintas Initiative Media.
Without divulging numbers, an executive in an auto firm admitted that his company spends more on television now than on print. “Advertising rates in print rise even though its reach does not grow. Television viewership on the other hand is growing," he said, refusing to be identified as he is not authorized to speak to the media.
Bharti Airtel Ltd’s global brand director Bharat Bambawale said that the company still uses newspapers for simple messages that need to be delivered to a wide number of people. Without disclosing the ratio of advertising on various media platforms, Bambawale said he sees digital media playing a bigger role for most companies.
“Digital, especially social media, is more culturally and socially acceptable. We have no choice but to be where the consumer is," said Sameer Satpathy, executive vice-president and head of marketing at Marico Ltd.
For newspapers, the advertising squeeze comes at a time when newsprint imports are adding immensely to their cost burden. The rupee’s depreciation has escalated costs for publishers such as HT Media Ltd, publisher of Mint and Hindustan Times, BCCL and Jagran Prakashan Ltd, among others.
HT Media CEO Rajiv Verma said the organization was looking at a 10-15% reduction in pagination to save on newsprint. “We will first reduce pages by 5-10% and then evaluate," he said.
Mohit Jain, executive president, supply chain, at BCCL and chairman of the newsprint committee of the Indian Newspaper Society, admitted that his company was cutting down on newsprint demand by 8%. “We are a more metro-centric newspaper where the sentiment is more bearish. Regional markets are still performing well so publishers in those markets are cutting back on newsprint by about 4%," he said.
To tide over difficult times, Hindustan Times and The Times of India have raised the cover price marginally in different markets. “Newspaper’s scrap value has gone up. We had to increase the price as people should not buy paper for its raddi value," added BCCL’s Kansal.
In television, the popular entertainment channels are not complaining yet as their advertising inventories are full.
“However, the news and business channels have been hit," said the CEO of a Hindi entertainment channel on condition of anonymity.
Typically, the summer is a slow season but the economic gloom and a certain tightness in the market are palpable, said Sunil Lulla, managing director and CEO of Times Global Broadcasting Co. Ltd, adding that advertisers are signing on for shorter periods and bargaining hard.
“Channels that are unable to fill inventory are giving bonus spots," he said.
At Star India Pvt. Ltd and Multi Screen Media Pvt. Ltd, which operates the Sony, Max and Sab channels among others, it’s business as usual.
“In the GEC (general entertainment channel) space we have not witnessed a slowdown for two reasons," said Kevin Vaz, president, advertising sales, at Star India. “The dependence of GECs on the fast-moving consumer goods sector is almost 65% and the sector has been aggressive with new launches. Also, our regional channels are growing on the back of strong local retail growth." But mobile phone handset makers and telecom firms are spending less, he said.
Aminah Sheikh and Vidhi Choudhary contributed to this story.
shuchi.b@livemint.com
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