AdEx will grow by 4.7%

GroupM’s mConsult’s annual study, This Year, Next Year paints a picture of growth for TV and radio, while newspapers and magazines, in addition to outdoor, will be hit hard.  Although the economic situation in India is not as dismal as opposed to some of the other markets, the general sentiment continues to be negative. This is a result of global linkages of several key Indian players who are affected by parent company performance in other markets.

In the downturn, organizations are treading cautiously and will wait till the latter half of the year to get a better sense before deciding on spends. The mConsult study takes into account predictions upto the end of 2009 only.

The study projects that the Indian AdEx market will grow around 4.7% this year to reach a total of Rs 23,755 crores. In terms of AdEx data, categories that have been least impacted by the downturn include telecom, educational institutes, entertainment and FMCG. These four contributed close to 50% of the total market in 2008.

TV has fared better than expected in 2008 and faces a less risky future in the coming year, given that it is the medium of choice for categories that are spending consistently. Print has suffered towards the latter half of 2008, a trend that will continue with the General Elections being a respite. The Outdoor space is likely to see a drop in inventory, due to city level municipal regularization drives. Radio is expected to do reasonably well as it has established a widespread network of markets and is a relatively less expensive medium than TV and Print. The response-driven nature of Digital Media will ensure that they continue to do well.

Before we get to the topline answers from the study, this is what Juhi Ramakrishnan, director, mConsult, GroupM had to say about the study.

How many clients and media houses have you spoken to, to put this together?

We have covered all major players in each medium. The same applies to the advertiser point of view. Our own clients make up about 30 to 40% of the organized media planning and buying market. In that context, we would have taken most of their competition into account which would cover about 60% of the market. We would, therefore, be fairly confident about what the larger players would be up to. We would probably have least visibility into the large mass of smaller advertisers who also feed in to the smaller channels and publications. We are confident of the total market figures;it is entirely possible that when you get down to the smaller players, we might have a far higher margin of error on what each individual player’s revenue is.

Any surprises?

Given the Indian market situation and the way that businesses are going, there is no reason for the number to be as low as what we projected. That seems to be driven more by sentiment and by the fact that many of the parents companies of these Indian companies are affected severely by the downturn in other markets. If you look at individual businesses at the consumer end, we don’t see any reason for concern. People are not sure how the rest of the year is going to pan out, so they have opted to be conservative in the first half of the year and then see if they need to up the spends later in the year.

Also, from a last year to this year point of view, we didn’t think the year would end out with print being on such a poor wicket and television being stronger. That’s a fallout of the way the market is going, where clients are saying they are much more comfortable sticking to the tried and tested medium.

On layering AdEx data with negotiated rates...

When the AdEx data comes in every month, we have the GroupM internal software tool which factors the respective discounts. There is obviously a challenge when in print across multiple markets there is the agreed rate and in reality both sides of the table know the value they are placing on each individual market. We do try to ensure that our discounting reflects that. For print, the discounting will not change so drastically. The rate card changes will happen typically once or twice in a year. For TV, there is a huge amount of correction and that is what is responsible for the number of changes that take place. What happens is that rates change according to viewership ratings, they change week on week, month on month.
 
Television

The study notes the first season of IPL and the launch and sustained rise of the general entertainment channel Colors as the two major events in Indian television in 2008.

The IPL was a commercial success on and off air, and broadened the audience viewership base even amongst the female TGs, introducing a host of new non-cricket advertising categories.

Overall GEC share remained more or less same while the audience base fragmented, leading to softening of ad rates in GEC content. The rate cuts were not however as steep as the fall in audience so cost-per-rating point rose.

Evolving viewer interests and the inability of mass channels to fill this gap took its toll on GEC shares which saw an 8% decline over the last two years despite a doubling of the number of channels in the genre.

Share of regional channels increased from 21% to 27%, but audience fragmentation due to new launches in various genres ensured that no channel could claim dominance of its genre. Zee TV’s Telugu and Kannada channels made their presence felt in 2008. STAR TV launched Bengali GEC STAR Jalsha and Marathi GEC STAR Pravah. Tamil Nadu alone saw four major launches in 2008. Variety of niche channels entered the market in 2008.

The number of cable and satellite households in India grew by 9% in 2008, according to syndicated surveys. The DTH digital market is currently estimated at 10 million homes. While average time spent by a viewer remained almost constant at about 145 minutes/day, initial studies indicate that people spend more time and watch more channels in digital homes, in all day parts. Once the DTH universe achieves critical mass, niche broadcasters will be in a better position to monetize the hard to-reach up market viewers, through better-addressed promotions and advertising.

There are unlikely to be any major GEC launches in 2009. Ad spends are expected to grow by 7% in 2009. FMCG, telecom and education categories will drive spends.

With ad rate increases and audience fragmentation in key genres resulting in higher cost per contact, increased time spent at home resulting in higher viewership, there is increased hours of cricket telecast: potentially 33% more days in 2009 compared to 2008.

Regional and news channels’ growth has taken place on the back of increasing regional focus of advertisers and the elections has resulted in an increase in advertising rates.

Accountability, network-wide deals and greater flexibility in offering tailored deals will set successful broadcasters apart from the rest. GECs will grow on the back of better advertising yields while erstwhile big-ticket money-spinning properties will face pressure.

Newspaper

The display advertising component of the Newspaper market in India for calendar year 2008 was valued at Rs.10,033 crore, a growth of 8% over calendar 2007 from Rs.9,290 crores.

Though the Indian economy was relatively insulated from the global economic downturn in the first half of 2008, it started feeling the impact from the third quarter.

Big users of print like Banking and Finance, Real Estate and Retail were affected. Categories like Educational Institutions and Social Advertisements saw increased spends in the last quarter of 2008.

The market saw an increase in cover prices from titles like The Times of India and The Economic Times. It also saw new launches with Hindustan, Nai Dunia and Dainik Bhaskar launching in the Hindi belt to achieve step growth, and the launch of a new publication Sakshi in Andhra Pradesh. This brought additional money with local businesses spreading their investment across multiple cheaper options available in the market.

Of the top 10 newspapers in India, six grew less than 10% in 2008. Of the top 20 only two grew more than 15%. The only newspaper showing really substantial growth in 2008 was the Mumbai edition of DNA with 49%.

Most publications struggled to hold on to their revenues in Q4 08. English newspapers fared better than Hindi and Vernaculars but only from having signed up longer-term deals earlier in the year. Consolidation is expected in the newspaper market. With eroding bottom lines, many publishers are nursing huge losses. Large groups like Dainik Bhaskar, Rajasthan Patrika and even Deccan Chronicle are likely to acquire small and single-city titles.

Publishers already under severe stress to maintain volumes are doling out discounts to maintain brand count. Ad expenditure could become more localized and the use of multiple-title all-edition packages may thus be reduced.

Magazines

Robust consumption and rising incomes have resulted in good news for print media in India, which has seen some substantial growth in complete contrast to the stagnant growth being witnessed in more developed markets.

At least 20 new titles spanning different niche segments were launched. Magazines’ 4% share of a rapidly-growing ad market was sustained. Many titles are still not covered in the syndicated AdEx tracking from Nielsen, so the study has taken its own estimates and corrected prior information accordingly. The magazine ad market was officially valued at Rs 730 crore for 2007 and was projected to grow to Rs 803 crore in 2008. Taking new magazines launched after 2006 into account, the figure is at Rs 760 crore for 2007 and Rs 850 crore for 2008.

2008 saw a major push on licensing. Indian publishing houses tied up with international titles. Publishing houses like Worldwide Media, India Today Group and others are looking at niche magazines as the way out in tough times and also as a means of keeping the reader hooked to their areas of interest.

City specific magazines and splits are being pushed aggressively in an attempt to make the content more relevant and topical.

Syndicated readership studies continue to show declining numbers for magazines. Also, the ongoing global recession has amplified the fears that tough times lie ahead. Corporate/Brand advertising will reduce materially and IT and Services are expected barely to maintain their level of investment, which is bad news for business magazines that are heavily dependent on these categories.

FMCG is likely to maintain spends so women’s titles will not have to struggle. At an overall level, all signs indicate a drop in magazines revenues in 2009 from 2008.

Competition from other media is causing intense price competition which may force out some of the smaller firms in the magazine sector.

An I&B Ministry proposal to allow foreign news magazines to bring out Indian editions has been approved. This will allow Indian publishers to launch Indian editions of foreign titles. The new policy will immediately benefit companies such as Network18 and Ananda Bazaar Patrika. The former has announced a tie-up to publish a fortnightly issue of Forbes magazine in India, and the latter plans to issue a local version of Fortune.

Outdoor

The OOH market grew by only 4% in 2008 and closed at Rs.1,448 crore, much lower than the Rs. 1,698 crore forecasted.

The meltdown severely affected key OOH markets (which contribute over 80% of AdEx) in Q4 resulting in heavily reduced spends.

Mumbai was the worst hit by the recession with 40% market shrinkage in Q4 of 2008 and inventory utilization falling 60%.

Among categories, the Financial Services segment saw a huge drop in spends. DTH category was a big new OOH user with the launch of three new service providers.

AdEx on OOH media is expected to grow by 4% in 2009 to Rs.1,500 crores. The General Elections will occupy about 5-7% of AdEx in 2009, but the study has not yet apportioned this predicted Rs 350 crore effort between the individual media. The predicted ‘like-for- like’ OOH growth of 4% will therefore rise once election activity is consolidated.

Growth in Outdoor will not come from traditional players like Airtel, Vodafone, Reliance and Tata Indicom, but from players like Idea, Aircel and Virgin, who are all looking at gaining a national footprint.

While the metros will be the largest contributors to the category, the contribution of Tier-II towns having already risen from 25% to 27% in 2008, will continue to grow in 2009.

Regulation will continue to impact the industry in 2009.

Radio

Ad spends on radio grew by a whopping 49%, from Rs 590 crore in 2007 to Rs 880 crores in 2008. Radio’s contribution to the overall AdEx rose from 3% in 2007 to 4% in 2008.

The opening up of several new markets in 2008 resulted in growth of 62% for private FM players who contributed Rs 590 crores.

Main categories advertising on radio included Media and Entertainment, Telecom, FMCG, Services, Retail, Education and Automobiles. Past spenders like Financial Services and Real Estate showed a decline in spends.

Though ad volumes have risen in the top metros during the year there hasn’t been any growth in value. There has been a slight decline in value by 2% in the last quarter of 2008 in these cities.

There are currently a total of 238 FM radio stations from 40 broadcasters across 90 cities in India. More than half are in towns of under a million.

This year 75% of total radio revenues came from spots; activations accounted for 10-12%; and innovations brought in the balance 13-15%.

The latest Indian Readership Survey (IRS) puts the reach of all radio in urban India at 24% and that of FM at 20%. The RAM system currently covers only Bangalore, Mumbai, Delhi and Kolkata and releases data weekly.

Bidding for the next licensing tender is likely to take place only after the General Elections of May 2009, so most of these new channels will be operational only from 2010.

2009 will still see a revenue growth of about 15% which would have been a lot higher had it not been for the recession. Radio growth will be primarily driven by various factors. These include increased spends on radio from categories like Telecom, Media and FMCG who look at it from a cost effective option perspective. Smaller markets will gain from categories like retail and education.