Show me the money
After two years of subdued ad rates, advertising on television has got expensive again with almost all the major broadcasters hiking the prices for a 10-second ad slot. In the current financial year, every leading broadcaster in the country including Star India, Zee Entertainment Enterprises Ltd (ZEEL), Multi Screen Media (MSM) and Sun TV Network Ltd has increased the advertising rates by 15-25%. And while there could be pressure on ad spends due to the current economic situation, broadcasters are convinced that the higher ad rates are here to stay.
The hike in ad rates was waiting to happen. The 2008 global recession had spiked the broadcasters’ hopes to see a growth in ad revenues. Though the recessionary pressures started becoming apparent in mid-2008, it was in 2009 that the full impact was felt. In an industry where nearly 70-80% of a broadcaster’s revenue comes from advertising, growth remained flat for most channels due to the shrinking ad budgets of marketers. Compared to previous years when television advertising revenue grew at over 16% annually, in 2009 it grew by a mere 1%. And as the economy recovered in 2010, advertising revenue for the television industry grew at 17% over 2009. The rise in television ad volume was driven by three sectors – FMCG (fast moving consumer goods), services and auto. The top 10 sectors including food and beverage, personal care, services, hair care, telecom, auto, personal accessories, banking/finance/investment, personal healthcare and healthcare accounted for nearly 60% of the overall TV advertising volume in 2010. This trend seems to be similar to that of 2009.
“The industry has come out of recession. The cricket events brought back viewership and advertising on television. Channels had cut down their ad rates during the slowdown and they are scaling it up to the normal now,” says MK Anand, CEO, Broadcast, UTV Global Broadcasting.
India’s oldest broadcaster ZEEL that owns channels such as Hindi general entertainment channel (GEC) Zee TV, besides regional channels such as Zee Marathi, Zee Bangla, Zee Punjabi, and other channels such as Zee Sports, Ten Sports and Zee Cafe announced a 20% rise in its advertising revenue at the beginning of this financial year. Punit Goenka, chairman and managing director, ZEEL, says, “Growth can only come if the channel pricing is right. Rising input cost has always been an issue. Moreover the demand is justified considering the number of homes we reach now compared to that of previous years.” In 2009-2010, ZEEL garnered approximately Rs 1066.97 crore of advertising revenue. In 2010-2011, it grew to Rs 1700.99 crore, which is an impressive growth of nearly 65.6% over 2009. During the April-June quarter, advertising revenue of ZEEL stood at Rs 378.74 crore, growing by a negligible 0.48% from Rs 376.91 crore in Q1FY11.
Sun TV Networks, the leading broadcaster in South India, that owns 20 channels in four South Indian languages including Sun TV, KTV, Sun Music, Sun News, Adithya and Chutti TV in Tamil, Gemini TV, Gemini Movies, Gemini Music, Gemini News, Gemini Comedy and Kushi TV in Telugu, Udaya TV, Udaya Movies, Udaya 2, Udaya Varthegalu, Udaya Comedy and Chintu in Kannada and Surya TV and Kiran TV in Malayalam, declared two rate hikes this year. In February, it raised the ad rates for its Tamil channels effective April 1, 2011.The ad rates for its flagship Telugu channel, Gemini TV, were increased by 6-13 %. The rates for other Telugu channels, including Gemini Movies, Gemini Music, Gemini News, Gemini Comedy, Kushi, were increased by 9-43%. The company declared another rate hike in March, that was also effective April 1, 2011. It increased the advertising rate for its Malayalam channels by 6-33 % and for the Kannada channels by 5-13%. The company also increased the slot fees or the broadcast fees that is received from the content producers accordingly. In 2009, Sun TV clocked an advertising revenue of approximately Rs 845 crore.
In April, India’s numero uno broadcaster, Star India, that owns channels such as Star Plus, Star One, Star Movies, Channel [V], Star Jalsha, Star Pravah, Star World and Star Movies along with joint venture channels like Asianet, ESPN and Star Sports increased ad rates for its bouquet of channels by 20% citing increased production and distribution costs. Surprisingly, Star Plus which has always held its rate cards close to its chest, for the first time ever made it public. Kevin Vaz, president, Star India, says, “The Star network has been growing year-on-year and has been going all out to give the best value to its viewers, partners and advertisers. Our network reach has increased and at the same time for the advertiser, the cost of reaching 1000 people has reduced by 38% in the last two years. This rate increase of 20% is just a part correction in lieu of the phenomenal growth the network has shown in the past two years.”
He further explains, “An increase in ad rates is a function of spiraling cost of talent, increased investments in technology, advanced delivery and distribution platforms as well as increased production costs. We also deliver value for money spent with our creative and innovative programming content and vast reach and hence believe that an ad rate increase is totally justified.”
Rohit Gupta, president, network sales, MSM, says that the company usually increases its ad rate by 20% every year and it is the same this year as well. “It is an usual exercise and we do it every year. Television still remains the cheapest medium in the country given the kind of reach it delivers and hence, in the worst years while mediums like print and outdoor did not grow, the television sector witnessed growth.”
Multi Screen Media’s Hindi GEC Sony Entertainment Television is estimated to have increased the ad rate for Kaun Banega Crorepati 5 (KBC) by a whopping 70%. The show went on-air on August 15 and has premium advertisers such as Cadbury, Idea Cellular, Axis Bank, Hero Honda, Pepsi, Samsung, Maruti, Just Dial and others. Media planners say that the channel has sold 10-second ad slots for R3.5-4 lakh. Sources disclose that last year the rate for a 10-second slot on KBC was available for R1.75-2 lakh.
Besides these industry goliaths, many channels that belong to bigger broadcast networks have also increased their advertising rate individually. This includes Viacom 18’s Hindi GEC Colors and MSM’s Hindi comedy channel Sab TV. Both the channels have a slew of successful shows which has turned out to be the minting machine for these channels.
For instance, on Colors, shows such as Khatron Ke Khiladi, India's Got Talent, Bigg Boss, Balika Vadhu and Uttaran are touted as the most successful and are thus ad slots during these programmes are the most expensive. On the other hand, on Sab TV, shows such as Tarak Mehta Ka Oolta Chashma, FIR, Papad Pol, Mrs Tendulkar, Lapatagunj and the weekend silent comedy show Gutur Gu command premium ad rates.
A senior media planner, who did not want to be named said, “The short-term advertising deal of three to six months has worked wonders for Colors. When the channel was launched, Star Plus was the number one channel. So it had a huge task of not only attracting viewers but also advertisers. Therefore, instead of inking annual advertising deal, they championed the idea of short-term ad contracts.” While none of the channel officials were available for comments, industry estimated reveal that Colors also has increased its ad rates by 20-25%.
This year Colors increased the ad rate for its reality show Khatron Ke Khiladi anchored by Bollywood actor Akshay Kumar by 15%. Ten-second ad slots for this show were priced R 2-2.5 lakh. The title sponsorship came at an additional price tag of R10 crore. And associate sponsorship was sold at anywhere between R4.5-5 crore. However in 2010, the title sponsorship for this show was inked at R 7-8 crore, while associate sponsorships were sealed at R3-4 crore. The on-air inventory was sold at R1-1.5 lakh for a 10-second slot.
“Sab TV has curved a niche for itself and has come a long way. In fact it has revived the comedy genre in the country and therefore the shows come with a hefty price tag,” says the media planner who did not want to be named.
It is not only the mainstream broadcasters that have increased ad rates. UTV Global Broadcasting that owns channels like UTV Movies, UTV Action, Bindaas, UTV World Movies, and now UTV Stars, says that the surge in its revenue has been aided by a continuous hike in ad rates. UTV Global Broadcasting's Anand says, “UTV has increased its ad rates across its channels by almost 100% in the last 10 months. And we have received good response from advertisers. A 30-35% increase in ad rates will continue to be witnessed.”
However, in a year where nearly R1,000-1,500 crore of advertising money has been sucked by cricket, first by International Cricket Council's (ICC) Cricket World Cup and then Board of Control for Cricket in India's (BCCI) Indian Premier League (IPL), non-sports channels don't appear worried.
As Vaz of Star India says, “After the World Cup, the enthusiasm around cricket has reduced. This has been seen in IPL as well as in the India-West Indies series. Advertisers are moving away from cricket into more stable and consistent rating genres like GECs. It provides the advertisers with a consistently high rating across the year and helps them avoid volatility in their media plans.”
According to Vaz, cricket can accommodate only a small section of advertisers as it caters largely to the male audience. “Also within a particular product category, only one or two players can get onto cricket, the rest advertise on GECs. With an overdose of cricket, fatigue has set in leading to lower growth in ad rates of sports channels. On the other hand, GEC genre is witnessing an upsurge in demand,” he explains.
The initial apprehension of an erosion in advertising revenue this year seems to have disappeared and channels have come out strong with their revised ad rates. Says Anand of UTV, “Though there has been a significant increase in ad revenue due to big cricket events, advertising will continue to be buoyant on other channels too. Therefore no erosion is likely.”
As Manas Misra, executive vice-president and head of medi abuying agency, Mudra Connext, points out, large advertisers, often the same ones who spend on cricket, typically keep monies aside for cricket and they knew there was ICC WC and IPL 4 this year. However, Rohit Gupta of MSM feels otherwise. He says, “Obviously there will be some impact. However, our numbers look good because of IPL.”
Interestingly, in 2007, a year before the entire world succumbed to recession, Indian Broadcasting Foundation’s (IBF), an industry body represented by almost all broadcast networks including ZEEL, Star India, MSM, Network18, NDTV and others, had proposed to levy a 25% surcharge on advertisements citing rising input costs. This resulted in a major stand-off between the channels and the advertisers and several big advertisers including Hindustan Unilever, Procter & Gamble, Reliance ADAG, Bharti Airtel, Maruti Suzuki, Coca-Cola, PepsiCo and General Motors threatened to halt their commercials.
During that time channels had held their ground claiming that due to extreme competition between 2005-2007 ad rates on television channels actually went down by 20-30%, thereby hitting the channels’ bottom line. The IBF's proposal of 25% surcharge was on the final rate agreed upon and not on the actual rate card, which is usually 40% higher than MRP. This stalemate ended with the IBF withdrawing the 25% hike on advertising rates of all existing contracts.
Given their past experience, what gives broadcasters the confidence that the ad rate hike this time around would go down well with the advertisers? While every broadcaster is talking about its success and the number of eyeballs and gross rating points it has lapped up, media planners say it won't be that easy. While Uday Shankar, the current president of IBF was unavailable for comments, Manas Misra, says, “For the Hindi market, there are still options available beyond Star India and Zee TV and buyers are being able to get around the rate hike – thanks to the competing channel environment. So unless one is looking for frills such as impact, connect with a ‘known title’, or is ‘prime time’ led —chasing GRPs hasn’t got costlier yet. “
Also, while most of the broadcasters say that the rate hike will benefit all the channels equally within the bouquet, media planners say it is mostly the GECs that will continue to run the show. “GECs get the most revenue and they will benefit from rate hikes first”, says Misra. He also says it is the GECs that has been at the helm of this rate hike. “Some genre leaders are asking for a hike in ad rate without much success. So there is no major phenomenon in other genres,” says Misra.
However, according to the Ficci-KPMG 2011 report on the media and entertainment sector, in 2010 nearly 53% advertising happened on regional channels as opposed to national sales. Says Timmy Kandhari, leader - media and entertainment (M&E) practice, PwC India says, “Post recession, advertising volumes have increased on TV at a faster rate than expected. The World Cup and the IPL drove TV viewership to a new level, thus bringing back advertising on channels. There might be a rationalisation of ad budgets in the rest of the year, as a major chunk of it has been spent on these two marquee events at the start of the year. But TV advertising will continue to grow at a rate of 14.5%, allowing the share of the TV broadcast space to grow from 47% to 50% of the overall M&E pie, by 2015.”
The high inflation rate and the latest hikes in interest rates could, however, spoil the best laid plans.Already, several marketers are reviewing their ad spends, if not cutting back their expenses as production costs rise, though broadcasters are hopeful that the impact would be minimal. Asheesh Chattered, CFO, Reliance Broadcast Network Lmt, says, “The inflationary pressure will affect the advertising revenue to some extent. It's actually a chicken and egg situation. Sales are getting affected but that doesn’t mean marketers will cut down on advertising or media buying cost. They want more value for money. They won’t splurge. The choppy market won't affect advertising revenue. It’s more of a sentiment or Sensex issue. So the issue of inflation and stock market should not be mixed up.”
All this could, therefore, lead to ad rates stabilising as broadcasters prune their revenue targets. “Because of the mega sporting events, sports channels charged a premium for advertising. The other channels felt that they could rake in higher ad revenues too, and increased their rates by 10-15%. Advertising will continue to grow on TV but ad rates might stabilise now,” says Kandhari.
For now it seems broadcasters have got back their pricing power.
Source: Financial Express