Category: NEWS

 

By Johnson Napier with Tuhina Anand, Shruti Pushkarna, Meghna Sharma and Shubhangi Mehta

 

Not many in the business arena would want to relive the harsh moments of 2008-09, which saw the economy at its most downward. While the phase did see a few corporate entities engage in a growth spree of daredevilry proportions, most brands were put to the ultimate test of surviving the slowdown odds or risk folding up business. The phase was, as most experts would agree, the toughest that had hit the Indian shores in a long time. And that there wouldn’t be anything harsher than that in a long time to come.

 

But then that phase was a thing of the past and if one has to assess the current scenario, there is a sentiment of adversity that’s staging a strong comeback yet again. Given the spate of hurdles facing the economy like rising inflation, hike in petroleum prices, falling value of rupee and global uncertainty, the question doing the rounds is whether the current economic crisis is putting as much strain on the industry as it did in 2008-09? And, importantly, will the gloom see the growth numbers nosedive to lower levels than what was originally anticipated for 2012-13?

 

To recap the growth numbers that was predicted for the media industry for 2012, Mindshare’s annual report – ‘This Year, Next Year: Indian Media Forecasts’ – had projected net revenue for 2012 at Rs37,397 crore, slated to grow at 12 per cent over 2011. This was somewhat close to the kind of growth that was witnessed in 2011, which stood at 12.8 per cent. But with the current crisis refusing to die down and with the sector already moving at a slow pace since January this year, the growth figures may see a marginal fall or remain stagnant.

 

Sectoral evaluation

Providing his outlook, Sujay Ghosh, Senior Vice President, DDBMudra South said that there is indeed a slowdown being felt across sectors. “There is a slowdown across several sectors like retail, apparel, real estate to name a few. As it happens with every slowdown, consumer spending gets concentrated on essentials and indulgences get affected. So, footfalls have shrunk and “like to like” buying has also come down. And with the petrol price hike, things will worsen further.”

 

Sharing a similar sentiment, Divya Gupta, CEO, Dentsu India said that there is a slowdown being witnessed in certain sectors, but then there are others that are doing business as usual.

 

When analysed further across sectors, the buzzword that’s doing the rounds is “caution”. Expressing such a trend in the domain of television, Ravikumar Gilganchi, VP, Sales, Kasthuri TV shared that in the last two months there has been an increased demand from the advertisers on returns and they have become very rigid on spending: “The dip would be around 15-20 per cent. However, I would like to believe that this is a short-term scenario and by June things would bounce back to normal.” His reason being that since it’s just the start of the financial year many would still be getting their budgets approved and hence, June is when the action would begin.

 

He further shared: “For the first rung channels, there is not much choice for advertisers and they will go with whatever price is being quoted with not much negotiation as they would want that channel to be part of their media plan. They would start negotiating hard with second rung channels where there are many options available.”

 

And it’s not just broadcasters who are feeling the heat. Production houses that play an integral part in the broadcast business too are seeing a rough patch. Hemal Thakkar, Director, Playtime Creations, whose show ‘Ruk Jana Nahi’ airs on Star Plus said, “This time economic slowdown has brought inflation with it which is the biggest cause of concern. This has led to a spike in manufacturing cost of product and budget limitation puts everyone in a spot. Interest costs too have shot up in last two years and so it triples the burden of execution in limited budget.”

 

But Rahul Kumar Tewary from Swastik Productions Pvt Ltd  whose show Navya airs on Star Plus thinks there is also an opportunity in all this: “The economic downturn has affected the industry as can be seen with the shutdown of channels like Imagine, but it hasn’t made any impact on the major players. The TV industry is on track for major growth as per the industry reports.” According to him, there are unlimited opportunities in the media space as it is a growing industry.

 

Another sector that may see a saturated growth pattern is print, which is the second favourite with the brands after television. Alok Sanwal, Project Head & Editor, Inext, expressed concern as he said, “Largely, there is a note of caution for each one of us and this phenomenon is something that a lot of ad agencies had predicted from the beginning of the year for us. If we look at the larger advertising scenario, it was not good even last year. As of now things have been fine for most publications, including us. I feel each one of us have to be sceptical of how things would shape up in the second and third quarter of 2012-13.”

 

As for the larger players, Sanwal feels that there is a word of caution there and the trend is utilitarian, by which he means, it is extremely sales driven: “So to that level, I think, it is a challenge for them. At the end, revenues may continue to grow but the larger challenge would be how to control expenses or optimise investments.”

 

R Rajmohan, publisher, Open said: “What we are seeing now is worrisome but the print industry has been witnessing a slump from January this year onwards. The range varies across newspapers and magazines and in some cases it is much more than 20 per cent drop in revenues. The market sentiments have not been positive for a long time and this has led to people curtailing their ad spends on a large scale.” As for the brands, he feels they are playing the game of caution. “They will only spend where they see a genuine need. As for the genre, I feel the lifestyle magazines would continue to do well while the others may not do so well. But the scenario may change with the onset of the festival season. Till then it is wait and watch.”

 

But there are those who believe that the scenario is not as bad for the sector and that it is on track for recording modest growth. Krishna Prasad, Editor, Outlook said: “I don’t know if the sentiment is as gloomy as it looks. If you look at the papers and magazines, there are so many sectors that are still promoting ads in them. The media, per se, has been witnessing tremendous action with so many new channels being launched and so many acquisitions and takeovers being the order of the day. So from a macro view, the economic gloom is not really taking a toll on our industry. But that does not mean all our problems are over, far from that. Oil prices are shooting through the roof, the value of rupee is falling further and all these factors will make our growth a challenge. We will have to see how things pan out in a couple of months from now.”

 

He added: “Brands are being careful with their spends. Even big brands are treading cautiously and are not going overboard, unless required. We will have to wait and see what the forthcoming months will unfold for the print industry.”

 

Agreeing with him, Mr Ghosh said that there are indeed pressures being felt by the clients as well: “There are client pressures in terms of numbers and therefore the client expects us to value add…in terms of strategic thinking on how to get more share of wallet. So our involvement with the client has gone up significantly. Similarly, the clients are concentrating on trying to get more out of their spends from everywhere.”

 

He further stated: “I think the spends will remain constant or probably fall a little but nothing drastic will happen. Because the clients have been through it earlier and are experienced enough in not going overboard with expenses…especially with hiring, inventories and so on. So they won’t have to cut down much on marketing spends or any other spends for that matter.”

 

Need for self-introspection

Always the one to be bridging the gap between the client and the consumer, the advertising agencies too are approaching the gloom with a note of caution. Providing his outlook, KV Sridhar, NCD, Leo Burnett, said: “If the industry is affected, the agency is affected and all this is caused by our internal issues more than the external issues. There are three pointers to this. First, advertisers do cost cutting and there are agencies available that are ready to work at lesser prices, this in turn affects the complete industry. Second, there are inefficient government policies, where the government is neither affected nor concerned about the sky-scraping inflation. And third, it’s the fact that we are all a part of a global family as an advertising fraternity. Keeping all this in mind we can still expect a double digit growth, the issue being that growth is also not enough for us, we are always aiming for more.”

 

Agnello Dias of Taproot India spoke on behalf of small and independent agencies when he said: “Ours is a small and independent agency, and hence personally, I do not think that agencies like us get affected by slowdown. It’s actually the bigger agencies having clients who play a part in the rise and fall of the economy of the country who get affected by the slowdown.”

 

Representing the industry as president of AAAI and also the Executive Director – India Operations of Draftfcb Ulka Group, Nagesh Alai too feels that the current slowdown is affecting the advertising industry: “The advertising industry, to a considerable extent, is linked to the fortunes of the country’s economy/GDP. The recalibration of GDP growth to under 7 per cent, the high inflation, the high interest rates, falling FDI inflows and share portfolio pullouts, the plunging rupee, lowered credit rating, policy paralysis at the government et al have significantly heightened concerns in the business world and that is reflected in poor business confidence.” According to him, while a few sectors like FMCG seem a bit more confident, most other sectors are seeing a softening and are seeing revenue and profit pressures.

 

Suggesting the possible solution that agencies could adapt, he said: “Overall, it’s going to be quite a challenging 2012. Most agencies will be affected and may have to relook at their numbers. Having said that, it is better to accept the situation as a business cycle and weather it with prudence and caution. It’s certainly not gloom and doom. My sense is that this time around, it is entirely up to us to rescue the situation and the sooner we do it, the better it will be for everybody. I only hope that the incumbent government gets out of paralysis and inaction and takes some positive steps in the interest of our economy and its people, if they are hoping to win at the 2014 general elections.”

 

Though a relatively small domain, Out of Home too is seeing the effects of the slowdown. Sunder Hemrajani, MD, Times OOH highlighted the trend as he said: “After the last slowdown which happened in 2008-09, when the industry actually declined, subsequently the industry had two good years, 2010-11 and virtually 2011-12. The last year, 2011-12 started well for the industry, in the first half from April to September, the (Out of Home) industry saw good double digit growth rates. The slowdown started in November and carried on right upto March and April this year. So overall, you had a situation where the industry grew at about 8 per cent but first half was significantly better than the second half.”

 

According to Mr Hemrajani, what has happened is the whole environment, and this is true not just of OOH but all media segments, has become very uncertain. “As a result of that uncertainty you find that people are holding on, clients are not making long term commitments. Earlier one used to get an annual deal or a six months deal, but now they have become three months and one month…so the level of commitment is becoming more short-term rather than long-term. Secondly, the pricing…it’s becoming difficult to increase prices and in some segments the prices have declined as well.”

 

But the situation is not as bad for Rajan Mehta, Founder and CEO, LiveMedia. He said, “Contrary to the current economic situation, our business is growing quarter on quarter. Possibly because it’s new and hasn’t hit saturation as yet and also because it is very well targeted and hence cost effective. We are seeing that marketers for whom we were not a priority medium earlier are beginning to consider us as their media budgets have been reduced. They say ‘necessity is the mother of invention’ and therefore it is in these hard times that when advertisers are being challenged to get a bang for their buck that they are discovering and adopting mediums like LiveMedia.”

 

Adding his thoughts, Haresh Nayak, MD, Posterscope Group India said, “From trade point of view we are seeing trends as close to 2008 and clearly non occupancy has gone up resulting in loss of business. This coinciding with monsoon which is supposed to be the lean period for OOH has brought down business and according to our estimates the non-occupancy has gone to 50 per cent. Though we implemented 18 campaigns last month, we are seeing a trend of quick availability and ease in implementing large campaigns due to slowdown.”

 

With the rupee showing slow signs of recovery and with petroleum prices expected to be hiked further in the coming months, the M&E industry will have to look at alternative strategies to see itself emerge stronger from the economic broil. It may help that the mediums of digital, radio and so on are putting up a strong show, especially digital that is scheduled to grow in excess of 30 per cent. Radio, too, could make merry with the stage set for phase 3 rollout, providing them alternate streams for revenue generation. For now, players are opting to tread on the cautious route and one will have to wait a couple of quarters before the fate of the sector could be ascertained.