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By Johnson Napier

The writing was on the wall and the signs apparent but perhaps one was hoping for the impossible to happen. After all, it’s optimism that drives any business activity. But if the revised growth numbers released by GroupM globally are anything to go by, we may all need to pray for some divine intervention this festive season.

Titled ‘This Year, Next Year – India Media Forecasts: Midyear update ‘, the study released by GroupM has brought to the fore growth figures that several sectors will throw up in 2012 (see Tables titled  The Detailed Mid-Year Numbers at the end of this story) and not what was predicted of them at the start of the year (winter edition).

To begin with, the overall growth figure that media will throw up in 2012 has been revised to Rs 355,917 million from the earlier Rs 373,975 million. With this change, the new growth number has been set at 6.6 per cent for CY2012 compared to 12 per cent that was set earlier. While the change is disturbing in nature, what has emerged a bigger shock is the sharp drop in revenue numbers estimated for the domain of television. From the original Rs 160,839mn that was forecast at the start of the year (winter forecast), the revised estimate now reads Rs 148,118mn (mid-year forecast) – an adjustment of nearly Rs 12,721mn or an 8 per cent decline (refer table). In fact, television is the only medium to have seen such a steep readjustment when compared to the other domains under media.

When asked on the reasons for the sharp decline that was observed for the domain of television and the impact of the drop on the industry, Vikram Sakhuja, CEO South Asia at GroupM said: “The decline from 12 to 6.6 per cent is primarily on account of the medium of television. We had expected the medium to grow by 4 per cent in the first half of 2012 while for the second half we had expected a growth of 27 per cent. So the two combined would have contributed an average growth of 12 per cent. We were expecting a low first half as there was no big sporting property like the ICC World Cup last year, and simultaneously expecting a good second half on account of T20 World Cup, The Olympics etc. But that has not been the case so far. Also, it will be inappropriate to say that there will not be good growth; there will be good growth in the second half but it will be lower than what we had anticipated. We are looking at a number of around 18-20 per cent for second half of 2012.”

On his assessment for the industry for the second half of 2012, Sakhuja said: “We are looking at a revival sometime soon as the political situation in the country is expected to become better and the economy is expected to come up with measures to stem the downward slide.”

Minor changes in print, radio & outdoor; others unchanged

Meanwhile, newspapers see a revision of -3.7 per cent with the new figure standing at Rs 139,681 mn as against 144,260mn predicted earlier. Outdoor is next witnessing a change of -2.3 per cent to Rs 17,985mn as against Rs 18,409mn that was predicted in the earlier edition. Radio follows with a -1.79 per cent decline to display Rs 15,887mn as against Rs 16,178mn that was predicted earlier. On the other hand, Magazines sector has been revised by -0.497 per cent to Rs 8,200mn as against Rs 8,241mn predicted earlier. Cinema at Rs 1994mn, Retail at Rs 4,364mn and Digital at Rs 19,689mn remain unchanged from the previous released numbers.

Explaining the rationale for the change, the study states: “While we expected first quarter of this year to be weak, we expected the economy and hence ad investment to strengthen after this. Ad investment actually remained weak throughout the first half thanks to macro-economic issues such as continued inflation, a weak Rupee and lack of movement in government policies. Elections are another source of additional advertising. However, since political spending limits per candidate have been applied more strictly, the spends were lower than might have been expected.”

On the performances of other sectors, Sakhuja said: “We hadn’t expected a good growth for newspapers and magazines and that continues to report a single digit growth. The same is with radio and out-of-home that will report numbers as envisaged. But we had also expected digital to throw up a robust growth of 30 per cent and that continues to perform as expected. So that’s the situation on the other sectors according to our study.”

When sliced further, the study depicts television as the medium most affected. The medium will witness a 5.6 per cent year-on-year change as against the 15 y-o-y that was predicted earlier. That puts it at the bottom three of the growth pyramid just next to magazines and newspapers. For the medium of television, the study states: “2011 had the cricket World Cup which attracted an incremental Rs 8,500mn. This was obviously expected to drop out in 2012, but April-May IPL cricket did not perform as strongly as previously to compensate. In addition, the Telecom category cut down spends substantially in the first half of the year. Financial services have been adversely affected by poorer economic conditions here as elsewhere in the world. Even consumer durables spent less in the first half of 2012 than the prior year period. Occupancy of premium inventory has decreased with advertisers choosing to stay with safer tried-and-tested formats.”

As for print, newspapers have been set to register a 5 per cent growth as against 8 per cent predicted in the previous edition. According to the study, “Regional publications have expanded into new markets and have actively developed local advertisers largely in the retail categories. They have therefore added some ad volume even though the larger national advertiser categories have reduced investment.”

Where the domain of Outdoor is concerned, the new growth number has been pegged at 6 percent from the earlier 9 percent. “Reduced consumer demand and the current global turmoil have caused 2012 budget reductions in categories including telecom; automotive; banking, financial services and insurance (BFSI); real estate; and FMCG vis-a-vis 2011. The trend began in 2011 and continued into the first quarter of 2012, which is considered to be seasonally very important for BFSI. In the first half of 2012, there has however been increased investment from the entertainment and media category,” notes the study. Adding further, the study notes: “The reduction is affecting the metro markets but not the non-metros and smaller towns, where demand from local advertisers in a few categories like jewellery, apparel, education, real estate and construction has offset  the withdrawal of national activity. Smaller towns are actually seeing ad demand rise as much as 25 per cent.”

Radio has been revised to 9 per cent from the earlier 11 per cent. States the study: “Radio’s first-half slowdown is another result in part of the poorer economic situation. The next round of FM auctions has been pushed to 2013, so delaying this uplift to next year. Individual markets have seen very varied demand according to local retail conditions.”

The study predicts Digital to remain unchanged since the last forecast. Given that it typically has smaller outlays and is very response-based, it has not been affected like other media, it states. Similarly, Retail Media & Cinema are also performing as expected. “Even though telecom advertising fell in the first half, categories like FMCG and durables have risen in these media. As previously envisaged, destinations in smaller markets have experienced raised demand of about 10 per cent. Leisure destinations have also expanded their presence in these smaller markets that has helped drive spends,” notes the study.

Blast from the past?

While 2012 is being compared to the slowdown of 2008-09, it has to be admitted that the current period does get to see few glimpses from the past. Answering the query, Sakhuja reasoned: “Similarities could be somewhat drawn to the growth story of 2008-09 because the core economic sentiment at that time was based almost entirely on the global downturn whereas for 2012, if I have to put a weightage to it, the negative sentiment is driven a little bit more by the inaction from the government’s end rather than the global downturn. So we have our own internal issues to sort out and not so much of an outside effect that is holding us from staging a good growth for the industry.”

Highlighting the trend spotted worldwide, especially the BRIC countries, the study notes: “The Brics and ‘Next 10’ (that’s the Next 11 minus Iran) are still expected to contribute 51% of global ad growth in 2012, down from 53% in the winter forecast. We have revised China growth down from 17% to 13% for 2012. We attribute this to general headwinds in the economy, with loss of consumer confidence having only a slight effect. This represents a $2bn reduction in expected ad investment, taking 0.4 of a point from global growth. Falling global and local sentiment has hit India and Brazil forecasts much harder, relatively speaking. These two ad economies are together only a third the size of China’s, but they shed $1.5 bn from their expected 2012 increment. The Russia forecast for 2012 is raised from 10 to 12%.”

Note: All numbers are net advertising revenues not inclusive of agency commissions. Hence they reflect what media owners have earned and not what advertisers have spent

MxMIndia quizzed a few honchos from different sectors to gather their opinion on what the change would mean for the industry. And the reaction was on expected lines…   Tarun Katial, CEO, Reliance Broadcast Network “There is a slowdown, but it is better than the last one we saw! The signs in fact, have been there from the last quarter of 2011 so most of the industry has been cautious in spends and projections. Having said that, there is optimism looking forward, because typically the second half of year sees spending leapfrog.” Prashant Panday, CEO – Radio Mirchi “I think the adjustment downward is correct. The Indian economy is in quite a bit of a slowdown, the interest rates are high, inflation is high and investments are coming down. Commodity prices drove client profitability downwards. Not surprising then that clients have been cautious on advertising spending. The advertising markets are shaky at the moment and any upturn is expected only during the Diwali season starting October this year. It can also start early if the government initiates positive decision making. Allowing FDI in multi-brand retail, increasing FDI limits in Banking and Insurance, successfully auctioning 2G telecom licenses and quickly rolling out Phase-3 of FM will all help in bringing cheer to the advertising businesses. The first quarter has been a tough quarter for most media companies. The few results announced so far are evidence of that. But don’t forget that this is a traditionally weaker half. So media companies should be expected to fare poorly…..like I said the recovery can happen from October this year…” Suresh Srinivasan, Vice President (Advt), The Hindu group “The first quarter of the year has been good for us however in the last month the numbers have not been so encouraging. Things are not looking too good and the numbers are less than our expectation. However, I would not term a short period of lull as defining the year as there are opportunities ahead. With festive season one definitely hopes that things would turn for the better. I think India remains largely unaffected by the global slowdown and we still see new launches happening in the market and people still spending on shopping. We have seen particularly less spending from BFSI sector, education and retail who traditionally have been big investors.” Shailesh Amonkar, CMO – Sakal group “We are more or less following the trend that’s been witnessed by the industry, which has been recording slow growth in the past few months. Going by our experiences, we feel Retail & Corporate are categories that have bought us some good growth but categories like Education which used to get us good numbers earlier has seen a decline. Even categories like Real Estate and Finance have been sluggish this year. We are looking at other alternatives like innovations, supplements etc and are partnering with clients across the verticals like digital, newspapers, activations etc to ensure that we generate whatever revenues through such ventures. We hope to see a revival by end of August and start of September – around the festival season. Things should be looking up during the next three-four months for the industry as it happens every year. But then again, this too will be dependent on factors such as good monsoons, inflation, fuel prices etc that will decide whether investments will come in or whether clients will be cautious in their ad spends.” Atul Hegde, CEO – Ignitee “I definitely foresee Digital throwing up a 25-30 per cent growth this year compared to the last year. I do not anticipate any situation that will lead us to downgrade the growth of this medium. In fact if one were to analyse the earlier slowdown period, a lot of expensive money from the mediums of television and print came to digital; this will be a trend that one will get to witness whenever there is a recession. Clients will want to invest in a medium that is more accountable, has very little wastage, where they do not need large investments…Also, what will happen is clients are going to be very selective about the markets that they advertise in; it’s not going to be blanket advertising everywhere. Digital will help them pinpoint that.Within digital, you will see social media driving the growth more than anyone else. Search will be the biggest focus area for clients as they are more targeted and one-to-one. Even channels like Youtube etc will add to the growth of this medium. So the medium will put up growth as expected. After all, the medium has gathered momentum after 7-8 years and large brands have seen the value that the medium brings to their brands. So it is going to be a good ride ahead for the digital medium.” With inputs from Tuhina Anand and Meghna Sharma

 The Detailed Mid-Year Numbers