Downturn is an upturn for the market leader

Campaign India probes what the impact of the downturn is on the leaders and the laggards of the media industry.

A downturn is a downturn, whatever the degree, and it is upon us. Advertisers have started pulling back in a meaningful way and the entire media industry is feeling the brunt.

As the advertising budgets dry up, some fall outs are obvious.

Advertisers buy what they know. And thus, the brand recognition the top couple of media players enjoy makes it easier for them to sell their stock. During an advertising slowdown, experimentation is on an all-time low and when there is a toss-up between putting one’s money on consistency versus gimmicks, it is the former that wins.

Adex growth of last year has been the lowest in the last 5 years, as per Maxus’ estimates. In light of this trend almost everyone, including the top players, will witness erosion in their pie.

However their share of erosion might not be as high as the bottom players.

“During the past one year the entry cost has been on a decline depending on the level of player and demand-supply situation,” says Priti Murthy, head, national insights, Maxus. “Today it is not about intra genre competition but also inter genre and inter medium too. Hence, the share of pie is going to get fragmented across medium and vehicles and the advertisers will be wary of spreading thin in the long tail of
channels.”

While most in the industry are holding back, waiting for the measures taken last year to show results, some of the industry experts we spoke to believe that yields will eventually be down-weighted. “The overall yield is expected to be lower. While bigger players will have the bandwidth to absorb this, smaller players need to look at alternate revenue models too,” says Sanjay Tripathy, executive vice president and head, marketing, HDFC Standard Life. “We can expect smaller media brands offering much larger discounts than the leaders. Some very small media brands may even perish or get sold.”

The tail-enders will have to work harder, especially in the print medium, say analysts.

“Advertisers could make things difficult for smaller players as the overall focus on ROI will be high,” added Tripathy.

“Insistence on circulation/ readership is a part of this and since smaller/ niche publications have always sold without the support of circulation/ readership, they will be hit the most,” Tripathy goes on to say.

While the top few will indeed get a larger share of the advertising pie, the premium that the top players demand owing to their position may go down.

Thus, while larger media owners will get a bigger slice of the pie, it will be at a lesser margin.

There is a glimmer of hope for smaller players that promise selective focus.

“Pan India / blanket coverage may not be the only criteria for many advertisers this year,” says Sushma Jhaveri, GM (west & south), Carat. “It will result in higher spending in better focused media vehicles – regionals, special interest, etc. that may not have large coverage.”

 G Krishnan, CEO, Aaj Tak

“During difficult times - advertisers tend to start attaching a premium for consistency. Channels that are able to continuously deliver high viewership will be preferred to those who are inconsistent performers. Whether or not overall yields for publications and channels will go down, I think we have just started seeing signs of a slowdown and should wait for a while before making any comment regarding yield coming down. However, as in most down-turn situations, marketers will want more accountability and it will be the onus of the publishers and the broadcasters, whatever the position, to deliver higher than expectation. ”

 Sushma Jhaveri, GM (west &south) Carat Media India

“Given the situation, every media house, be it small or big, will have to prove its efficiency to get any part of the advertising dollar. More the money involved, greater will be the need to prove its indispensability from the plan. Thus, bigger properties need to show more return on the advertiser’s investments. Investments in smaller vehicles though is relatively less hence lesser need to prove itself. While it’s too early to say if the overall yields will come down, but as mentioned earlier, smaller ones can be grab this opportunity and go beyond ‘survival.”

 Maheshwar Peri, publisher, Outlook Group

“The current downturn will surely result in marketers and advertisers look closely at the top few players and in the process No.1 and No. 2 would increase their market share. However, certain very good and qualitative magazines that can be characterized No. 1 and No.2 in content would also survive and would not lose out. Though t is possible that the overall yields for publications and channels may go down, but as of now people would still looking at the success of the campaigns they have launched and their effect on the brand and sales. Marketers will try to drive down the rates though I think the stronger publications and groups will hold on to the rates.”

 Priti Murthy, head-national insights, Maxus

“Yield will definitely be down weighted by 20-30% depending on medium/vehicle. A brand have a spend to yield ratio of 1 : 2 would be today looking at a situation of 0.8 : 3 !!! Hence it will be a tough year for all the smaller players. Sustenance would be an issue as they are fighting for the smaller pie of the monies with more competition – 2 yrs back smaller channels were 3-4 today there are 8 of them for the same pie. With marketers moving to cautious and necessary spending the long tail are the first ones to be rationalized and will be used only in critical need period.”

 Sanjay Tripathy, exec. VP, head-marketing, HDFC Standard Life

“Today, media owners are facing severe pressure not just from competitors in their own medium but from other media as well. In most cases when spends are being watched, media that deliver reach are more important than media that deliver frequency. In effect, reach delivering bigger vehicles (top rankers) are better off. Given the fact that even greater accountability is being attached to media investments today, advertisers will not want to spread their resources thin. Needless to say, advertisers will spend more with the top two if their CPTs / CPRPs are comparable to their smaller competitors. ”