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GroupM projects slower ad growth for TV in 2017
MUMBAI: Media agency GroupM’s report ‘This Year Next Year’ (TYNY) rings alarm bells for broadcasters. If 2016 was bad, then 2017 has worse in store for the segment, which has already been battered and bruised by demonetisation and sluggish demand in key sectors.
TV broadcasting advertising expenditure (AdEx) is projected to grow at 8% in 2017 to touch Rs 27,378 crore, which is slower than the 10% growth that the segment achieved in 2016. In 2016, TV AdEx rose 10% to Rs 25,530 crore.
This will be the slowest AdEx growth for the TV broadcasting sector in recent years. TV AdEx has always grown at a faster pace than the overall AdEx. In comparison, total advertising expenditure in India is expected to grow at 10% to touch Rs 61,204 crore in 2017.
In terms of media mix, TV’s share of total AdEx is expected to fall to 44.7% of total expenditure in 2017 from 45.5% in 2016.
Demonetisation has hit overall ad expenditure in 2016, digging a hole of about 2%. Total AdEx grew 12% to stand at Rs 55,671 crore in 2016, according to WPP-owned media agency GroupM.
Demonetisation’s impact will also be felt in the first quarter and recovery is expected to start from March-April. At 10% growth in 2017, India’s total ad expenditure will grow at the slowest pace in three years.
GroupM CEO South Asia CVL Srinivas said that the slowdown in FMCG, which comprises almost 50% of TV AdEx, is the major reason for the downgrading of TV AdEx. E-commerce and telecom, the other key segments that were earlier fuelling growth, are also expected to be cautious in ad spends, he added.
“After many years, the FMCG growth rate is slower than overall AdEx growth rate, and TV growth rate is lower than the overall AdEx growth,” Srinivas said, pointing out the two key trends in 2016.
According to Srinivas, sports, free-to-air (FTA), and high-definition (HD) channels will do well compared to other genres. “This year we expect sports to continue to do well. We expect HD to do well. We are seeing a lot of growth in HD although it’s a very small base. We also expect some FTA channels to do well considering the reach and the value proposition that they deliver,” he noted.
FTA channels had also done well in 2016 as they are delivering good reach thanks to Doordarshan’s free DTH platform Freedish.
While agreeing that the growth of FTA channels has come at the cost of pay channels, Srinivas said that the pay universe is still very crucial for effectiveness. He said that the Indian Premier League (IPL) and other high-impact properties will continue to do well.
“To an extent yes but advertisers don’t just look at the cost of the spot but also the effectiveness of the spot. Somewhere as agencies we always need to balance efficiency with effectiveness, which is why we need some of the most high-impact programmes. You will still see IPL do well this year because at the end of the day we need to deliver efficiency as well as effectiveness,” he added.
On Hindi and regional GECs, he said, “As far as GECs and regional channels are concerned, we see some pockets, some specific time bands, and some specific programmes continuing to do well attract eyeballs as well as ad dollars.”
Meanwhile, demonetisation and sluggish growth have pulled down the overall AdEx growth in 2016 and are likely to spoil the media owners’ party in 2017 as well. AdEx grew by 12% in 2016 to Rs 55,671 crore as opposed to the projected growth of 15.5%.
While demonetisation had a big part in this slowdown, other factors like sluggish growth in various sectors like FMCG, consumer durables, real estate and retail advertisers also were at play.
The e-commerce segment, which had fuelled the AdEx growth in the preceding years, also slowed down in 2016 due to rising losses and the difficulty in raising fresh capital at desired valuation.
“FMCG, which is close to 30% of AdEx, had a sluggish year. So, when 1/3rd of AdEx slows that pulls things down. Second was e-commerce which fuelled a lot of growth in 2014 and 2015. But come 2016 it slowed down. We had expected e-commerce to slow but we didn’t expect it to slowdown so rapidly and so early in the year. Slowdown happened in e-commerce in April onwards itself. Traditional retail, real estate and consumer durables also had a sluggish year,” he stated.
While the period prior to demonetisation had also witnessed muted growth, the government’s decision to scrap high denomination notes had shaved off almost 2% from the AdEx growth. Had it not been for demonetisation, AdEx would have grown by 13–13.5%.
“Demonetisation, as per our estimate, shaved off 2% from the total growth. One way of looking at it is that if there was no de-monetisation, we might have ended the year at 13–13.5%. Because of de-monetisation we got hit even more,” he asserted.
Auto, media, e-wallets and government/political spending are expected to help achieve the 12% growth target.
Explaining the media scenario, he added, “Digital is leading the AdEx growth with a 30% growth, while TV continues to be the largest medium in the mix. Print continues to grow at a stable rate of 4.5% and is still the second largest medium in the AdEx.”
GroupM estimates the Digital AdEx to grow by 30% in 2017 to Rs 9,490 crore. The digital AdEx is estimated to take a 15.5% share of the total AdEx this year. There will be a high emphasis on view ability metrics and outcome based optimisation. Ad spends will grow on OTT platforms, as internet speeds improve and catch up TV gains ground.
Print’s share of the total AdEx is projected to decline by 1.6% to 29.8%. The report, however, expects print’s AdEx to grow by 4.5% to Rs 18.258 crore in 2017. In 2016, the same grew by 4% to Rs 17,472 crore.
Vernacular and regional newspapers will see a higher growth rate compared to English peers. For magazines, ad de-growth will continue to be the norm. The increase in ad spends expected from print heavy sectors like auto, BFSI, and e-wallets will contribute to this growth.
While radio is expected to grow at a little over 10%, there is scope for the medium to pick up as the Phase III rollout is completed in 2017. Higher growth is expected as stations will see the supply impact of the full year.
Other media such as OOH will witness good traction from sectors addressing rural audience and premium niche audience. As per the trend in recent years, Cinema advertising will grow at a high double digit rate of 20%. Cinema consolidation has led to investments in infrastructure. This, coupled with the growing acceptance of premium Indian and Hollywood content by advertisers, augurs well for the medium.