Television

'There will be serious disruption in our business over the next 4 - 5 years as fundamental models will change' : Ashutosh Srivastava - Group M South Asia CEO II

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Group M is aiming big in India this year. Areas such as branded entertainment on television, sponsorship management for sporting events, developing search capabilities and expanding its India footprints via the Kinetic operations is what's high on the agenda.

In this the concluding installment of a two part interview, Group M South Asia CEO Ashutosh Srivastava feels that in the next four - five years there is going to be serious disruption in the media business as fundamental models will change.

Excerpts:

Apart from branded entertainment on television, what is the other big area for Broadmind?



Sports is the other big area for Broadmind, which is untapped currently primarily sports is defined by cricket in India. What we are doing is looking at all the other alternatives to cricket. They are not huge in terms of value but they are great opportunities for experimentation and learning. Sports such as F1, PHL and Marathons are niche sports, so you don't put big bucks but it gives scope for experimentation to see what works and not.

Sponsorship management is what we will be focusing on and looking at how to activate the brand in the market.

So you have Broadmind, ATG and the digital business, which contribute about 25 per cent of overall revenues. How do each stack up?



Broadmind would be about 12 per cent, ATG - six per cent and digital - six per cent.

Our digital business, which was in partnership globally with Ogilvy was called mOne. Last year the partnership broke off and the digital division is now called Group M Interactions. The digital business is growing 100 per cent year on year. It was a small base but if I were to look at our plan for just the digital business this year, we would possibly be as large as the entire Mediacom agency.

A lot of its growth is going to come from the mobile platform, wherein we have already started some work. The second big impetus will come in the search area, which is the holy grail at present. We are following our Key Performance Measures (KPM) model. So globally Group M has decided that India will be the hub for developing search capabilities because we have the software and data analytics capabilities. mOne-Group M business director Sanchit Sanga spent the last couple of months in our US office learning the ropes on how to set up a search business in India. That is going to be another big driver because in any digital platform, search will remain integral to the way we use these.

Kinetic is another big story. Some people have call outdoor additional but the way Landscapes and Portland have gone about developing that market is phenomenal.

Until now, this has been a huge unorganised, fragmented medium with a whole lot of small players who sell on relationships and no accountability. We figured that if we want to grow the brand activation market and get into the new consumer congregation points like malls and multiplexes, we need to build those capabilities. So Kinetic will focus on each of these. Their mandate is to lift the game in all out of home, not just billboards and bus shelters and to bring in accountability, measurability and new formats.

The fact is that on the selling side it is getting organized, so all the more important from the clients or the buyers side to organize and consolidate it and make sure the balance remains and both work together to develop the market.

What about ATG?



The area of ATG is research, which is an internal function. The area of bigger interest to clients is to be able to build decisions and support systems with the help of data analytics, which tell them how to optimise their investments.

ATG is the next couple of years is going to boom. Also, in India there are a lot of natural advantages in this area - IT and number skills, cost advantage and also IT infrastructure is already there. So this will become a destination for knowledge process outsourcing. To my mind, in five years time ATG could even become bigger than our core businesses.

What are the plans for expansion of activities from geographical and product levels?



Let's look at geographical expansion first. Within India, currently the key business centers where clients require services are the top five - six cities and that has still not expanded. This is where we differ from China, where we operate in 15 cities. The difference I that outside of the top cities, the businesses that are there are not on that scale, so the opportunities are less.

Having said that, geographical expansion is certainly coming our way through the Kinetic route for us. They will enter smaller markets and once they are there, they will certainly tap the opportunities and start building client relationships. That we really see as a road map to our geographical expansion. It's a five year plan, but certainly Kinetic will be there in the top 25 - 30 cities in the country. So we have the opportunity of being in those cities.

If we had to broaden the view and look outside of India. There isn't much in Bangladesh and Sri Lanka. The sheer size of the market is not that much. Bangladesh is growing but again, the country gets devastated every year due to natural calamities. Sri Lanka is a one-city business. We don't know the future because again trouble seems to have started.

Pakistan remains an opportunity. Here the problem remains the India - Pakistan issues. If those were not there, then I'm sure the Pakistan market will explode and they will be far bigger gainers of this than us. We currently have our operations in Karachi, which has now grown to be as big as our Bangalore and Chennai offices put together. It is clearly a dominant player in Pakistan.

It also is a market for specialist services certainly in the area of entertainment. It has a very vibrant television industry. They also have some sort of local movie industry.

In terms of new product offerings, I think currently we have more in our plate than what we can handle. The challenge is to get comfortable growth out of what we have.

Another area is talent. Underlining all these plans is that where is the talent going to come from? In a moving market, you can always latch on to the growing opportunities but unless you have good people, you can't. At the senior level, there are lots of good people but suddenly in the middle level there is a lull.

Taking about this, an industry issue is attrition - be it accounts or personnel. The sheer number of accounts that change hands in a year is incredible.



In our case it is more of personnel attrition but then again they don't go to other agencies. They either move to the clients' side or to channels.

As far as client attrition is concerned, it happened in the last two - three years because this whole industry is new and two players emerged - Group M and Madison - who started offering services on a different scale from what was being offered earlier and hence clients changed hands.

But if it has been happening for the last three years, then it should have reached some sort of stability now… in the last couple of weeks, the sheer amount of money that has changed hands is huge.



I am looking at all those and what I feel that many of those businesses are so small that they don't need to go in for a separate media services contract per se. They are not that large spenders. In a market where you pay two and a half and three per cent commission, it cannot be a profitable business engagement on a media only business. But people are doing that and I think everyone will learn the hard way over there.

You mentioned two players - Madison and Group M. Now if you both can arrive at a blueprint at how this can be worked upon then…



But we don't pitch for those kind of accounts at all. We stay out of it. We would still get them because within WPP, there would be a JWT or O&M, who will go and pitch for a Rs 10 million client also because their game plan is very different. So therefore by default we have to work on those accounts.

All our focus is on clients who are really in this business to look at the media service businesses, appreciate them and pay for them. We have stopped pitching for media-only businesses because it is not worth it.

One is clients have lots of expectations and they are spending large chunks of money so those expectations are justifiable. On the other side, there are certain clients that should not be looking at a separate media agency service. Some of them still do it.

Yes, some do it because it helps them to bring down the price story. Here I am talking about the commission and fee based structures. What is your take?



We would like to move towards a fee based structure. Today, roughly about half of our operating companies' revenue is on fee but conversely if you look at it, the other half is still on commission. A couple of years ago, the ratio was 35:65 (fee : commission) two years ago. Last year it became 50:50. but still it is a huge task because 50 per cent of our business is still on commission and the dialogue, which we have with some of clients are global clients, who globally are on the commission even today because they haven't figured out a system of benchmarking fees.

What we have been doing with all our operating companies, MindShare specially, is increasingly getting into discussions with all our clients saying here is a set of tangible deliverables, which will have a certain impact on your business. And accordingly you will have to provide us with a fat incentives, which is separate from a commission or a fee.

MindShare has been very successful in moving quite a few of their large clients onto this platform. A lot of Mindshare's growth in the last one year has been due to this. They have scaled up their fee and commission on the back of their performance. Right from HLL, Motorola, GSK to Nike, it's a whole variety of clients who have been successful with this, which I think is a very good sign for our business. It is an indication that the business is maturing and clients are now recognizing that.

Any closing remarks…



A lot of people say that there are a lot of changes in the last couple of years, economy is buoyant and therefore there is a lot of growth and it is a good time. According to me, you haven't seen anything yet because the way I see the next four - five years - there is going to be serious disruption in our business. Fundamental models are going to change. If you look at television, the distribution business is going to stand on its head over the next five years.

Who is going to be a winner in that, we don't know. There are different technologies which will change the rules of the game.

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