With the rupee in free fall, escalating prices and the economy teetering on the brink of collapse, it wouldn’t be incorrect to say the country is going through one of its worst phases presently. The first quarter of the current fiscal, which registered the slowest growth in over four years, saw market sentiment at an all time low. The dismal scenario made us wonder if television advertisers too had been forced to tighten their ad budgets, adversely impacting broadcasters in the process. Talking to a cross-section of advertisers, media planners and broadcasters,indiantelevision.com found that industry opinion stands divided on the issue.
Aegis Group plc chairman India & CEO South East Asia Ashish Bhasin blamed the negativity in the air for the industry thinking that reduced ad spends were not too far away. “Growth is still there but not as much as one would expect or wish it to be. Therefore, people have started thinking that cuts are on their way,” he opined.
A media planner said on the condition of anonymity: “The general mood isn’t positive. Advertisers are bound to rethink on the money allocated for advertising as there is an imbalance between demand and supply. People are not in the mood to go out and spend, so advertisers are apprehensive about spending too.”
Godrej & Boyce vice president (sales & marketing) Kamal Nandi put it out in clear terms saying: “We apportion a percentage of our topline to advertising promotion. If the topline growth is not moving as per our expectation, then we will drop expenditure. Initially, when we had done the planning, we were expecting the market to grow at 20 per cent, but it is growing at half of that.”
He asserted, “If the topline is dropping, then proportionately, the advertising will also drop,” saying that the company now plans to spend only where it gets higher ROIs. “We are very open to this though,” he added.
However, Parle products general manager (marketing) Pravin Kulkarni had a different take on the matter. “Depreciation of the rupee will not affect advertising. Budget cuts happen because of media costs going up. Media costs depend on how much inventory is available, and what is the demand for that. And if an advertiser is cutting down, then it is because of that,” he observed.
A Vodafone spokesperson too said that such slowdowns don’t affect the company as budgets are decided and allocated at the beginning of the financial year itself.
Others reasoned that with the festive season just round the corner, it was difficult to ignore or drastically reduce ad spends.
Said Madison Group COO - buying Neel Kamal Sharma: “This year, the festive season is not going to be like previous years. Clients are cautious because of the economy,” adding there were chances of the budgets being revisited. “The impact will be seen across categories as the fall in market and depreciation of rupee is affecting everyone. But the impact as well as cuts will vary from company to company,” he said.
Indeed, many media planners were of the view that though the general trend would be of companies either rolling-back or postponing the launches of new products, the festive season could not be ignored. They even went on to say that most advertisers allocate a large portion of their budgets for end of year as consumers are bound to shop more because of various festivals.
Said E&Y consultant Mihir Date: “If you look at TV or print, one can see advertisers have already started their new campaigns. There are ads splashed all across and it will only increase in the coming months. So I think, apart from certain sectors, no one else will cut back.”
Similarly, a Dabur spokesperson said the company wasn’t planning to cut down on ad spends because of the impending festive season.
An industry expert observed: “In the current market circumstances, anything is possible. Cutting ad spends is not something that advertisers will voluntarily do, unless they are pushed to the wall. But I do not think it’s happening as of now.”
Meanwhile, Zee chief sales officer Ashish Sehgal shared a diametrically opposite view on the subject of ad spends. “I presume the economy actually pushes advertisers to increase budgets to push sales. Recession hits the consumers directly, so advertisers will have to do more of advertising. This is one cost they will have to invest in to protect their future. One cannot ignore the existing portfolios as far as FMCG (Fast Moving Consumer Goods) is concerned whereas in the auto sector, there are 10-15 launches that are planned so they need to invest there.”
Similarly, ITV (News X and India News) ad sales head Arti Machama said: “We haven’t got any negative sentiments from our clients. And if it happens, then all broadcasters will be affected. However, if regular advertisers pull out, retail will still be there. Plus, with state elections and festivities coming up, advertisers will have to build up for next year.”
Suvarna business head Anup Chandrashekar said, "Our ad revenues have grown y-o-y despite the economic slowdown. The large FMCG advertisers have continued spending on our channel and we do not see any major impact on revenues. We are buoyant that we will see a significant growth in revenues this year backed by our increase in viewership performance."
With no consensus on whether advertisers will slash ad budgets or not in the current scenario, we proceeded to find out whether broadcasters would agree to such a cut, if at all...
“If they don’t agree, it is up to them. But if brands, manufacturers are not getting the expected growth, how will they invest in communication?” said Nandi in a matter-of-fact manner.
A CEO of a niche channel felt the genre would be the most hit and went on to argue: “Contrary to what most advertisers do, if they want to save money, they should cut ad spends on GECs and sports channels rather than niche channels where the percentage saved will be lesser. Our primary source of revenue is advertising. So, we will go to more number of clients and introduce more innovations. The festive season is on and they all have to advertise because that’s the only way they can make up for their loss in other times.”
Several broadcasters felt that with 10+2 coming up, prices were anyway headed north and only premium products would be able to advertise on high-rated channels. As such, advertisers would have to choose if they wanted to go with mass or niche channels.
"FMCGs spend throughout the year but it is the automobile and electronic categories keep a huge budget for the month of Oct-Nov. So, we will have to see how much they are willing to spend now with the value of rupee depreciating. So, there could be some cuts, but we will have to wait and watch," says a senior GEC broadcasting professional who says they were lucky enough to sign in sponsors for the channel's upcoming programme.
A Hindi movie channel head went a step further to insinuate that the anticipation of the possible rate hike due to the ad cap could be the reason for advertisers and agencies to contemplate ad cuts. “This could be some kind of reverse ploy to defend the hike,” he said in a guarded manner.
All said, the negative vibes of the current slowdown cannot be denied and only the coming weeks will be able to tell if this is all smoke and mirrors or people want to indeed play it safe.