OUTDOOR CALLING

2009 – Turnaround after turbulent times

Buoyant economy and extremely favourable demographics till first half of 2008 made the Indian media industry one of the fastest growing sectors in the country. The country witnessed more spending, leading to more money flow in the leisure and entertainment activities, giving a steady boost to the media industry. By embracing multiple platforms, expanding into new geographies and exploiting the potential of under penetrated geographies, Indian media had built a scale, where it could then attract large players and investors.

However, later part of 2008 and early 2009 was the period of uncertainty world over. The global crisis led to asset write-downs, credit getting stifled, increased funding cost and crisis spreading from sub-prime to other sectors. India was not isolated from this global meltdown and the external outflows, interest rates and asset price volatility led to deepening crisis. While the economic situation in India was not as dismal as some of the other markets, the general market sentiment was negative.

In times of recession, advertisers desist from experimenting with media and often fall back on the medium, which has traditionally offered them the best results. During slowdown, most organisations treaded cautiously and were wary of committing to marketing spends across untested new media. They waited till they had a better sense of the business outcome before deciding on the spend level.

The effect of this crisis was largely visible on some of the key sectors like real estate, infrastructure, auto, financial services, aviation and transport, retail, etc. Companies in sectors most affected by the economic slowdown had cut down their ad spend by up to 20 per cent, as compared to the previous year. Various industry reports indicated advertising industry growth at single digit rate in the range of 5-7 per cent for 2009.

Globally, historically the OOH sector has outperformed the overall advertising industry and accounts for around 6 per cent of the overall ad spend. Though OOH sector in India holds huge potential and as of now it is estimated to be about 6-7 per cent of the total advertising industry, its growth has been traditionally hampered by the unorganised and fragmented nature of the sector.

For the year 2009, different industry reports have estimates for the OOH market size in the range of Rs 1,200 crore to Rs 1,600 crore. The market would possibly have been bigger if the slowdown had not hit us.

The slowdown phase was a tough time for the entire economy. Media was not isolated, but rather one of the most affected and hence, the need to change strategy was all the more for the media industry. The outdoor advertising industry performance in Q1 for 2009 was worse than other media formats. The corporates were adjusting their media budgets downwards to meet the profit commitment. This had adverse impact on OOH spends. The situation called for discontinuous action and the industry focused on category development, targeting new segments, increasing customer engagement through customer centric format innovation, providing more value, optimising cost and enhancing productivity and accountability.

All this took away the Q1 of 2009 and then it was Election time in the country. The outcome of the Elections was positive as it meant stability and focus on growth with long term perspective. Apart from the political stability, the economic condition also witnessed a positive change. The Government announced economic stimulus which had a positive impact. Since the beginning of Q2 of 2009, the market started looking up and the signs of recovery could be seen from the trends of the key sectors affected by slowdown. Real estate, infrastructure, BFSI, auto, etc., have been the high spenders and now market started looking significantly up for them as well. One can now see quite a few new real estate projects, IPOs, car launches, etc., being announced.

The positive change in the market started to impact the media industry as well in a positive way and the economic turnaround was clearly visible. Considering the favourable demographic composition, strong long term fundamentals of the Indian economy, low advertising to GDP ratio and low media penetration in the country, KPMG also projects a 12.5 per cent growth for the sector over a five-year period. The media companies witnessed continuous improvement in the top line as well as profitability from Q2 onwards. OOH sector was not isolated and was definitely a key beneficiary to this improving condition.

The Indian Government also had prioritised infrastructural development in the 11th Five-Year Plan. The Planning Commission of India has envisaged infrastructure spend of $500 billion and $1,000 billion in the 11th and the 12th FYP, respectively. With the airports and metros up for modernisation and expansion plans, emergence of malls, multiplexes, real-estate and other state-of-art infrastructure, there is an enormous potential for quality OOH in the coming years.

Few of the recent acquisition opportunities tendered-out also indicate that the market for OOH has started looking up. Recent times witnessed a significant increase in contract durations to make it a viable business proposition for organised players capable of investing and delivering international quality product.

Infrastructure development, entry of reputed players, public-private partnership, cost efficient operations, longer contract duration, value proposition and its measurement, changing lifestyle, etc., are bound to act as key drivers to fuel all round growth for OOH.

OOH media has the ability to catch eyeballs of people on the move, and in terms of the potential growth within the space; OOH advertising is gradually assuming greater significance within the overall media plan. Outdoor delivers more exposure for less money, and remains the last mass and best targeted medium. OOH offers better coverage of the market, control over marketing resources and opportunities for consumer engagement. In the current scenario, when the focus is on “on every dollar spent”, new categories of advertisers are bound to move towards OOH to deliver results.

Overall, 2009 has been an extremely challenging year for the OOH industry. While the worst is over, the industry will take some more time to recover from the ‘meltdown shock’. It is moving in the right direction.

(Sunder Hemrajani is Managing Director of Times Innovative Media Ltd.)