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IndustrySpeak: Can Big Street weather the economic downturn, and turn Skywalk into a profitable deal?

IndustrySpeak: Can Big Street weather the economic downturn, and turn Skywalk into a profitable deal?

Author | Nitin Sharma | Monday, Sep 08,2008 8:09 AM

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IndustrySpeak: Can Big Street weather the economic downturn, and turn Skywalk into a profitable deal?

In times of rising inflation and an economic slowdown came the news of Big Street, the OOH venture Reliance ADAG, making an upfront payment of Rs 79 crore to the Mumbai Metropolitan Regional Development Authority (MMRDA) to bag the 10-year outdoor advertising rights for Mumbai’s first Skywalk.

It may be recalled that in August 2008 MMRDA had selected Big Street as the out-of-home advertising company for Mumbai’s first-ever ‘Skywalk’ that links Bandra with Kalanagar. The bid included a minimum upfront payment of Rs 13.68 crore. Big Street will also foot all additional costs, including building two lifts, CCTVs, basics like water tanks, lavatories, and 10-year bills of security maintenance and electricity.

exchange4media spoke to some leading OOH players and the advertising community on the significance of this contract for Big Street and implications for the OOH industry. While many felt it is a right move, others raised their doubts on its business sense.

Sriram Iyer, CEO, Street Culture, noted, “Downturn and recession in major economies tend to happen at least one per decade. They have mostly been short-lived and followed by a pronounced upswing in economic fortune and India is no different. In other words, planning for marketing during a recession also involves planning for marketing in the recovery that follows it. Which is why Big Street’s move of winning the Bandra-Kalanagar Skywalk is a significant evidence to suggest that advertising builds strength, speeds recovery and drives sales. Those who continue their communication activity are likely to protect profits during the recession or downturn and increase their profits dramatically once the economy stabilises.”

Ajaz Memon, Director, Network Media Solutions, felt that most high-bidding tenders in the recent times, for example, the Mumbai and Delhi Airports, did not give the winner the luxury of having adequate time to justify the long-term investments. But in this instance, Big Street had the convenience of making early losses. He said, “Since the Skywalk involves multiple site options, there is also leg-room for losing money on some, and converting others into money-spinners. All in all, while initially, things will be in the red, with smarter marketing moves in the second phase, Big Street may actually end up laughing their way to the bank.”

Kalpesh T Vora, Director, Creation Publicity, felt that Big Street’s bid would take the industry on the backfoot. He said, “The minimum cost per month would be approximately Rs 1 crore, which again would be on a higher side. Looking at the current economic scenario, one can get 10 times the number of sites at better locations on a monthly payment, and so it will be interesting to see how Big Street makes business sense out of this deal. Looking at the future, this bid by Big Street will not be fruitful to the industry as it will lure the statutory authorities to raise the minimum bid amount for future tenders.”

Soumitra Bhattacharyya, CEO, Laqshya Outdoor, said, “Every company has reasons for making a bid, which is based purely on financial and profit making reasons. But if it is a strategic one, then you cannot peg a value to it in its current scenario. For Big Street, all can be right if they make money and all can go horribly wrong if they don’t. So, we should not be judgmental at all, after all it is their business and their call.”

According to Abhishek Kandoi, Director, EncycloMedia Networks, “Outdoor ad spend, and for that all media, have traditionally fallen in times of recession, but recovered quickly. The benefits of the medium are particularly relevant at a time of economic uncertainty, rapid broadcast coverage combined with high frequency, effective calls to action; inescapable. That is why I feel Reliance’s Big Street has done a smart thing by owning the advertising rights for the Bandra-Kalanagar Skywalk for a period of 10 years, and like Jack Welch from General Electric, I too believe that a period of economic slowdown is the best period to invest in growth.”

Sanjay Shah, CEO, Navia Asia, India, opined, “This is a new media vehicle (though it could be similar to foot overbridges) that has opened its doors to the OOH Industry in the city. There will definitely be a lot of ways in which this opportunity could be explored, and I am sure when a figure like this was quoted, it must have certainly gone through a lot of calculations and must have been quoted with full justifications.”

Mangesh Borse, Director, Symbiosis Advertising, felt that this was what happened when investors and available funds distorted market rates. He said, “The need for media property becomes more important than profitability. Rs 79 crore is definitely on a higher side. It will take a lot of business accumulation and some smart occupancy strategies to justify this investment. Also, what remains to be seen is how much the Bombay Municipal Corporation would plan to exclude Big Street from property tax, something which other outdoor media have not been able to do.”

Thus, despite the continued talk of economic downturn, smart business and advertising will remain the key for Big Street to skillfully position Skywalk as the next Patel Bridge of suburbs in Mumbai and take advantage of new buying concerns.

Officials of Times OOH, which was one of the six major OOH players that were in the race for the Skywalk tender, didn’t respond to exchange4media’s calls or mails till the time of filing this story.

Also read:

Big Street pays Rs 79 cr to walk the Mumbai Skywalk for next 10 years

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