We’ve reached out to the govt for some sensitivity & kindness: Ashish Bhasin

In a chat with exchange4media, Bhasin spoke about the set of recommendations that AAAI has sent out to the government for the revival of the Indian ad industry 

e4m by Misbaah Mansuri
Updated: Apr 17, 2020 8:58 AM
Ashish Bhasin

While advertisers are getting over the initial shock of the COVID-19 pandemic, the economy seems to be sliding into a state of a prolonged downturn. And now, with the lockdown in the country being extended to May 3, the industry is bracing for the impact on the business to linger for months to come. 

Ashish Bhasin, CEO APAC and Chairman India, Dentsu Aegis Network, and President of AAAI, has sent out a detailed set of recommendations on behalf of the members of AAAI to the Union Minister of Information & Broadcasting Prakash Javadekar, emphasising the importance of the advertising industry for the accelerated revival of the economy.

 In a conversation with exchange4media, Bhasin shared details about the recommendations suggested to the government by the AAAI in this respect. He also spoke of COVID-19’s impact on global advertising, the anticipated time for revival and how the Indian ad industry can weather this storm.

Edited excerpts: 

Tell us about the kind of impact COVID-19 has had on the ad industry in India? How much of a loss has the pandemic caused?
The impact, obviously, has been very severe, and it depends upon what part of the business you're in. So for example, if you're in an events business or an outdoor business, the impact has been dramatic, severe and almost catastrophic because the business in that area is down to near zero. There is no part of the advertising, and media business that is not impacted. If you are handling an airline client or some other travel clients, the impact is extremely severe. But almost every part of the business has been substantially hit. The impact doesn't seem to be a short-term event because, for one, the lockdown itself now has been substantially extended.

And even after the lockdown, it’s not as if suddenly everything is going to come back to normal. So, I think the impact is substantial and will be there for a reasonable period of time.

What key relief measures or recommendations has the AAAI suggested to the government for continuity in the advertising business?
Amongst the various problems that the industry is going to face, one of the biggest will be that of liquidity. And liquidity is like a chain. If dealers aren't picking up goods then liquidity stops. If customers aren't going to retailers, liquidity stops. Then clients can't pay the agency fees. Liquidity in any economic cycle is like a chain, and therefore, one of the biggest impacts is going to be on liquidity. There are some easy possibilities to at least temporarily ease that out. One of which is that almost all agencies have crores and crores of rupees stuck in TDS with the government because ours is a very unique business model.

 For example, a media agency makes 2-2.5% margin but the rate of TDS is quite substantial. By the time you get refunds and so on, there is a lot of money which is blocked. This is our own money. So if the government can quickly release that, it will help the industry. So there are suggestions like that. Another suggestion was providing bit more time for the payment of GST. 

Another fundamental suggestion was that - is advertising an expense or an investment? We feel that it's actually an investment in building your brand and can that be allowed to be amortized over a period of time, or some incentives given to clients. Let's say for every Rs 100 that you spend on advertising, you will be given an abatement of say Rs 200. Therefore, you get a bit of a tax benefit on it. Encouragement like that would definitely help advertising at this stage.

The government itself is an advertiser for many agencies and forms a significant part of theIr billings. And it's not just the government, as in the ministries, but there are a lot of PSUs and various government controlled entities, including state ministries who advertise. Crores and crores of rupees have been locked up for a long time and the payment cycle tends to be very long from the government. The government can at least pay up its own dues. That itself will help us in tiding over this crisis. 

You have to remember that even for agencies, people cost is one of the biggest costs. 

We don't want to be in a situation where we have to let go of a large number of people. So if there’s people’s cost but no in-flow, what do you do? 
So it’s in the government's interest and the economy's interest because advertising spurs the economy, it drives consumption, it drives demand. So if we are given a little bit of encouragement, it will help. If we are able to survive through this period, it will make a substantial difference to the economy.

Should the government give in to recommendations, how much of a relief will it be for the industry?
We’ve not asked for a relief package as such. It will help the industry tide over some immediate liquidity crisis because people's costs are such an important part of our industry. Our industry is very unique. A significant cost for most agencies, around 60-70 per cent, tends to be people-related. So if there is no liquidity, then you're left with a very bad option of having to cut down on number of people, which is bad for the economy, bad for the people, and for all of us. That is what I'm hoping will be avoided. We have not asked for a revival or relief package or a grant. We have just asked for some sensitivity and kindness to help tide through these very, very difficult times.

Tell us a little about the impact of the pandemic on the global ad market. What have other governments done for the ad industry in those geographies that we can take note of?
Well, of course, different countries have different packages. For example, Singapore has had two sets of relief packages. So there, for example, they gave up to $4600 and 75% abatement on salary for the month of April. So different countries have come up with different packages, but each economy is handling it differently. Almost all governments are trying to help in some way or the other. The Indian government is also working towards putting money into the pockets of the poor, which is the right thing to do at this moment but I think that was phase one. In phase two, it’s important to look at how smaller industries, medium-sized industries, service industries like ours can be supported to get out of these turbulent times. 

The pandemic has definitely impacted the global advertising in a significant way. China was the first market to be impacted but ironically today China and Taiwan are the only markets in APAC in my company which are working from office and not working from home. Ironically, they are back in business already, albeit still recovering. 

It's a different degree or a different level of impact for different countries, but most markets have now been impacted, not just in Asia Pacific but significantly in Europe as well as the US. So it's pretty much a global phenomenon.

Overall, advertising which was expected to show single-digit growth, I think globally will show negative growth this year. 

What about global accounts? Are they shifting budgets to lesser impacted countries due to the pandemic?
It's not like that. Different countries are responding in different ways. By and large, in many cases the general advertising scale and spend of advertising has significantly been reduced across countries. In some ways it makes sense because this is not a time where people are going to be buying cars or washing machines because even if they want to, many parts of the world are in lockdown. And other than essential goods, there isn't too much that's available, or there's not too much of consumption that is happening. So, in general, I think the consumption, therefore the advertising level itself has gone down across mediums and countries. What has also been noticed almost globally is that television and digital are showing an uptick in terms of consumption.

But we’re in a strange scenario where a higher consumption of television and digital is happening but there isn’t enough advertising. So the supply and demand mismatch is significant and noticeable.

How long should it take for revival to come?
Unfortunately, it’s not going to be short-term. The next two quarters are going to be very bad. I mean, this month of April, of course, is a total lockdown. So therefore it is going to be pretty bad. May also we don't know how it’s going to be, whether it will be fully functional or partly. 

I think one thing people forget is that once an economy is in a shutdown mode, it’s not a switch that you can switch on and hope that next day, things will be back to normal. So, for example, if a factory is shut, labour has gone to the villages, raw material procurement has stopped, you cannot just switch it on and hope that things will get back to normal. It takes over 3-5 months for the production to start coming back to normalcy and for all the offtake to start happening at a retail level, etc. On the positive side, the good news is that prediction at least is that the monsoon should be normal, and should be on time. We underestimate the importance of monsoons in the Indian economy, though it’s something a large part of people are dependent upon. It accounts for around 20% of the GDP, but the number of people who are employed directly/indirectly or partially employed by or influenced by agriculture, are substantial in India. It plays a very important part not just of the economy but if there is a good harvest, if there is a good crop, then that drives more consumption. So they'll buy more soaps, motorcycles, etc. So if the monsoons are good, then I expect that around the Diwali season, the festive season, things will get better. The earliest you'll see some semblance of normalcy coming in is not going to be before the fourth quarter of the calendar year. And that too will be in phases.

What about your suggestions to agencies on how they can navigate this volatile advertising landscape when a pandemic of this stature affects the industry?
I think first of all, you have to look after the safety of your people. Nothing is more important than human life. Make sure that all precautions are in place and if any help is required, provide that. Second thing is to focus on your business continuity planning. I mean, look at us, nearly 3500-4000 people, almost overnight had to adopt work from home. It sounds easy but it needs a lot of preparation. From your VPNs, bandwidth licenses, etc, everything should be in place. So Make sure that a robust BCP is in place as a second step. I think the third step is that you've got to communicate more with your teams to establish clarity in this situation of uncertainty. 

 I think the best way to handle it is to be very honest, and very transparent. This is a global medical based emergency which is now becoming a financial emergency , and therefore everybody is going to get impacted. As leaders, we've got to make sure that we dissipate or reduce and mitigate the impact as much as possible particularly for people at junior levels. 

Last but not the least, you have to give confidence, you have to be optimistic as leaders and as citizens of India. The mid-term and long term future of India is very very bright. And we will emerge stronger from this.

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