Broadcasters feel the May heat as advertisers tighten purse strings due to lockdown
Industry experts hope that June and July will be better as they expect advertisers to spend the IPL ad money that got saved
Broadcasters are feeling the extreme May heat, both metaphorically and literally, as the state-level lockdowns and overall pessimism in the market have forced advertisers to tighten their purse strings. Senior ad sales executives of leading broadcast networks say that April was largely a decent month, but all of them agree that advertising growth has come to a grinding halt in May.
The suspension of Indian Premier League (IPL) mid-way due to a rise in Covid-19 cases among players has meanwhile given hope to some broadcasters who think that it might turn out to be a blessing in disguise for entertainment channels. However, others believe that IPL is immaterial at this juncture as the overall ad market is depressed.
According to a senior TV broadcast executive, April was a challenging month for entertainment channels since IPL took away a large chunk of the ad budget. But May will be tougher since advertisers are not confident about spending money due to state-level lockdowns. The executive feels that the steep ad sales target set by broadcasting companies will be difficult to achieve due to the depressed market condition. According to him, some networks are already feeling the heat as they have not been able to meet their targets. There have also been instances of ad rate cuts, he added.
A top-level executive from a leading regional network concurred that the advertising situation is looking bleak. According to the executive, the first three months of 2021 turned out very well. However, April was bad and May is looking worse than April.
"Things are looking pretty weak. We were all extremely heartened by what we saw in January, February, and March when we thought things are going to come back roaring. My gut tells me that Q1 is going to get impacted. We will have a sequential drop in both volumes and collections. On a YoY basis, it will look good because last year's same quarter was a complete washout, but on a sequential basis, we will see some slippages. Clearly, there is some sort of pessimism in the broader market," the executive said requesting not to be named.
However, both, Sony Pictures Networks India (SPNI) Chief Revenue Officer - Ad Sales and International Business Rohit Gupta and ZEEL Chief Growth Officer - Ad Revenue Ashish Sehgal disagree that April was a challenging month for broadcasters. In fact, Gupta said that April was an excellent month from an advertising point of view while Sehgal noted that TV ad spends saw a marginal drop during the month in comparison to March.
But while Gupta too feels that the advertising situation in May is uncertain, Sehgal predicts that there could be a 5-10% drop in ad spends during the peak summer month.
"It's very uncertain right now. April was excellent but May is still very unclear due to the lockdown. With many cities going through lockdowns, shops are closed and secondary sales is not happening. Lockdown is virtually there in every part of the country. This is a proper lockdown so there is a bit of hesitancy. It's very unclear right now. It's a week-to-week kind of a thing. Brands are also unsure how they are going to spend," said Gupta.
According to him, the suspension of IPL doesn't have any impact on the market as the advertisers are hesitant to open their purse strings. That said, Gupta feels that the IPL money that is getting saved will flow back to regular channel platforms.
"April was a good month for ZEEL. It was definitely lower compared to March, but that is an annual phenomenon. April is slightly lower than March because we have IPL. A lot of money gets diverted there. Overall, we have hit the numbers that we had expected to," Sehgal asserted.
He further stated that there is not much advertising uptake in May due to the lockdown. "Brands are maintaining the regular advertising that they were doing. The good part is that they have not reduced spends, unlike the last time. The kind of growth that we had seen in the last 3-4 months...that is not going to happen. If I compare May to the previous month, then there might be an impact of 5-10% on ad spends," he shared.
ZEEL, he said, has also held back some of its impact properties which will impact the top line. Sehgal also sees a ray of hope in IPL suspension as brands that have budgets for summer marketing will spend that money once the lockdown is slowly eased from June onwards.
"We have also held back some of our impact properties because of which there might be some impact on our top line. At the same time, IPL money will shift between the end of May and June towards general entertainment because of two reasons. One is the money that gets saved on the IPL and secondly, the impact that IPL used to put on ratings will go. With IPL gone, the GEC ratings will grow due to which it becomes a more efficient buy," he noted.
Sehgal and Gupta vehemently deny that broadcasters have cut ad rates due to pessimistic market conditions. "No way there will be any cut in ad rates because our channels are doing well so there is no question about it," Gupta averred.
Sehgal added that there was no undercutting, no discounting of rates. He further stated that discounting has not happened even in the news due to the assembly elections. "Nothing of that sort happened. Discounting has not happened. We have not given any discounts to any advertiser. I know for sure that the top four networks have not done any discounting. If some smaller channels or networks have done that then that is a different matter."
The ZEEL CRO pointed out that this time FMCGs were better prepared to manage distribution-related challenges hence there was no drastic cut in advertising money. "Even on our GECs, the rates were going up till the time lockdowns were not imposed. The growth of ad rates have halted but I am expecting that to come back in June," he asserts.
Meanwhile, the senior official of the leading regional player, who has been quoted above, said that the FMCGs tend to cut back ad spends during lockdowns since they know that people are anyway going to buy their products. "When there is a lockdown kind of a thing, all well-entrenched brands tighten their belts because they are sure that their sales will happen anyway. There are some sectors which are still spending like e-commerce, food delivery, and ed-tech."
Gupta said that ad spending differs from brand to brand. Some brands are getting impacted while for some there is no impact. "Auto sector has been impacted due to lockdown. FMCG is still doing strong. FMCG has been consistent throughout. They are the big ones. The big number growth comes from these smaller categories when they pitch in so that is where the issue is," Gupta elucidated.
Sehgal believes that June month will give a big boost to Q1 FY22. He expects June and July to be peak months for TV advertising. "The IPL money that has got saved will be spent since many advertisers will have to spend their summer marketing budget. June is the last month for any summer campaign so we expect them to spend money when the lockdowns open in June which they are expected to since we have hit the peak. Advertisers have held back a lot of advertising money which they will start investing once lockdowns open. I think June will be a big month," he asserted.
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