Ad revenue dips by up to 25% in July due to GST teething problems
Despite a significant initial drop, industry experts are hopeful that the market will recover the losses by end of the year. Experts claim that the road to recovery has already started
Published - 16-August-2017
Published - 16-August-2017
July 2017, the first month of the Good Services Tax (GST), did bring with it loads of teething problems that reportedly resulted in a drop of up to 25% in ad revenue. Industry experts, particularly from the television sector, admit facing the GST heat during the last two months. The impact on sales was so big that a few organisations have reportedly made it mandatory for the sales team to work for six days.
Up to 20–25% drop on record
Television channels across the spectrum bore the brunt of the implementation of GST. The industry saw a drop of 20–25% ad revenue during the month of the July. In some quarters of the industry, the impact of GST has been likened to that of demonetisation, if not worse.
MK Anand, MD and CEO, Times Network said that the network’s ad revenue was impacted by 20–25%. He said, “Ad sales has been impacted in June and July due to GST.”
In the days that followed demonetisation, the advertising industry saw major advertisers slash marketing budgets and stall all marketing initiatives due to a slump in sales. Pawan Jailkhani, Chief Revenue Officer, 9X Media, calls the last 45 days worse than demonetisation. Jailkahni says that from June 15 to July end, the market has de-grown by close to 20–25%. According to the Pitch Madison Ad Report, loss in the months of November and December, 2016 was estimated to be around Rs. 1,650 crore. The report was optimistic that the industry would recover by April 2017. But the new tax regime has once again put the advertising industry in a quagmire.
Jailkhani calls this the double whammy. “Seasonality wise, July has been always low. On top of that it got further hit by GST. Since last week of July, it has recovered and market is showing good signs but I don’t think we will be able to regain that loss in the next six months of the calendar year. I don’t expect it to grow substantially in August and September. Also, this time the festive season is of a short duration. I strongly believe that all the estimates, whether it’s Pitch Madison, GroupM, Dentsu, or Publicis, have to recast their growth for this year,” he added.
Turner International India reported losses up to 20%. “Everything was going well till June 15. Then advertisers were grappling with GST at their end. They had to resolve pertinent issues which took a while. In the past week, people are getting ready for season time and by August 7 it has taken off again. So, the impact was felt between mid-June and first week of August,” said Juhi Ravindranath, Vice President, Head Advertising Sales, South Asia, Turner International India.
Hopes are high on August and the festive season
August is witnessing the settling down of initial teething problems. With the festive season taking off early this year, the industry is hopeful that sales will pick up. Many sales heads claimed that the trend is already turning positive.
“August has seen a comeback. The trend is now positive and we clearly see recovery,” said MK Anand. Karun Gera, President, Lokmat Media Private Limited, also reiterated the same. “GST impact at best has been limited to a month. In July, FMCG businesses were trying to stock up retail. Pre-GST, we found that across all FMCG businesses pipeline were pretty well de-stocked. From first week of August we see fairly good uptake coming, in terms of ad flow coming into us. Also, with the early festive period, there is a need to create demand as well. So, whoever is still lagging will start picking up by next week or so,” he said.
Radio too had its share of GST impact
Government policies, be that GST, RERA or last year’s demonetisation, have all impacted ad spends. The cumulative effect of these policies hurt the Radio industry heavily. Ad volumes for Radio saw a sudden dip in the month of July owing to GST and the overall growth of the industry was stunted.
“Q1 ad volume for radio industry must have dipped by around 15% in markets like Bengaluru and Mumbai and the impact has largely been felt in the existing frequencies and not the new ones. Existing frequencies have seen miniscule or negative growth and it has been a mediocre quarter,” said Satyanarayana Murthy, CEO of Radio Indigo 91.9 FM.
“Across categories and industries, Q1 has been a disappointment owing to change in government policies such as GST, RERA and the effects of demonetisation. Q2 is also witnessing impact of the policies. We are hopeful that September onwards, business will be better and the festive season will make the market sentiments better,” said Harrish Bhatia, CEO of 94.3 MY FM.
The print industry may have escaped the worst of GST. Alok Mehta, Veteran Journalist, Political & Social Commentator and Writer, said that GST will not have a major impact on the Print media. “If you look at Print, it has grown over the years. There may a slight impact on the ad revenue which has been reported. But overall the Print industry is robust enough to deal with the new tax regime,” he said.
FMCG industry worst hit
The FMCG firms were the first to be directly hit by the implementation of GST. The Q1 results of FMCG firms uniformly show a dip in profits and experts assign this dip to the implementation of GST. This impact is bound to have dented ad spends, but media planners are confident that in the long term, GST is only expected to have a positive impact on the industry.
While Dabur registered a net profit dip of 9.80%, Emami Ltd. reported 98.16% drop in consolidated net profit. Additionally, Marico Ltd. noted a volume decline of 9% across Parachute portfolio and Saffola Edible Oils range in response to GST. Marico said in its Q1 results that its “advertising and sales promotion spends were held back amidst environmental uncertainty.”
“The last quarter was a unique situation due to GST. Wholesale market started destocking but there has not been a large offset at the end customer. The positive impact for FMCG is that restocking is now starting to take place. There will be a positive impact of GST in the medium to long term as logistic costs come down, though it will take time to percolate. By January, spends slowly picked up and by April it was normal. June and July were slightly slower due to adjustments for GST,” said Ashish Bhasin, Chairman & CEO- South Asia, Dentsu Aegis Network.
Similarly, Sam Balsara, Chairman, Madison World, said that although most FMCG manufacturers report a disturbance in the wholesale market, most regular advertisers have not reduced their spends because of GST.
For more updates, be socially connected with us on
WhatsApp, Instagram, LinkedIn, Twitter, Facebook & Youtube