Paritosh Joshi: Advertisers their own worst enemies?

08 Nov,2012

By Paritosh Joshi

 

If you have been keeping track of estimates of the television advertising market over the last several years, using FICCI Frames reports or Media Partners Asia publications or any one of a gaggle of consultant and investment banking firms’ projections, you would cite a year-on-year growth rate of anywhere between 7 and 15% for the last half decade.

 

If there was an empirical way of verifying this; there isn’t, by the way; the actual numbers would probably fall within this range. Which brings us to a simple question. Is this rate of growth good, bad or terrible? To answer this question, you need another data point. How has the footprint of television grown over this period? When I joined the industry in 2005, conventional wisdom as well as empirical surveys held that India had about 80 million TV homes.

 

The same sources also suggested that this number was growing by upwards of 7 million homes every year. This growth estimates reconciles fairly well with the latest estimates: over 130 million TV homes now. During this period, the GDP Real’s as distinct from Nominal growth rate , barring the last couple of years, has been in the high single digits. The Nominal growth rate, that doesn’t correct for inflation, has stayed in the teens.

 

Another way of putting this is as follows. TV households have very nearly doubled their Real incomes and more than doubled Nominal incomes during this period. And the number of TV households has itself grown over 60%. Aggregate all this up and you can reasonably infer that the economic opportunity represented by TV homes, which is after all what advertisers are after, has well nigh tripled during this period. In brief then: TV advertising revenues doubled. Economic opportunity that the advertising chases tripled.

 

That should settle the question about the quality of the advertising revenue growth rate rather unequivocally- it has been terrible.

 

And I haven’t come to the bad news yet, but stay with me a moment.

 

A very large proportion of the revenue growth has come not from better yields or systematic price corrections. It has come from a steady expansion in advertising inventory sold by the broadcasters. Since 2004, the Cable Act places a cap on permissible advertising inventory for a licensed TV channel at 10+2 minutes per programming hour; this to be comprised of 10 minutes for commercial advertising and 2 minutes for channel promotion. In actual fact, and surely you have noticed this every time you watch TV yourself, channels routinely run much more advertising than that. I could name genres that go as far as half an hour for every programmed hour.

 

However it wasn’t always like this. It got here by the proverbial slippery slope. Starting with generally high compliance with the stipulation at the outset, a given broadcaster might find herself in the situation of having to increase revenue but not muster the courage to secure it by increasing prices. Instead, the broadcaster might say to herself, “hey, let’s slap on a couple of extra 30 seconds spots every hour at the same prices. We will get the revenue we need and no one need be any wiser, after all even the viewer is scarcely likely to notice”. That unpleasant trick called JND – the Just Noticeable Difference – was used repeatedly in its most egregious form, to slice out more and more content time and replace it by a cancerous expansion of commercial time. And the consumer, not being brain dead, was noticing. The broadcaster chickened out of the hard decision and the consequences weren’t pretty.

 

What happened to the advertiser who refused to pay a modest and fairly earned price increase? His commercial started out in a great place, a 3 BHK you might call it in Mumbai residential terminology but was squeezed, in agonizing progression into a I BHK, a studio, a 1 room chawl, a Dharavikholi and finally a dugout between the platform and the tracks. Eventually, the advertiser’s relentless focus on Efficiency squeezed every last smidgen of Effectiveness out of the commercial, turned it into roadkill. Advertisers scripted their own misery, if somewhat indirectly.

 

We are in an awful place today. Broadcasters’ abject pusillanimity and advertisers’ cussed monomania has left both in an abyss. Neither appear to have the  gumption or the clarity of thinking that will enable them to emerge from it. So let me thrown down the gauntlet to the third participant in this daisy chain, the media agency. As the intermediary in the transaction, you should most clearly see the trouble we are in. And prescribe the remedy which is so obvious.

 

Diwali is the season when we clear clutter and cobwebs and give our homes a fresh, cheerful lick of paint. Isn’t it time to do just that to our advertising inventories?

 

Paritosh Joshi has been a marketer, a mediaperson and a key officebearer on industry bodies. He is developing an independent media advisory practice. He can reached via his Twitter handle @paritoshZero

 

 

Post a Comment 

2 responses to “Paritosh Joshi: Advertisers their own worst enemies?”

  1. Anonymous says:

    Sorry Mr. Mehrotra, I am unable to catch your drift. I have certainly written pieces about the subscription/distribution side of the business but this one was strictly focussed on the apparently endless expansion of advertising inventories to the point where they serve nobody’s interest, not the advertiser’s, not the broadcaster’s, least of all the viewer’s.

    However, I totally endorse the need for all components of the broadcast value chain to work in partnership and move beyond hostility to collaboration. I have been an outspoken votary of this position and my personal friendships in the cable distribution community are endorsement, if endorsement was needed, of this position.

  2. Rajeev Mehrotra says:

    Why are there on 3 player’s in this plot Mr Joshi ? Is the business model of any good business just about revenue or also about cost ? Seemingly your diatribe, as is the case with all channels seems to leave out the cable operator. That’s of course unless the government steps in and declares digitisation for the benefit of all. So since the time that you have joined the media industry what does the entire TV industry collectively pay the cable operators who demand, under-declare, renege and demand once again ever increasing “costs of distribution” from the TV Channels. In your collective wisdom as part of the various industry bodies, what have you done about it ? Am sure it’s quite delightful to always turn to a third party and ask them to lend a helping hand. However now let us understand what you in your capacity as a media professional or all the TV industry professionals have ever done to right the terms of the relationship with the cable operator.

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