Ad-Spend Slide Hurts Media-Biz

By Pyotr Mundolsky and Phyllis D’Souza in Mumbai

Southern News & Feature Service Exclusive

SNFS provides an insight into the sufferings of advertising industry, due to the demonetisation by the National Democratic Alliance regime

The demonetisation has dealt a body-blow to India’s audio-visual entertainment to the tune of Rs.1400 crores [US$ 20 million], top industry sources told SNFS.

The monthly ad-spend is roughly Rs.4500 crores, as per industry indices.

In early 2016, media agency GroupM had predicted an annual growth of 15.5% to Rs. Rs.57,486 crores from last year’s corresponding spread of Rs.49,758 crores.

Part of WPP PLC, the media agency had predicted that digital advertising would annual swell by a face pace – by 47.5%.

The earlier fiscal had seen an ad-spend annual growth of 14.2% overtaking the group’s prophecy of 12.4%.

“Audiences have thinned in cinemas affecting box office collections of movies that were expected to be hits. Advertising agencies that are already known to delay payments up to 120 days have asked production houses to hold the cheques citing demonetisation blues. And this has adversely affected top programmes with high television rating points [TRPs] as advertising contracts are being heavily withdrawn and/or deferred”, top satellite channel sources told SNFS.

India’s top advertiser Hindustan Unilever (HUL) has cut its TV ad-spends December onwards, sources said.

Release Orders are being handed over on week-on-week basis instead of the usual monthly practice. As a result, HUL alone has cut its budget till January 1 by Rs.150 crores, a highly placed source in a general entertainment channel [GEC] outlet told SNFS.

HUL, however, denied the averment.

“Our investments in popular brands are planned dynamically to ensure optimum exploitation of consumer interest driven by market forces and ground realities,” a source aware of the development commented.

Nevertheless, an internal HUL communication, it is said, had predicted adverse short term impacts on sales dampened by the ongoing demonetisation scheme.

“Cash strapped retail buyers are bound to spend less,” says one of the operative lines in the presentation, an insider said.

The strain has been outlined in a circular of the Indian Broadcasting Foundation (IBF).

“It has been observed that several advertisers/agencies have started sending cancellations to members on existing deals, which include both short term and long term contracts citing the demonetisation initiative of the Government of India,” it says.

Production companies are facing the crunch as units supplying equipment and food during shooting and post production schedules are not able to withdraw cash. Stars too are paid a sizeable portion of their remuneration in cash. Endorsements of products involve a huge cash component – and these have acquired new question marks. Finally, those who succeed in withdrawing money are landed with two numbers of Rs.2000 currency notes. Nothing at all can be achieved with this sum. Further, even for this paltry sum, change is extremely difficult to obtain, insiders told SFNS.

Media sales firms chose to downplay the development.

“Cancellations are underway. However, we see this as a temporary hiccup. While old-school sections are feeling the heat, newer companies specialising in e-wallets like PayTM, M-Pesa and a few others are experiencing a windfall. The losses, when finally computed could be around Rs. 500 crore, at present estimates, in the known sectors. The hit is also bound to hurt those surviving on TV advertising. Nevertheless, the newer businesses’ inflow could stem the ebb to a decent extent,” a channel’s marketing head said, insisting on anonymity.

The worst effects were experienced in the FMCG, textile Banking-Financial Services-Insurance [BFSI], Non-Banking-Finance-Corporations [NBFCs], real estate and jewellery sectors whose sizeable component depend on initial cash inputs. Rumours about income tax raids only worsened the fears driving business further southward.

Demonetisation has also forced a rethink on the advertising plans to be finalised before March 2017.

“Everything depends on how the market shapes up in the coming weeks. The biggest dampeners are coming from tidings about a 50% tax outgo adversely affecting sentiment. Firms that have a little stashed cache of cash meant for the oncoming year will have to consult auditors to do some serious tax-planning, to reduce the burden of fines. It would, however, imply a windfall for income tax department. While none grudges the taxes, fears of what taxmen would do later, is a source of serious worry,” a top source said on phone from Kolkata.

Well-known media personality S Gurumurthy told an elite gathering in Chennai that a decade-long decadent and unrealistic growth fuelled by false currency, black wealth and black money had triggered the urgent need to force the demonetisation move by Prime Minister Narendra Modi.

“The course correction was long overdue. The discredited former United Progressive Alliance [UPA] regime allowed the inorganic, sudden and unrealistic growth that drove prices northward that suited the designs of some 5% of the super rich in this nation. What seemed like a runaway growth potential was also financed by counterfeit currency and even terrorist funding,” he said in the Nani Palkhivala Memorial Lecture.

“Surprisingly, most newspaper and television channels opted not to expose the obvious malaise,” he added.

-additional reporting by Radhika Padmanabhan in Chennai

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