First the slowdown blues and now the impact of coronavirus, the situation does not seem to be improving for the advertising industry.
Advertising is coming under pressure, and it will come under more if things do not improve because consumption is slowing down.
Also, if companies are not producing there is no need for them to advertise, said Ashish Bhasin, CEO APAC and Chairman India, Dentsu Aegis Network.
The impact on TV advertising is estimated to be around 10-12 percent in Q4FY20, and things could get worse if IPL gets cancelled.
“If IPL gets cancelled ad spends on TV will drop further to around 15-20 percent in Q1FY21,” said Karan Taurani, Vice President – Elara Capital.
Plus, advertising budgets will not be extended to other genres, he believes.
“IPL 2020 was estimated to generate almost Rs 2,500 crore of ad revenue including sponsorships. If the tournament gets cancelled, we don’t expect the money to get diverted to other genres as the verticals catering to sports and other genres like GECs (General Entertainment Channels) are very different,” said Taurani.
However, he added that around 10-15 percent of spends of IPL can get diverted to other genres.
Repeat content on TV will make things worse for TV advertising
While IPL’s fate is key for TV’s ad growth, the halt on shooting for all entertainment purposes will also impact ad spends on television as channels will have to run repeat content.
Taurani expects ad pricing to decline by over 50 percent in the GEC genre due to repeat content.
“All four large networks are under pressure as some of the large FMCG brands have discontinued their contractual obligations or long-term deals. Despite the growth in news consumption, this genre too has reported decline in February, he added.
Also, expectations are not high from the festive season in 2020, which is why TV advertising is estimated to grow not more than 6-8 percent YoY in the second half of FY21,” added Taurani.
The overall decline in TV advertising for FY21 is estimated in the range of 8-10 percent.
Not just TV, every medium will see a drop in ad spends
Along with TV, other mediums are also seeing decline in ad spends due to the outbreak.
Vahishta M Unwalla, Research Analyst – Care Ratings, thinks that the medium that is impacted the most in terms of decrease in ad spends due to the coronavirus pandemic are cinemas and Out of Home (OOH) advertising.
“Advertising spends growth has remained subdued in the past few months of FY20 due to the slowdown in the country. Slow or flat revenue growth of top advertisers including FMCG, automobiles, retail and fashion, gems and jewellery, telecom led to dip in such discretionary spends by corporates. COVID-19 has definitely worsened the situation,” she added.
Plus, print is expected to be impacted the most and ad spends could be down by 20-30 percent in Q1FY21. During the same period, radio could see a decline of 19 percent in ad spends.
Digital to see the least impact
According to Taurani, digital will be the least impacted one.
Ajit Narayan, CMO – Socxo, pointed out that there was already a shift in spending towards digital.
“Remote working and remote communications have spawned the shift towards digital networking and digital events,” he said.
However, ad spends will drop by 10 percent in Q1FY21.
“It (digital) will see a minor decline in ad spends especially in the video segment as consumption is likely to pick up for subscription video on-demand services (SVoD),” said Taurani.
Advertising industry sensitive to economic growth
While the scenario is better on the digital front, Narayan thinks that coronavirus impact will be felt by all forms of marketing communications.
And, this is because advertising is dependent on the health of the economy, said Bhasin.
“Productions that have halted, these are not something that one can switch on or switch off. Unless the government announces quick stimulus packages there will be dark clouds which will linger even beyond the infection getting sorted out,” he said. Money Control