With television the mainstay entertainment in many Indian towns, advertising revenues for the sector are expected to recover by the second quarter of FY22, according to a latest report by Edelweiss.
Though the second wave could affect near-term ad spends, research estimates 20-25% revival in ad revenues for broadcasters as things normalize. While most networks have kept fresh content flowing by moving shoots out of Maharashtra even during the lockdown, most fast moving consumer goods companies—the largest contributors to TV advertisements at 60%—have learnt to adapt to the pandemic and will continue with their plans to innovate and expand sales.
The year had started on a positive note with total ad volume having increased 39% year-on-year from January to April 2021 even though advertisers had tightened purse strings in FY21 to counter waning demand and to cut costs.
“An unexpectedly strong covid wave in March dampened the excitement among advertisers. But recovery in ad spends is expected across staples and discretionary segments. FMCG companies are keen on advertising; armed with learnings from the first wave, they plan to sustain aggression on new launches and marketing,” the report said, adding that in Q4FY21, many FMCG brands increased their ad spends to push launch of new products.
Leveraging consumers’ shift to healthier options, they have launched a number of natural products, while others have introduced brands and SKUs to drive premiumization. “All these imply more marketing and ad spends, which in turn, will translate into higher revenue for broadcasters,” it said. Moreover, content production is better equipped to handle the second wave with at least Hindi and Marathi language shows moving to nearby states to continue shoots.
“Everything depends on whether we’re able to ensure the availability of fresh content all this while,” a senior broadcasting sector executive had told Mint earlier on the condition of anonymity, and added that all companies had witnessed the worst with no movement of goods and no ad spends last year. “While there are no product launches now, things should get better June onwards,” the person said.
“The year (2021) started with renewed optimism among advertisers. They went aggressive on ad volumes with expectation of sustained recovery from the pandemic. Volumes were also driven by a need to promote a number of new launches and general recovery in ad spends by FMCG companies,” Edelweiss said in its report and added that genre-wise ad volumes of movies and music channels surpassed overall ad volumes with 25% year-on-year growth for the same period. Apart from FMCG players, e-commerce also received a significant boost from the increased habit of ordering online during the pandemic.
“Ad spends by some top FMCG players in Q4FY21 indicate a considerable increase by most, bringing the overall ad spends in FY21, despite cutbacks in the first quarter to almost the same level as FY20,” Edelweiss said and added that broadcasters have also seen a considerable improvement in ad revenue in the last two quarters of FY21. For example, Zee Entertainment Enterprises Ltd saw a heavy dip (roughly 50%) in its ad revenues in the first half of FY21 due to cutback in spends from advertisers on account of the sudden uncertainty caused by the pandemic. However, in the second half, there was consistent increase in ad revenue and recovery close to pre-covid levels.
To be sure, the pandemic gave a significant boost to television viewership as people spent more time indoors. In 2020, overall time spent on television increased 7% over 2019.
Further, television as a medium still remains strong in terms of viewership and patronage. There is a chunk of population from rural areas migrating to television media every year. According to an EY report, television households will grow over 5% till 2025. Live Mint