Is another recession knocking at our door?
The distinction between the past, present and future is only a stubbornly persistent illusion. - Albert Einstein It’s not been very long since the entire Indian economy was hit by the global economic downturn. Though the effect was not as severe here as it was in the Western countries, there was a strong impact on the chain of businesses that influence the media, advertising and marketing industry. The recent downgrading of US credit rating by Standard & Poor seems to be the harbinger of another crisis. The Sensex plummeting below 16,000 -- a 14-month low -- is just the initial fallout of this downgrade, which may revive sickening memories of the worst ever crisis seen in 2008. Meanwhile, London saw its worst ever riots in an otherwise peaceful country, while activists in India struggled to rid the nation of corruption. Does the situation ring a bell? It indeed does. A friend and a veteran media owner shares his opinion thus: “The situations indicate that an economic crisis is knocking at our door. This time, it is going to be harsher than the 2008 crisis. Hence, I strongly recommend that everyone takes a hard look at any new expense and the existing spending pattern to see where money can be conserved. All businesses will have to set a target of a certain percentage reduction to the middle line. Whether you should proceed as if you were on capital expenditure or take a pause on them is very crucial. It would be wise to hear the knock rather than wait for it to arrive in full force.” Are entrepreneurs and marketers paying any attention to the developments and warnings? Are they still watching spends wisely, a practice that was consciously followed to recover from the downturn? We Indians have a habit of taking things to either extreme – high or low. There was unwanted scrutiny during the last recession, but lessons learnt from it have been forgotten. While deciding whether to play it smarter than the competition or play safe in the long run, marketers seem to have fallen for the former, splurging high on communications today. I’m not sure whether there will be a pull-back of spends earmarked by advertisers. However, I’m quite sure that the advertising sector - that seems bullish right now with big media conglomerates pouring in money into Indian businesses - would see a hit with the recent development. Though the Indian economy has been sturdy, most of the business our agencies handle has a direct link with the progress of the US. After all, it is the foray of leading MNCs from around the world into India that has made this business so lucrative. If I take a look at the major spenders over the last few years, telecom majors have been spending hugely on communication since the mobile revolution in India set in. The speed at which these players have tried to let their communication in is not funny. But the race is slowing down, with not many Zoozoos flying in or fraction-of-a-rupee charges for long minutes. This is sort of a hint, that the traditional marketers are playing it smart. Take the education sector, for example. While the big ones like Amity are still spending substantially, the mid-size ones have taken a back seat, realizing that there is less ROI in terms of admissions because of weak basic product. With liquidity in the markets drying up, real estate has also considerably lowered its marketing spends and is targeting direct touch points rather than mass media. The recent instance of these companies facing a huge setback due to the turmoil on the Noida expressway is another reminder that tethers are still held by the government. The auto sector seems to be the only saviour that continues to drive media spends, but that is also because auto launches are planned much ahead in time. True to its nature of playing the diversification game, the media also seems to have taken note of the impending crisis. HT Media, though quite profitable in its media business, has made great strides in the education business. Bhaskar Group, which made its name from the media business, has also diversified its portfolio to emerge as a big power/energy sector player. Are these conscious moves by media owners over the long term so that times of recession do not mar their business? I’m not certain, but the pointers are in that direction. Another trend that may revive is consolidation -- larger players buying out small ones in order to keep afloat! Having said that, one positive trend I would like to highlight is that most expats working in India wish to stay on in our country long term. That shows confidence in the future of the Indian economy. The outcome of their efforts has been extremely positive. Optimists in our market believe that the outcomes of the past will drive the Indian economy of the future. Though the festive season is just round the corner, ripples of the downgrading of US credit rating will be felt in the Indian media sector. It remains to be seen who spots it first and acts accordingly. Earnings from the festive mood may balance the ripple effect, but a well-thought-out strategy will have to be adopted so that we are prepared for any instance like 2008. Only those who hear the noises right will scale through... Oprah Winfrey’s quote sums it all up – “Doing the best at this moment puts you in the best place for the next moment.”
Tags : Media Mantras