AD DISCOUNTS: DECODING THE REAL PROBLEM

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Industry reports on the Television sector suggest that there is 65% growth in eyeballs over a six-year period (2012-2017), while various estimates point to overall TV advertising spends growing over 80% during the same period. Even the number of channels grew from 425 to 650, as covered in Adex. The profitability and share prices of listed broadcasters have also been growing. While the current argument is about media agencies making upfront discount commitments to advertisers in a pitch, without prior approval from broadcasters, I prefer to analyse the topic a bit deeper.

THE BROADCASTERS
I believe the top Broadcasters are sitting pretty. No agency is quoting rates to its clients out of the set precedents and perhaps some small leeway, as the agencies also know that the large broadcasters cannot be arm-twisted beyond a point. The biggest sufferers are the middle and bottom rung of broadcasters. While advertisers are having a joyous time, making their agencies fight to get the best rates, I don’t think they understand the potential value they are losing out on.

Let’s look at the four Southern States of India, which have more than 20% of the TV audience, contribute 25% of the national taxes and offer almost 15% FMCG growth, also with strong presence of local brands. TV in these markets can deliver a plan with 90% reach and it offers a comparison on growth on all parameters over the previous year, including the highest time spent, in comparison to all other markets. Yet, broadcasters are forced to offer additional discounts, particularly for national clients, simply because some of them do not have the ability to look at data from different angles and present logical explanations. To make matters worse, neither are they working together to protect the ecosystem (if one negotiates with a particular channel, with a promise of keeping the others at bay, heavy discount is guaranteed) nor do they know how to price themselves right (a printed rate of Rs 10,000 per 10 seconds being finally offered at Rs 500 is a reality).

Negotiation is good as long as it is win-win; it empowers the media buyers, it offers a window of relationship between the channels and agencies and makes the advertisers look at their agencies as value creators. Given the impending threat where advertisers will start looking at platform-agnostic audio visual medium investments (vernacular content consumption on digital is rising), broadcasters have to get it right, on data and delivery.

THE MEDIA AGENCIES
Media agencies, in my opinion, have failed to hold conversations with the broadcasters beyond discounts. The planners at agencies have stopped applying any intuition and produce plans based on computer algorithms. They do not even go out and see what happens, in reality. I recently saw a media plan with a huge difference in the reach numbers between different frequency points, say 1+ 60% and 3+ 25%. To me, this can be easily overcome. If such conversations were to happen between the channels and agencies, I can guarantee that the plan can look significantly better in terms of value.

THE ADVERTISERS
Advertisers who have been used to thinking ads in English or Hindi and later dubbing it to other languages are now realizing, all that they did was pave the way for growth of local competition. Again, talking about the South, actors (even TV actors) get big time recognition unlike other markets. Imagine the potential of working with the broadcasters, using these insights, to fight local competition. Such conversations can’t happen when 5% extra discount is the focus. A recently launched satellite channel in Kerala perhaps has the potential of making a brand actually enter 26 lakh households in the State through a very different loyalty programme. But the ad sales team from the channel tells me that the agencies are only interested in talking about rate discounts and eventually such opportunities never reach the clients.

If a directional change has to happen in the current scenario, the broadcasters must either have people in their teams who are able to interpret various data points – and I don’t mean just BARC data - or work with external consultants, in order to create a culture of valuedriven conversations with agencies. The agencies, in turn, should show the willingness to take such conversations to their clients.

(The author is MD & Co-founder, Y&A Transformation Pvt Ltd. The views expressed here are his own)