In lieu of inflationary headwinds and macroeconomic uncertainty, several large verticals have opted for a cautious approach and have thus cut their ad spends, as a result Indian adex is seeing pressure in the first half of 2023, as per Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital.
In his views, the case is such that a property like Indian Premier League (IPL), the most compelling sports tournament, has reported a steep decline in overall ad revenues (to the tune of roughly 25%-30%), due to several reasons, including advertising money being split between TV and digital, and new age or e-commerce companies cutting ad spends to focus on profitability.
“General Election will be a driver for ad spends in CY 24 and TV– especially the news genre remains to be a major beneficiary of the same. Moreover, in terms of TV adex, regional markets (specifically south states and Marathi) are key drivers due to record GRP ratings, which will propel better pricing growth vs TV industry average growth; broadcasters may need to focus on SVOD (Subscription Video on Demand) as a major revenue stream, as AVOD (Advertising Video on Demand) in India remains highly competitive with global giants (search and social) and sports-driven OTT platforms commanding a lion's share,” he added.
Elara Capital continues to remain positive on TV adex in India, as it drives a bigger reach and is favourable for large traditional brands which look for mass campaigning.
“TV adex will see convergence towards growth rates of 5-6% over medium term, which is already factored into our estimates for Zee and Sun TV; however, our current estimates for ad revenue in the ongoing year may see a downward revision, as TV adex is estimated to move back towards 90% recovery vs pre Covid-levels, as compared to a 96% recovery in 2022,” he said.
With this, he also clarified that they still maintain a positive stance on Zee driven by potential merger synergies, Sun TV on the back of valuations (4.4x one year fwd. PER - core TV business) as strength in regional is going to stay.
“TV Today remains to be a big beneficiary of the general elections in CY24 and growth rates therein will magnify too (towards 10-12% YoY growth),” he shared.
“India adex growth could be revised downwards to 10-12% (including positive impact of Cricket World Cup- 2%) in CY23, from an estimate of 16% YoY growth projected by larger ad agencies,” he said.
However, the second half of 2023, in his opinion, is expected to showcase respite as larger verticals like FMCG, auto and telecom (44% contribution to total TV, Print and Radio Adex) are expected to drive ad spends momentum on the back of multiple new launches (which are on hold for now), inflationary pressures cooling off and a better festive season.
“Expect TV medium to be a big beneficiary of this, as these verticals advertise heavily on TV,” he stated.
Furthermore, he also emphasised that in his views, new age companies will continue to play spoilsport and are therefore expected to report a decline of 20%-25% on their ad budgets, which will have a negative impact on overall India’s adex (10% YoY growth).