Weak consumption threatens premium ad rates for major high-impact properties

New Delhi: Until consumption picks up, media platforms will face challenges in securing premium ad rates for major high-impact events like the Kumbh Mela, Champions Trophy, Delhi Elections, and even the IPL this quarter, Indian media and entertainment industry experts said.

Experts believe that while the festive season 2024 remained subdued and two-wheeler sales showed mixed performance in December 2024, the revival in consumption, the upcoming Union Budget announcement, and anticipated policy changes with Trump assuming the US presidency in January will be crucial in shaping brands' willingness to loosen their purse strings.

As the Maha Kumbh returns on January 14, 2025, after 12 years, brands are presented with an opportunity to engage with 400 million visitors at India's grandest marketing "Mela." However, soaring advertising rates pose a significant challenge for brands looking to invest heavily in the event.

A senior executive at an FMCG major said, "The skyrocketing ad rates for major properties during the Kumbh have been a deterrent. For instance, advertising on an auto rickshaw, which usually costs Rs 450, is priced at Rs 2,500 during the Kumbh. Similarly, branding a boat, typically priced at Rs 500, now costs Rs 4,000. Brands aren't willing to pay 10 times the usual rates."

Looking ahead to the Champions Trophy starting February 19, a senior media executive noted that advertisers have been hesitant to commit significant spending on the event. 

As for the IPL, kicking off in mid-March with its consolidated digital and TV rights under JioStar, advertisers are expected to be cautious with their spending, avoiding excessive commitments.

A media strategist told BestMediaInfo.com that a revival in consumption is essential for brands to loosen their purse strings. 

"The situation remains uncertain as of now. Business has been challenging for many brands over the past six months, leading to cautious and value-driven spending. If advertisers don’t have the money, how can they pay exorbitant premiums?" the strategist said.

As startups have become increasingly cautious about their advertising spending, an industry observer said, "With startups tightening their purse strings, media platforms will have to rely on top advertisers to generate ad revenue."

Fast-moving consumer goods (FMCG) companies are grappling with inflation, rising input costs, and pricing pressures, leading to shrinking gross margins and flat-to-modest operating profits in the October-December quarter. Revenue growth is expected to remain value-driven, with only low single-digit increases anticipated.

Several FMCG firms raised prices during the December quarter to offset higher costs for inputs such as copra, vegetable oil, and palm oil. However, these hikes coincided with subdued urban consumption, weighed down by high food inflation. 

In contrast, rural markets—accounting for over a third of the total FMCG market—outpaced urban growth, showcasing resilience. According to the NielsenIQ (NIQ) FMCG Quarterly Snapshot for the third quarter of the annual year 2024, the rural value growth at 6.7% continues to stay ahead of Urban at 5.0%

The media strategist added, “The performance of the automotive sector is a key indicator of the Indian advertising landscape. While December saw record-breaking sales for four-wheelers, two-wheeler sales were mixed, reflecting the broader economic sentiment.” 

Hero MotoCorp's domestic sales dropped over 22% year-on-year to 2,94,152 units in December 2024, while Bajaj Auto's sales declined by 19% to 1,28,335 units compared to December 2023.

Meanwhile, a media agency head noted that many companies are awaiting US President Donald Trump's inaugural speech on January 20. 

“Trump's past criticism of India’s trade practices as a "Tariff King" and his calls for reciprocal tariffs raise concerns about increased scrutiny on Indian exports. His "America First" approach could push for renegotiated trade deals, demanding lower tariffs on US goods and potentially reshaping bilateral trade dynamics,” said the agency head. 

The markets will also remain volatile till the budget announcement happens on February 1. “Post that, some policies will change. So money won't come easy to any say, any media company this month,” commented a media agency executive.

"Given the current scenario, the advertising landscape is expected to remain in flux for most of Q4, particularly in January. Generating revenue hasn’t been easy. A lot of money is going to servicing the trade. Therefore, spending on advertising will be a little tight in the current scenario," the head added.

Industry leaders interviewed by BestMediaInfo.com noted that just because media platforms have raised ad rates, it doesn’t mean advertisers will simply pay whatever is asked. It will be difficult for platforms to secure significant revenue from advertisers.

"The 2024 festive season and December sales have been underwhelming. Even with a potential revival, it takes months for businesses to bounce back, not just a few days of good news. While we expect business to pick up over the next six months, it’s unlikely to have a significant impact on the upcoming quarter," said one leader.