The optimism shown by outdoor advertising agencies in Kolkata in the beginning of 2009 has crashed with most hoardings in the city going empty. According to the outdoor advertising agencies in Kolkata, the sector took a hit from September 2008 and as of now, seen a 50 per cent drop in advertising revenues.
This is a direct result of corporate houses incurring huge losses due to the slowdown and has cut down outdoor advertising drastically.
Nationally, too, advertising has dropped by 50 per cent in almost all sectors, according to analyst reports.
According to Noomi Mehta, MD of Selvel Advertising, the largest outdoor advertising agency in Kolkata, “Currently Kolkata has 25-40 per cent vacancy for outdoor advertising, depending on locations. Till last year December, outdoor advertising was growing by around 10 per cent. However, since January this year, the monthly spends towards outdoor advertising is Rs 4 crore per month, a drop of at least 2 crore a month compared to corresponding period last year.”
“The drop can be attributed to the slowdown across industries as almost all corporates delay or defer launches and are concentrating on cost cutting measures,” Mehta said.
“However, in other metropolitan cities like Mumbai, outdoor advertising is much worse with around 50-60 per cent vacancies,” Mehta added.
According to Nirmal Thakur, secretary of Outdoor Advertising Agency Association, "November and December 2008 saw close to 20-30 per cent drop in outdoor advertising in Kolkata, despite the festive season. We had earlier predicted a stable 2009 for the outdoor advertising industry but now January-February has also taken a hit.”
According to Amitava Sinha, executive VP of Rediffusion in Kolkata, "Growth in advertising will depend largely on how the largest advertisers grow in 2009. In Kolkata there are only a handful of big advertisers like ITC, Spencer's Retail, ITC, Eveready, among others. Advertising space in Kolkata is dominated by FMCG, retail and real estate companies and a few local jewellery brands."
According to Jayanta Kar, CEO of R K Advertising, an outdoor advertising agency in Kolkata, hoardings of several advertising agencies, which were placed in catchment areas in the city, have been pulled down by the Kolkata Municipal Corporation (KMC) advertisement department for non payment of taxes by the March 15 deadline.
While corporate outdoor advertising is down 50 per cent, and renewals are down by 30 per cent, KMC has not reduced its fixed rent during recession and in fact, has increased rent on display boards on various spots.
According to sources in the industry, KMC currently charges tax close to Rs 23 per square foot for display advertising.
According to a Ficci-KPMG report, one of the biggest challenges that the sector faces today is the lack of a central regulator governing out-of-home (OOH media). Rules and regulations vary from state to state, which inhibits standardizations across locations and leads to unregulated growth. Further the ongoing liquidity crunch has forced many real estate developers to go slow on construction activities, thus affecting the supply of retail space. This is likely to affect the spread of ambient media.
The OOH media has grown at a compound annual growth rate (CAGR) of 17.3 percent over the past three years, and is estimated to have reached Rs 16 billion in size in 2008, a growth of 14 percent over 2007. The sector's performance was affected in the second half of the year owing to the overall economic slowdown. It is projected to grow at a compounded rate of 12.8 percent over the next five years and reach a size of around Rs 29.3 billion by 2013. Currently, the growth is centred largely in tier I towns, with metros accounting for more than half of the total OOH market. Sectors spending the most on this medium include telecom, media and entertainment and financial services companies.