You are here: Home » Opinion » Columns
Business Standard

Vanita Kohli-Khandekar: Working towards a slowdown


Vanita Kohli-Khandekar  |  New Delhi 

The bad news continues. Last week, on a car ride from north to south Mumbai, I saw lots of empty hoardings, a visible indicator of hard times. According to one estimate, roughly half the billboards in the city (the biggest outdoor market in India) are going abegging. A few weeks back Saakal laid off 70 people in its Delhi office. In November, news channel, Voice of India, laid off 250 people.

Over the last few weeks almost every media manager, CEO or executive I have met has been moaning about the ‘worst Diwali and the worst quarter.’ Every media — television, newspapers, magazines, radio, internet, outdoor — is bearing the brunt of the turn in sentiment as advertisers cut spends by anywhere between 30 and 70 per cent.

But why are advertisers cutting spends? As far as I can see, people haven’t cancelled their subscriptions to magazines and newspapers, they haven’t stopped watching TV or listening to the radio or surfing the internet. The time spent on media has remained what it was till the last survey done on these things. Why don’t advertisers want to reach these people?

Has people’s purchasing gone down? No it hasn’t. Has their willingness to spend gone down? Yes, it has in several product categories — especially housing, financial services and durables. In a slowdown, one tends to be careful with money hoping to make it last that much longer. So, many categories, such as financial services or realty, are within their rights to cut spends — especially if their advertising is geared towards getting a response rather than building brands. This affects roughly 25 per cent of the Rs 20,000-odd crore spent on advertising this year.

Then there are others — typically media and entertainment companies themselves (a large category), retailers, services (hotels, courier companies et al) that are slashing spends. “These are knee-jerk cuts,” thinks Mangesh Borse, director, Symbiosis Advertising, a Mumbai-based outdoor media firm. Already, he says, some retail advertisers have started coming back to outdoor. Then there are Fast Moving Consumer Goods (FMCG) marketers, one of the the biggest category of advertisers on TV, who are in fact increasing spends.

If the trend is still a mixed bag, why then are media and entertainment companies shutting businesses and laying off people? The companies fall in two categories. Many of the shelved plans, layoffs or shutdowns are from companies whose business plans were simply not strong enough to take a knock. These then are unsustainable businesses set up because capital was easy. The others are more serious though. The fact is that GDP growth is slowing down to 6 or 7 per cent instead of the expected 8 per cent, that banks are unwilling to lend and that the global economy is in active recession. Therefore the start-ups that need the lifeblood of working capital will find it tough to convince bankers, investors and advertisers that they could make it.

So, a Colors for example, which got off to a flying start, but now needs to monetise its viewership in a bearish market could have a tough time meeting revenue numbers. There are already rumours floating around about Peter Mukerjea’s INX Media, there is another one on NDTV and its NDTV Imagine troubles. In a good market these companies would have ‘made it’ or ‘not made it’ on the dint of programming, marketing and distribution strength, in a bad market (unfairly enough) just a ‘gloomy feeling,’ might be enough to do them in.

It is this gloomy feeling which foxes me. India’s GDP forecasts at least project a growth, which means advertising is bound to grow, at 15 per cent, if not the earlier estimate of 20-odd per cent. This is unlike many mature markets which are seeing negative advertising growth.

A friend in a media company quips that “The herd mentality works in reverse too. Just like everyone was rushing to expand and spend money, they are now rushing to cut spends and layoff people because someone else is doing it — not because they need to. In the process, advertisers and media companies are frothing at the mouth and working themselves towards a slowdown. They are making what would have been merely an uncomfortable year into a grim one.

The author is a media consultant and author of The Indian Media Business.  

First Published: Tue, December 16 2008. 00:00 IST