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Media: The advertising story - Views on News from Equitymaster

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Media: The advertising story

Mar 26, 2008

2007 has been a robust year for the media sector. Buoyant economic growth, rising income and increasing customer base has led the Indian entertainment and media industry to record a growth of 17% YoY in 2007 with the industry touching Rs 513 bn (Rs 438 bn in 2006). Healthy spends on advertisements have also played a role in bolstering growth of the sector. As per the Pitch Madison Media Advertising Survey, the ad spends across media segments continued with their growth streak recording a 22% YoY leap in 2007 to touch Rs 177 bn. Advertising is experiencing a paradigm shift in recent times. Digital platforms are helping wider access and increasing the customer base.

Total ad spends
Rs bn20062007% growth
Print 70.0 84.7 21.0%
TV 60.0 71.1 18.5%
Outdoor 10.0 12.8 27.5%
Radio2.9 4.8 68.4%
Internet1.7 2.5 51.5%
Cinema0.6 1.0 90.0%
Total 145.1 176.9 22.0%

Print and television continued to garner more share of the ad spend pie. Print media ads recorded a 21% YoY growth, while TV ad spends grew by 19% YoY for 2007. Expansion in regions and editions and introduction of new formats has spurred the growth of print media. English newspapers continue to lead the pack in terms of earning higher ad spends. The cinema segment witnessed the highest jump on account of low base. Also, the advantage of passing the message across a wider audience helps the cinema advertiser to rely on this segment. With media companies wanting to offer a complete advertising solution, they have diversified into various segments. The segment, which is garnering interest, is the outdoor advertising segment which grew by nearly 28% YoY.

As seen from the chart, while print and TV witnessed growth, they are losing the ad share to the other segments, which are clipping faster growth. Internet and mobile are two keys enablers for the same. With companies foraying to the tech world, the rise in this segment is inevitable. For instance, newspaper companies are starting the e-paper. Internet advertising is said to be growing at 32% CAGR over the past four years and is expected to touch Rs 11 bn in 2012.

Mobile has been the surprise packet. India is the fastest growing mobile market and is set to have the world's second largest wireless network, ousting US to the third slot, by April 2008. India adds 8 to 9 m subscribers a month as compared to the US, which adds 2 to 3 m subscribers a month and China, which adds 6 to 7 m. Telecom players have contributed 5.2% to the overall ad spends. In case of the radio division, with new licenses issued, players have expanded to the Tier II and Tier III cities. This has given a zest to this segment. Over 150 radio channels have been operationalised till 2007, expanding the spread of radio. An additional 560 radio stations are expected to be set up in the next five years, which would swell the revenues.

Going forward...
As per the FICCI-PWC Report 2008, media sector is expected to touch Rs 1,150 bn by 2011. High growth in advertising revenues, emergence of alternate revenue streams and shift from passive mediums to digital interactive mediums are expected to boost growth. Further, players moving into different segments will aid the growth. Digitalisation is the future for most segments and companies will have to adapt to this change. The industry is set to script a new story, provided all the inefficiencies are eliminated. With the fortunes of the industry linked to the economy, the sector is expected to have good times ahead.


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