9 October 2020

Media

Expert Speak

Ad spends picking up sharply; IPL driving festive energy

TV remains preferred mode for advertisers

Amidst the sharp recovery in consumer spends, we interacted with Mr. Ajay Varghese, Vice

President-Buying with Omnicom Media Group, to understand the trends in corporate ad-

spends before the festive season and how broadcasters are preparing for recovery in their

legacy business. Key takeaways from the discussion are:



In 2HCY20, the IPL is driving a large part of ad spends. The IPL is a ~INR30b event and

spends on IPL have grown in 2020 v/s that in 2019.



Currently, TV and all other prominent advertisement channels are running full on

inventories as corporates have blocked slots, reflecting the strong ad budgets by

corporates due to the festive season approaching and economic activity picking up.



Ed-tech apps like Byju’s, Udemy, etc. and gaming apps like Dream11 are spending heavily

on ads in 2HCY20.



Star and Sony are witnessing high ratings in sports and fiction genre. Other major

broadcasters have also seen some traction, but Star and Sony are expected to steal the

thunder this festive season.



For advertisers, RoI remains good and measurable in the TV segment. Of the total ad

budget for large corporates, 90% goes toward TV ads and 10% toward digital ads.

Strong pull-back in ad revenues in 2HCY20







Festive season:

The festive season is expected to see a healthy rise in ad revenues.

FMCG, consumer durables and automobiles will spend heavily this festive season,

according to Mr. Varghese. Auto companies have launched many new models, and

thus, are also expected to spend heavily to drive sales in 2HCY20.

IPL traction remains strong:

In 2HCY20, IPL is driving a large part of the ad spends.

The IPL is a ~INR30b event and spends on IPL have grown in 2020 (v/s 2019). IPL

already has 17 co-sponsors in 2020, with each sponsor investing at least INR500m.

Moreover, IPL during the festival season has further boosted the ad market sentiment.

Reality shows:

Other shows like Big Boss and KBC are also seeing huge traction witnessing strong demand on the

ad front. KBC and Big Boss have 10 sponsors each and have witnessed YoY growth in ad revenues.

Mr. Ajay Varghese

VP-Buying,

Omnicom Media Group

Mr. Varghese has spent

close to 20 years in the

industry. He started his

career in 1997 with Thomas

Cook and then moved onto

sales with the Indian

Express group, ETV

Network and Starcom. His

experience is across diverse

categories such as FMCG,

Banking, Phones, Retail,

Healthcare, Eyewear,

Airlines, E-commerce,

Home Appliances and

Corporate. He has worked

on brands such as J&J,

Nivea, Parle Agro, Hasbro,

Standard Chartered, Meru

cabs, Racold, Cadila and Jet

Airways.

F

estive season providing a healthy boost



Inventories:

Currently, TV and all other prominent advertisement channels are running on full inventories as

corporates have blocked slots, reflecting corporates’ strong ad budgets as the festive season approaches and

economic activity picks up.



Star and Sony driving festive season:

Star channel’s revenue is driven by the IPL, which has seen 40-50% growth

in viewer ratings. In the non-sports genre, Star has a good line-up of soaps and reality shows before the festive

season. Other channels like Sony and Colors also have a healthy content pipeline, which should attract

advertisers. Other major broadcasters have also seen some traction, but Star and Sony are expected to steal the

thunder this festive season.



Rising categories:

Ed-tech apps like Byju’s, Udemy, etc. and gaming apps like Dream11 are spending heavily on

ads in 2HCY20.

Research Analyst: Aliasgar Shakir

(Aliasgar.Shakir@motilaloswal.com);

Suhel Shaikh

(Suhel.Ahmad@MotilalOswal.com) /

Anshul Aggarwal

(Anshul.Aggarwal@motilaloswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

9 October 2020

1

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Expert Speak





Healthcare spends:

Healthcare has been a small contributor to ads in the TV segment, and is mostly active via

the print and digital medium due to the high cost of ads on TV. While the segment has seen some rise in TV ads,

it still remains insignificant for TV channels.

News channel:

News channels have seen growth in ad revenues in 1HCY20 as their GRPs have risen significantly.

With the upcoming elections, Hindi news channels should see further traction.

High RoI leads to TV channels being the preferred mode for advertisers













TV channels provide better RoI:

TV channels are preferred by advertisers as they provide better RoI. Of the total

ad budget of large corporates, 90% goes toward TV ads and 10% toward digital ads.

Digital platform remain low RoI channel:

Digital apps yield lower RoI for corporates, as there is no third-party

agency that monitors the viewership and authenticity of subscribers and effectiveness of the ads. Hence,

corporates are hesitant while spending on digital platforms, which makes TV still the preferred mode of ads.

AVOD OTT apps, thus, are witnessing fatigue in ad revenues and some apps might move to the SVOD model.

YouTube remains leader in video space:

Video ads contribute ~25-30% of the total ad spends and has a market

of ~INR30b in India. Youtube is the largest player with ~67% market share (INR20b revenues).

Digital ad leaders:

Google and Facebook would continue to demand the highest share in the digital ad space. In

the OTT segment, Hotstar, Zee5 and Sony Liv are the leading domestic apps for advertisements.

Threat from RJio:

RJio has immense capability in the ad space and can be the next disruptor in the digital

advertisement segment. It could see enormous traction in the digital ad space, driven by their huge investments

in technology, which is challenging existing digital advertisers.

Cinema advertisements:

Cinemas ads would be affected due to the delayed opening of theatres and 50%

capacity norm. Also, all major movie releases have been pushed to 2021. Thus, cinema ad revenues would be

affected.

Expect CY20 to remain muted









TV ad growth:

TV ad revenues are expected to grow 60% in 2HCY20 (over 1HCY20). For CY20, TV ad revenues

should drop ~10-15%, dragged by the lockdown in 1HCY20.

Radio segment:

Radio listenership has increased 20-30% during the pandemic. However, listenership in ‘drive

mode’ has not seen significant growth. Hence, radio ad segment should remain muted in 2HCY20.

Print segment:

Print segment’s revenue has plunged ~80% in 1HCY20. In 2HCY20, it is expected to see ~50-60%

revenue decline as people are fearful of COVID-19 spreading via physical copies. Radio, print and outdoor

segments are expected to see a fall in ad revenues during CY20.

Digital ads:

Due to limited advertisement options in 1HCY20, advertisers have opted for the digital platform, and

thus, the digital segment was less affected with ~6-7% drop in revenue YoY (digital platforms are estimated to

have ~INR60b revenue in 1HCY20). The digital segment is expected to grow in 2HCY20.

Ad industry hurt by the pandemic in 1HCY20









Slowing economic activity:

Even before the pandemic hit the nation, advertisement spends in Jan-Mar’20 were

already sluggish due to the weak economic outlook. COVID-19 further amplified the pain in the industry.

Ad losses:

CY20 saw 60% YoY drop in TV ad revenues, resulting in loss of ~INR140b ad revenues in India due to

the lockdown.

Lack of monetization:

Higher GRPs were witnessed across channels, but it couldn’t be monetized as production

of daily shows was halted and couldn’t be aired on TV channels during the lockdown period.

Discounts on ad rates:

Broadcasters were offering up to 70-80% discounts on advertisement rates in the initial

period of the lockdown, but only FMCG and essentials were active in the ad market.

9 October 2020

2

Expert Speak

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Expert Speak

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