Higher advertising costs for India in 2007: Lodestar Universal study

By , agencyfaqs! | In Advertising | October 19, 2006
As per the report, in India, continued audience fragmentation and the onslaught of technology, coupled with the battle for eyeballs with new formats and enhanced local and internationally sourced content, will result in higher advertising costs

Lodestar & #BANNER1 & # Universal has released the annual APMES for 2006-07 and it reveals that cautious optimism continues to dominate the Asia Pacific (APAC) media scene. The series has been published by the Universal McCann network to provide clients and the advertising, marketing and media sectors with a road map to business development.

As per the report, advertising and communications spends in the APAC region are projected to increase by 5.6 per cent in 2007 over the 2006 levels. The increase next year is roughly in line with the growth experienced in 2006, which is expected to finish at 5.7 per cent higher than the media spends in 2005.

The 'cautious optimism' for growth in media spends next year will be fuelled primarily by investments in China during the second half of the year, in preparation for the Beijing Olympics in 2008. China and Hong Kong will be the chief beneficiaries of the 2008 Olympics.

Among the countries surveyed - Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, Korea, Taiwan and Thailand - by Universal McCann in its 2006 half-year trend reports on media economics, China continued to be the fastest growing media marketplace in the region. China's media growth is expected to accelerate further to between 18 and 20 per cent in 2007, as both MNCs and local companies prepare for the Olympics.

India's media communications industry was amongst the most positive in 2005, growing by 12 per cent. This was propelled by increased strength in economic fundamentals such as a positive outlook amongst domestic and global investors and continued growth in the economic power of Indian consumers.

These positives are expected to continue from 2006 into 2007, when a growth of 13 per cent is expected. However, while interest rate hikes and the impact of global oil price hikes still linger, consumer sentiment remains positive and their spending is expected to sustain growth. A positive business outlook will also see the market growing significantly during the next two years. Projections for the market are also buoyed by a significant increase in India playing cricket tournaments in 2006-07, including the ICC Champions Trophy and the ICC Cricket World Cup.

As far as media inflation goes, two factors - the 2008 Summer Olympics and continued fragmentation - are expected to fuel inflation in the APAC region. The average APAC media inflation (weighted by the size of each country's media industry) is expected to be around 4 per cent in 2007, taking into account media card rate increases, negotiability, the programming environment and audience dynamics. The projected 2007 inflation rate is 0.5 per cent points higher than the expected year-end inflation of 3.4 per cent in 2006 and will be driven largely by the expected demand for advertising in China and Hong Kong.

In India, continued audience fragmentation and the onslaught of technology, coupled with the battle for eyeballs with new formats and enhanced local and internationally sourced content, will result in higher advertising costs.Price inflation is a reality both in mainstream and new media, capitalising on the increased demand for advertising space from advertisers, hoping to tap into the potential spending power of the market's one billion plus population.

Further, India can expect a 14 per cent increase in media costs in 2007, which is more or less the same percentage of increase expected by the end of 2006. In 2004-05, this figure stood at 9 per cent.

Among the other markets, Japan is expected to have zero inflation in 2006 and in 2007. Lower demand for television, as advertisers rethink their advertising investments across traditional and digital platforms, is expected to control the costs of advertising in 2006 and 2007.

Taiwan, which has been hit by domestic and global issues, is expected to show media deflation in both 2006 and 2007, given a lower demand for advertising space among key advertisers.

The Philippines, is expecting a 15 per cent increase in the cost of advertising in 2007.

In Australia, a slight rise in media inflation is expected in 2007 as two of the free-to-air TV networks capitalise on their increased audience shares. Digital media platforms, as well as alternative media, such as outdoor, will continue to be limiting factors on market inflation.

In Malaysia, on the other hand, the introduction of new channels on Astro Cable TV Services will further fragment TV audiences.

In Singapore, the effects of the consolidation of television stations under one company (MediaCorp) and the continued strength of the main English and Chinese newspapers (mainly under Singapore Press Holdings) continues to direct media inflation. Audience fragmentation, with the emergence of alternative sources of entertainment and information (mainly from digital and online media channels), will also affect the cost of reaching audiences.

For the record, the APMES report is prepared by in-market experts in the Universal McCann network offices, taking note of prevailing and future economic, consumer and sociopolitical trends, market by market.

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