It’s an obvious reality that advertising revenues are one of the first casualties of any recession, and this time, analysts say, they may never recover to 2007 levels. And this downturn is exposing the full impact of digital media upon ad revenues, an impact that remained under the radar in a healthier economy. PricewaterhouseCoopers (PwC) believes the economic downturn does not change the underlying drivers for digital migration. In fact, it is more likely to influence the pace. In short, making it more difficult for traditional media to hide from the digital migration. Signs of the migration to digital Consumers are using digital video recorders and VoD to free them up from the TV schedule. Quality of downloading and streaming is improving. High-end devices such as smartphones and iPods, too, are shaping up new consumption patterns. Major changes are in the offing. One of them is related to the way brands are going to be managed across distribution platforms supported by new commercial models – raising a lot of questions from the advertiser’s perspective. Another is related to readiness of the market in terms of attaining a critical mass for any platform. Then, one also needs to evaluate the level of `engagement’ with that platform. Impact of digitisation on TV According to PwC, the global entertainment and media market as a whole, including both consumer and advertising spending, will grow by 2.7 percent compounded annually for the entire forecast period to $1.6 trillion in 2013. Initially, the firm expects to see a 3.9 percent drop in 2009 and a mere 0.4 percent advance in 2010, with a period of much faster growth during the remaining period to 7.1 percent in 2013. Together with Latin America, Asia Pacific leads global growth with an annual compound rate 4.5 percent through to 2013 fuelled by growth in China (9.5 percent CAGR), India (10.7 percent CAGR) and Indonesia (12.9 percent CAGR). Ricky Ow, senior vice-president and general manger, SPE Networks – Asia, says that different economies in Asia are at different stages of growth. “But the digitisation progress in each of these markets may not necessarily be in tandem with its economic growth. There is no definite co-relation between the two,” he said. “TV advertising has a stronger hold in a developing economy than a matured economy. The overall TV advertising share versus other media will remain largely the same, but with digitisation, we will see a shift of the share from FTA to pay-TV. In other types of medium, we will see new media possibly shaving off some advertising share from print media,” he said. From a media agency’s perspective, Guy Hearn, director of Communications Insights, Asia Pacific at Omnicom Media Group, too, says TV advertising will continue to be very important in the forseeable future, particularly for communication tasks, such as awareness generation, that require broadest possible reach and frequency. “Especially in developing markets TV will still be the best way of reaching a mass audience such as China, India, Indonesia, Vietnam, Thailand etc. Some of the increased spend in digital in other markets may be at the expense of TV, but the trend so far this year has been that print spend has been more likely to be under pressure,” said Hearn. CASBAA’s advertising consultant Julie Petersen says when talking about TV advertising, it’s important to make a differentiation between local terrestrial television and those channels delivered via cable and satellite (C&S). Because those 315 million plus households that receive TV signals via the latter tend to be more ‘upmarket’ and are profiled within a higher socio economic category – with a higher disposable income – they are more valuable to advertisers. Petersen said as C&S reaches nearly 50 percent of that market across the region, agencies and advertisers are realising that a combination of subscription TV and online can be the most effective way of reaching a specific target audience. She underlined this by adding that CASBAA conducted its own investigation amongst the regional TV planners in HK and Singapore and found that TV is the most effective for telling people about a brand they have not yet heard of, sparking interest in a brand or persuading people to try a brand or product. “Advertising in general has not suffered as badly in Asia Pacific as other parts of the world. In the few countries where we have credible advertising revenue monitoring services we have seen a slowdown over the first half of the year but forecasts for the second half are strong. Taiwan, for example, was badly affected earlier in the year but is now showing a recovery. Declines vary but Newspapers (26.2 percent), Out of Home (24.8 percent) and Magazines (23 percent) were the worse performers in the first half of 2009,” she said. “With fragmentation, what we’re witnessing is a flight to quality,” said Tom Keaveny, executive vice president and managing director, Discovery Networks Asia-Pacific. “Strong brands and high-quality content are benefitting from digitalisation and increased competition, as consumers turn to the networks that they know they can rely on.” Ad dollars on Pay-TV SPE’s Ow said digitisation in various key Asia markets is projected to be completed by 2013 which is good news for pay-TV, as platforms will be able to offer more channels, more choices to viewers. With a wider selection of channels available, viewership will start to shift from FTA to pay-TV. Consequently, TV advertising will also follow where the viewership flows. “The increase in digital pay-TV platforms will increase the speed of pay-TV achieving the critical mass to be able to compete with FTA,” said Ow. With the current economic climate, advertisers are looking for more efficiency. And pay-TV is an attractive option in this context. “With pay-TV we provide targeted campaigns with limited wastage, a quality environment for their brands and an audience with high disposable incomes,” said Discovery’s Keaveny. “Pay-TV has been growing in terms of share of advertising and I only see more growth. It is a medium with a high level of involvement with audiences, which translates to it being more effective at delivering results – a greater ROI.” Accountability to advertisers key “We’re looking at more accountability to advertisers with Peoplemeter ratings. While different markets are developing at different rates – and offering either challenges or opportunities, as a whole we are seeing audience growth. A key development for Discovery is launching more local feeds in key markets, allowing us to provide our clients in these countries with additional windows for their campaigns for their local markets specifically. This then gives them the option to buy local, or to extend their campaigns to a regional or international one.” In some markets, as Keaveny points out, consolidated ratings take into account time-shifting. In those markets, sponsorships can provide an opportunity for clients to maximise their advertising spend. SPE’s Ow said digital will be able to offer better accountability, but advertising on digital platforms is still in its early days as many markets still have a dual system. The focus now should be to grow the penetration of digital. With better accountability, viewer interaction and more customisation, digital will fuel a new wave of growth for advertising on pay-TV. “In addition, the ability to get better viewership information offered by digital systems will change the way we buy and account for advertising spend in future. We have not yet witnessed the full power of it,” said Ow. For its part, CASBAA through its Asia Television Advertising Coalition (ATAC) initiative is working together with the broadcasters and suppliers in several countries across the region to improve the measurement scenario. “Discussions with media planners confirmed that a credible revenue measurement service would have a positive impact on advertising expenditure to pay TV. One thing is for sure – the variances by country are enormous. The CASBAA ATAC project aims to demonstrate the value of pay TV audiences across the region in order to grow the percentage of revenues closer to the share of viewing,” said Petersen. She said if the audience measurement service was able to measure the data on an overnight basis, “we could adopt the methods in use by some other regions whereby time-shifted viewing is counted into the mix if it takes place within three days. The future solution to the measurement issues will be solved as digital TV distribution increases and new measurement technologies can be introduced.” Petersen added that Australia has just announced a full scale development of a 10,000 home audience measurement panel using return path data. The new audience measurement panel is designed to complement, not replace, the current OzTAM and RegTAM ratings used by subscription TV. The Multiview Analytics (MVA) service will supply the subscription TV ratings and interactive advertising response information from the return path panel. In addition to managing the return path service, MVA will co-ordinate and develop the industry’s advertising spot verification service. There’s no doubt that in all Asian markets digital has been under-represented in the media mix – only in Australia does the proportion of spend allocated to digital come anywhere close to reflecting the amount of time consumers spend in online environments, says Omnicom’s Hearn. From TV’s perspective, in a market like Australia, according to MindShare, the current expenditure split is 90 percent FTA and 10 percent subscription-TV. According to the agency, the penetration level of subscription TV is growing. “By the end of 2009, it should hit 51 percent (28 percent in 2007), driven by the reduced level entry price and pay-TV networks airing first run programming,” said Matthew McCann, director, The Exchange, MindShare Australia. He added that subscription TV is fast losing its luxury item tag. “In 2009, we are yet to see a network winner and for advertisers it’s becoming increasingly more difficult to predict a ratings winner. Programmers have taken a cut-throat approach with new programmes in terms of delivering ratings. In the past, a programme would be given a couple of weeks before deciding it’s fate; driven by a fear of losing revenue, a programme is given one opportunity to prove itself before facing the axe,” said McCann. In India, advertising on TV stood at Rs. 9,168 crore in 2008 with an impressive growth of 16 percent, occupying a 41 percent share of the total media spend pie. Out of the total number of television channels, 70 percent are FTA – but they constitute only around 26 percent share of advertising revenue. “Although the number of FTA channels has gone up by close to 20 percent in 2008, their share of advertising revenue remains unchanged. Some of the FTA channels in South and Hindi news genre did witness a sharp revenue increase but the loss in revenue by the rest of the lesser viewed FTA channels pulled back overall growth. In terms of viewership, FTA channels occupy one-third of total viewing. 50 percent of it is contributed by terrestrial channels. Local cable channels constitute around seven percent and the remaining 60 percent is of pay channels,” said Mumbai-based Atrayee Chakraborty, planning sciences director, Lintas Media Group. A market like Malaysia has traditionally seen its FTA and pay TV have a relatively low penetration compared to the rest of region. “We have seen growth in our Satellite TV viewership. However, as pay TV continues to grow, we see a decline in our FTA viewership. Another reason for this decline is the redirection of media consumption from mainstream media towards on-line/digital. With the Internet providing avenues for news and communication, we have seen a significant increase in time spent online. Primary activities are blogging, social media and forums,” said Kuala Lumpur-based SiangLin Tan, MD, MediaCom. She said Astro has grown to 2.728 million household subscribers with a potential home viewership of over 12.3 million. “Our pay TV and FTA TV stations are aggressively adopting new and innovative ways to protect their market share. As a whole, TV stations are gearing up to produce more branded content to aid potential advertisers.” Singapore-based Germaine Ng Ferguson, assistant general manager, advertising sales, corporate sales, StarHub, said while digital adoption is increasing, it is still in its infancy. Many advertisers are still grappling with their digital strategy, not knowing how to effectively exploit this new media space as it is very fragmented. “In Singapore, media consumption of FTA TV is decreasing but cable TV and Internet advertising are still growing. Cable TV advertising provides advertisers the value and control that FTA cannot offer due to its targeted audience.” “Even though Internet and mobile penetration have gained significant ground across the region, we believe that advertising on these media is still relatively small – for example, Internet ad spends for Singapore and Malaysia alone is merely in the range of one to two percent. TV will still remain a key part of advertising, as most people still consume some form of TV within their media palette, and given that TV penetration across Asia Pacific is still high with cable TV penetration being particularly healthy and growing in the emerging markets,” said Ferguson. In Thailand, TV advertising market is about 50 billion Baht per year. FTA accounts for about 99 percent of this pie, says Wannee Ruttanaphon, chairman at IPG Mediabrands. According to Wannee, pay-TV and FTA satellite is growing a rate of 30-50 percent. “Nielsen is not monitoring pay-TV at the moment. Reason for the shift is because of growing viewers in Bangkok and upcountry urban areas. Also, price is still very reasonable.” From experience, she said Initiative tried to convince clients to try pay-TV without much success due to a lack of published rating and monitoring. “However, this year we see change. Some operators have put an effort themselves by funding Nielsen to put up 100 panels. But results were not officially published – probably due to low viewing figures vs FTA. This is understandable.” To solve the issue, Initiative conducts its own research in both Bangkok and upcountry to check popularity of pay-TV channels. This started being tracked on a monthly basis in August 2008. “Both advertisers and operators still do not understand how to buy and sell pay-TV. Pay-TV channels mostly have fixed formats, i.e. cartoons, series, fashion, sports, etc. Targeting is through the choice of channels rather than by programme as in the case of FTA. We suggest clients to buy run-on-station to maximise the chance of seeing the commercial. Some experiment through local promotion activities to gauge success rates. More advertisers (major players) are willing to explore pay-TV this year with evidence of viewing, plus dissatisfaction of inflation in FTA. After all, Pay-TV is still not that expensive to explore,” explained Wannee. In China, TV is still the most powerful media and continues to enjoy in general a double digit year-by-year growth, according to Optimedia’s CEO Steven Chang. China is the world’s largest TV market with over 380 million TV households and a cable penetration of 43 percent, reaching more than 160 million homes. Digital penetration will reach around 70 percent of cable homes within the next five years. Referring to 600 million mobile phone users and 336 million Internet users, Chang said there is a fragmentation issue. But the deterioration of viewership as far as TV is considered still not that serious. “The weak ones become weaker. Also, the mobile TV is still relatively underdeveloped,” he said. Significantly, he said one third of the TV households have IPTV services in place but there are no ratings in place for IPTV. Agreeing with Chang, CSM Media Research’s Matthew Brosenne said, “TV advertising growth will continue to be strong as TV viewing remains at high levels here in China – on average just less than three hours per person per day. TV’s unique reach advantage continues to drive its role in any advertisers media mix. Internet penetration while having grown tremendously still covers only a small part of the total consumer market. Strong progress in content quality and opportunities for branded entertainment also help to support TV media advertising growth.” The industry is already witnessing that the cost of marketing is coming down with far greater inventory resulting from fragmentation. Specialists say even in the digital world, there should be an assumption that there will be some channels with higher penetration than others, which are more likely to attract advertisers, with inventory being more limited as a result, and thus its cost is unlikely to be affected that much. SPE’s Ow said there will essentially be two groups of channels within the digital landscape – one group that is made up of well-penetrated channels; the other group that is made up of the less-penetrated channels. Channels in the first group will form the basic buy of a media plan; channels in the second group are like supplements that will enhance the plan because they offer unique content that target very specific psychographic groups of audiences. “Advertisers and broadcasters will also work closely together to create advertising solutions that allow more interactivity with the viewers. With digitisation, advertisers can run campaigns that solicit viewers’ immediate response. Such options mean there can be better accountability to the advertisers,” said Ow. So how is digital benefitting during the downturn? “It’s also true that marketing budget restrictions brought on by the recession have led more marketers in Asia to think more about digital – that’s a good thing, but marketers who think of digital only in terms of cost savings or efficiencies are misunderstanding the opportunities for consumer engagement that digital provides,” Omnicom’s Hearn said. “Free to air will increasingly become a second or third screen, other than for live events, but for all that will still be important for audience acquisition. One of the impacts of the recession, at least in the earlier parts of the year, has been that people have spent a little bit more time at home. Because of that, TV ratings have held up well so far,” concluded Hearn.