Advertising revenue for television broadcasters is recovering and may reach 97 percent of pre-pandemic levels in this financial year, industry officials and experts indicated.
Zee Entertainment managing director Punit Goenka said recently that in terms of advertising revenue, the company as well the broadcasting sector will be in line with pre-Covid-19 levels.
According to Karan Taurani, a senior vice president at Elara Capital, ad revenue for TV broadcasters will be back to as much as 97 percent of pre-Covid levels in FY22.
Broadcasters get about 65 percent of their revenue from advertising. This line of revenue fell after the Covid-19 outbreak and subsequent restrictions as companies curtailed their advertising campaigns or scrapped them.
TV ad revenue was about Rs 32,000 crore in 2019 and dropped to Rs 25,100 crore in 2020, according to a FICCI-EY report in March 2021. With the lifting of Covid-related curbs, the vaccination drive and the festive season, advertisers are returning to TV channels.
Zee’s domestic ad revenue in the second quarter of FY22 grew 20 percent year-on-year and 18.9 percent quarter-on-quarter. However, it was still 11 percent lower than pre-pandemic levels.
Broadcaster
SUN TV’s Q2 ad revenue recovered strongly, increasing 39.84 percent. The company is estimated to get 5-7 percent lower ad revenue in FY22 than it did before the Covid-19 outbreak.
Pent-up demand
“Demand is good and FY22 will be at 95-97 percent of pre-Covid levels. In FY23, we will see some sort of pent-up demand kicking in as a lot of regional genres will do well because of local advertising picking up,”
Taurani said. “Next year, we will probably go to 110-115 percent of pre-Covid levels, a 12-13 percent growth.”
Taurani noted that advertising on TV channels generally was not growing at more than 8-9 percent.
“With regional genres seeing more demand, it should see a better growth rate only in FY23,” he said.
According to Likhita Chepa, a senior research analyst at CapitalVia Global Research, the Diwali season brought in a much-needed boost and recovery for TV channels.
“Leaders across categories say the festive spending by brands exceeded their expectations. The reopening of malls, theatres and other economic and leisure activities, coupled with the festive season, witnessed advertisement spends bouncing back,” Chepa said.
Nitin Menon, cofounder of NV Capital, a credit fund for the media and entertainment sector, said that looking at the overall trend and growth in advertising revenue, the second half of FY22 looks upbeat and very optimistic.
Taurani said that last year too, advertising revenue increased during the festive period from pre-Covid levels and this year there was further growth.
He said ad rates have largely come back to pre-Covid levels.
“The inventory came back first and then the ad rates. So, whatever recovery we are seeing in ad revenue is due to the ad rates,” Taurani said.
In terms of channels, sports was among those that saw the steepest fall in ad rates in the absence of content but now they are seeing good traction amid advertisers thanks to tournaments like the Indian Premier League (IPL).
“Sports has seen the biggest recovery genre-wise in terms of TV advertising,'' Taurani pointed out. However, English infotainment and youth channels are still struggling, he said.
Movies flop
N Chandramouli, CEO at TRA Research, a consumer analytics and brand insights company, said the movie genre on TV faces a lot of competition from streaming services.
“Blockbuster movies used to be a big attraction on TV. However, with so many options available to the viewer, the movie genre has lost its sheen for the advertiser. Also, very few movies are being made and reruns of movies are not as exciting as first-time releases,” Chandramouli added.
For general entertainment channels – regional or Hindi – traction is returning. Most have come back to pre-Covid pricing, according to Taurani.
Chandramouli said the genres that attract the biggest advertising budgets are sports and entertainment.
“The regional channels especially are likely to get a larger share of the ad budgets due to wider reach and relevance. These segments will continue to see more ad flow,” he said.
In terms of advertisers, Taurani said that while FMCG is stable, e-commerce, digital, cryptocurrency and internet companies are growing higher than last year’s numbers.
“That’s where the entire growth trigger is coming from,” he said.
Chandramouli said mobile phones, new-age tech-led companies and staple kitchen products, among others, are likely to be the advertisers in the coming times.
“IPL and the T20 World Cup drew in a lot of advertisers. This trend will continue with the launch of new content by broadcasters. FMCG, e-commerce and startups and auto will continue the trend of advertising. Crypto exchanges have been one of the top spenders in advertising during the World T20,” said Menon.
