TV DEMAND GROWING ENORMOUSLY, PRICES TO GO UP MORE THAN 10%

15. 9. 2021
Vladimír Pořízek; zdroj: TV Prima
Vladimír Pořízek; zdroj: FTV Prima
HOME INTERVIEW NEWS
TV ad inflation rate will start at 10%. Hitting the 15% level cannot be ruled out.  

Since this spring, the demand for TV advertising has been growing enormously. This trend is even stronger at the end of the year both according to advertisers’ projections and the actual demand for September and October. The pressure on ad capacity further increases, for example, with the growth in SVOD services. Similar to almost all other industries, media companies see an increase in their input costs, such as show production, licences and other fixed costs. Together with the high demand for TV products, the costs result in the need to increase prices for 2022. The inflation rate will thus start at 10% and hitting the 15% level cannot be ruled out either. We discussed the existing situation in the TV advertising market in more detail with Vladimír Pořízek, Prima’s COO.

The first half of 2021 saw increased demand for TV advertising. Was the demand for TV ad space in the first half higher compared to the first half of 2019?

This year’s first four months nearly copied 2019 and exceeded 2020. We experienced a significantly higher interest of our clients with the easing in May. It was growing year-on-year in the summer and does not seem to fade out.  While demand increased by several percent in May, September sees growth of tens of percent. In financial terms, about 15% of income from the first half of the last year moved to the second half through deferred consumption, i.e. to the period from August to December. This year’s demand exceeded last year by tens of percent both in August and September.

What impacted this year’s higher demand for TV advertising the most?

That all people know and have repeatedly verified that TV works. It is the most effective medium for the vast majority of clients’ target groups (smile). In uncertain times, clients tend to apply time-proven tools, i.e. they stick to certainties. Moreover, the Covid period increased the number of viewers and the length of TV consumption.

What is the specific increase in the number of advertisers who used TV advertising compared to the pre-Covid period? And how did the advertiser structure change?

Neither the number of advertisers and campaigns nor the structure of Media Club’s clients have changed significantly as opposed to a certain part of the TV market. However, the proportion of advertiser spend has changed. We often see increased volumes with clients who are new in using TV as the ad medium. We are pleased to participate in their growth. In addition, all must have noticed that major TV advertisers include clients closely related to e-commerce. This confirms what we have said about our effectiveness. After several years of shortening, we can see a trend of using longer footage, e.g. for brand building, rather than activation shorter pulse footage. Of course, this puts pressure on placing numbers of clients and campaigns with the limited inventory and statutory limits. We want to reverse the trend by next year again.

Ad space capacities of the stations represented by Media Club face their statutory limits. How will you respond to this?

A year ago, when we started business activities for 2021, the Covid-19 pandemic culminated and it was very difficult for everyone to estimate future development of the market. Not all clients were willing to guarantee all 100% of projected marketing budgets and now, they are revealing their reserves. But as our CEO says, we are not a factory that is able to increase its production capacities. We were naturally facing the decision whether to refuse certain requirements but we do not want to go this way. Especially not with clients with their majority or 100% split with us or clients with successful long-term cooperation. We strive to offer and use other solutions, such as sponsoring, online video advertising or eGRPs that become a standard part of the bundle. Media Club also represents many successful radio stations that provide synergic support to TV communication and where clients can move a portion of their budgets. Our studies and actual campaign results (via click-through) drive substantially higher effectiveness of cross-campaigns.

We continue making major investments in programming to increase our position and station performance. The composition of our channels is a factor contributing to this goal.

For the next year, we are seeking instruments to avoid lack of inventory and be able to fully satisfy the demand. Clients who will be able to plan their investments so that they can guarantee them for several months or those making the maximum use of less than 30 second footage might have an advantage. Internally, we also discuss our new approach to investments in excess of the agreed volume guarantees or a cap for campaign communication.

From previous statements of media market representatives, some increase in TV ad prices for 2022 seems to be certain. An increase of up to 15% is being debated. How much can the price per rating point grow?

If we consider the current level of demand and the situation in which we can see high interest of clients in negotiating terms for 2022, it is very probable. In my opinion, the minimum level will be 10%. All of us can see the increase in viewership of paid services such as Netlix that we succeeded to eliminate effectively in the Covid period. We managed to delay its impact by nearly two years thanks to the higher consumption of TV in general. Looking forward, it is just one of the factors that will cause a decrease in terrestrial viewing thus reducing the viewership, and GRPs, of the TV market. We make internal projections of the reduction in GRPs generated by us by up to 5% per year. If we take into consideration the trend of TV market growth (volumes) of 5% per year, we cannot but start our plans with inflation of at least 10%.

What is the optimum price increase rate in your opinion to guarantee effective advertising communication while avoiding any higher outflow of TV advertisers?

I think that it is up to individual clients to know and consider what is effective. But if we are talking about long-term effectiveness, TV has long been the cheapest and most effective medium. Money in the market is growing, GRPs are likely to fall in the long term despite the fact that this year we succeed in increasing inventory by about 5% year-on-year. Be it as it may, any increase in viewership and performance requires increasingly higher investments. We thus have to consider all circumstances. At the same time, we can see that clients’ digital spend has been growing markedly year-on-year although prices are regularly up 5-10% year-on-year taking into account the entire online segment.

Are these the only reasons to increase prices? What are the other ones that may play a role?

I have already mentioned the key two. Excessive demand, significantly limited space, e.g. compared to digital, with the expected gradual decrease in GRPs. The costs are certainly the third reason. Any long-term contract - both distribution and content - has an inflation clause. Another factor is a more limited offering on the part of film and series purchases as all big studios have become fond of direct-to-customer services provided through their distribution platforms. Apart from Netflix, Disney+ as well as Viacom with its Sky Showtime platform and most likely also Warner and Discovery with their new platform will come to the market this or the next year.

Is the growth in general inflation reflected in the media inflation development? How?

Of course. The cost of human resources has been growing due to inflation. And our costs predominantly include human work both inside the firm and in content production. The Czech Republic has become a very interesting destination for foreign film and series production firms, which pushes the prices up. In addition, inflation as such in its current scope reduces the value of money. Similar to our clients, we do not want to sell our work or successful products cheaper, especially when demand is high. Inflation is therefore a common market standard.

What development in terms of TV advertising demand do you expect in the second half of 2021 and in the first half of 2022?

Unfortunately, we have no crystal ball. In this instable time, there are multiple scenarios for the next year. But as I have mentioned we have many clients, much more than last year, who want to start negotiating next year’s prices. We are optimists, expecting that there will be demand for our product.

We estimate that the market will continue to grow by units of per cent in 2022. We also believe that starting from October, we will be able to satisfy the increased market demand thanks to our programme schedule. We started our Prima Star Season as a five-time winner of the evening.

We prepare our business policy for 2022 and budget negotiations to satisfy all money agreed and not to repeat this year’s excess any more. We are ready to sacrifice a slight year-on-year decline in volumes. In any case, our autumn schedule this year is the most expensive one we have ever had. And we are ready to continue the investments. That is why we believe that thanks to this and the inevitable inflation we will be able to create sufficient space to absorb the market growth.

Source: mediaguru.cz
Loading more ...