Delayed Ad Market Recovery In India: Report
India’s second COVID wave, which has persisted through the spring of 2021, is likely to have scarring effects in the medium term and could weigh on long-term growth. States are making efforts to restrict economic damage with calibrated lockdowns, as opposed to the strict national lockdown witnessed in 2020. The pandemic has taken a vicious toll on India’s health, though the outlook is more positive in 2021 as key businesses in the essential goods segment are permitted to operate. Still, consumer demand for all but essentials is likely to take a hit and the country’s economic outlook remains fragile.
The race between virus and the vaccine has begun and the economic cost will depend on how quickly the states will vaccinate its population and contain a possible third wave in the last quarter of this year. The IMF, in its April 2021 WEO report, estimates real GDP growth of +12.5%, reflecting a stronger recovery than initially expected after lockdowns were eased in H2 2020. Expectations may be downgraded, however, if another nationwide lockdown is introduced later in the year. Increases in health expenditure could also squeeze discretionary spending on durables, home improvements and contact-intensive segments, which would also negatively impact real GDP growth. The IMF estimates CPI (consumer) inflation of +4.9% for 2021.
In terms of advertising activity, the disruptions in 2020 led to a contraction of -22.8%. The advertising market is forecast to increase +11.0% (previous forecast +26.9%) from INR 562 billion ($7.6 billion) to INR 624 billion ($8.4 billion). 2021 will be a year of recovery on the revenue front for all media, especially television and print; however, the projected recovery could vary depending on the severity of the expected 3rd wave and disruptions to the economic activity. Digital adoption was propelled by the pandemic with the increased use of devices. Search, video, social and display, in that order, have seen phenomenal growth in traffic. Streaming services, gaming, and e-sports all benefitted from the housebound population. The reach of e-commerce platforms has also widened, due to the adoption of online shopping in Tier II and Tier III cities and beyond. Digital overtook print as the second largest category in 2020, with advertising revenues rising +5% to reach a 29% market share. In 2021 MAGNA anticipates digital advertising revenues will grow +10.5% to reach $2.4 billion, 30% of total advertising spend.
After shrinking by -30% in 2020 (one of the steepest falls anywhere in the world last year), linear ad sales will grow by +11% to INR 444 billion but that will bring the linear ad market to just 77% of its pre-COVID size. It will take three more years of double-digit growth to come back to surpass the 2019 levels (INR 572 billion).
Television bounced back in the third quarter of 2020 after the content pipeline was restored. Continued resilience is expected in 2021, with +13.2% growth in the first quarter supported by FCMG, E-Commerce, Realty, and digital-native categories. The Indian Premier League (IPL) was back on air in its original schedule, though without audience participation. However, the league was suspended indefinitely when the bio-bubble got breached. It remains to be seen if the ICC Twenty20 World Cup, currently scheduled for the fourth quarter of 2021, will take off as planned. Content production has not been impacted so far, despite the state-level lockdowns, as broadcasters have shifted the shoot location. Overall, television is estimated to grow +9.8% for the full year.
Newspapers went off the shelves in the first lockdown in 2020, leading to a fall in circulation and a steep revenue hit. Circulation is now back to almost normal, as the medium got relief from the government: distribution was allowed beyond the designated curfew hours and made part of the essential services. Magazines are still going through a bad phase, however. Ad revenue recovery could take a while and will be drawn-out. Overall, print will grow +13.1% because of the “easy comp” effect (revenues eroded by -40% in 2020), despite the continued
slowdown in business.
Radio’s hyperlocal approach and digitization of channels is helping the segment to recover. The decline in transit audience listeners was compensated by increased at-home listenership. The growth in listenership and revenue is expected to come primarily from Tier2 and Tier3 markets. Categories like FMCG, retail, health services, BFSI and local government will contribute to the growth. Overall, the segment will grow +20.3% in 2021.
OOH was acutely affected by restrictions on movement, which led to steep reductions in public traffic. Outdoor recovery will happen in stages and vary by format. Street furniture, billboards and transit media will recover faster, while malls and theatres are set to have a longer period of struggle. Movie theatre occupancy is expected to reach around 20% by end of this year. The return of big budget movies should help the recovery for multiplexes but will not be seen until the second half of the year. FMCG brands, led by personal hygiene, e-commerce, government infrastructure projects, and tech apps are likely to contribute to the growth. In total, OOH spend is expected to grow +15% in 2021.
