Ad revenue outlook dims

The media industry hopes the economy improves in the months ahead, after consumer confidence fell in April for the first time in six months.

The tumbling confidence was blamed on skyrocketing oil prices and the rising cost of living. The conflict over constitutional amendments, political uncertainty and street protests have contributed to an unstable political situation.

The demonstrators were still on the streets as the Mid-year Economic Review went to press, demanding that Prime Minister Samak Sundaravej resign.

The media and entertainment industry acknowledged that business performance was slow in the first quarter because some entertainment content went off the air, while many entertainment events were postponed to mourn the late Princess Galyani Vadhana.

Still, they hoped the elected government formed in February would move the country forward after struggling for 16 months under the coup administration.

From January to April this year, total ad spending fell by 1.4% year-on-year to 28. 3 billion baht, according to Nielsen Media Research Thailand.

Witawat Jayapani, the president of the Advertising Association of Thailand, said a 5% increase in ad expenditures was the best projection it could hope for. It was not high fuel prices, but an uncertain political climate that hurt the industry.

"Last year was a gloomy year, but people hoped that it would be over when we got a new government," said Mr Witawat. He thinks 2008 will be an unusual year as people become accustomed to the government.

"Well, people looked forward to the new elected government. Once it was formed, they did not want it."

The uncertainties have psychological effects on consumers, making them reluctant to spend, said Parames Rachjaibun, chairman of the consulting firm Turnaround.

Witawat: 5% gain would be very good

Their spending was rational rather than emotional, added Mr Parames. People want to get value for money. Therefore they need information to make decisions.

"Communication is the trend right now for advertising. Agencies not only produce the ads, but also help advertisers to do communication, providing more information," he said.

Phot Jaichansukkit, president of Public Relations Society of Thailand, agreed, pointing out that advertising has been growing slowly, but this was in contrast to public relations and communications. He said that in the first four months of the year, public relations billings were approximately 50 billion baht, more than half the total of 90 billion baht for all of last year.

Corporate communication in particular has been increasingly used since a single company can own various products, said Mr Phot. Corporate communication is a valuable tool to strengthen the brand as a whole. They have also organised smaller but more frequent marketing events for customers.

Wasan: ‘‘Politics is beyond our control’’

Mr Phot predicted marketing events would likely gain momentum for the rest of the year.

That was partly true, said Mr Witawat, however, many event organisers were forced to accept lower service fees because of tough competition among numerous players.

"Events are increasing, but they (event organisers) are not earning more money. I think this is the right time for event organising agencies to form an association to standardise prices and pitching fees in the industry," he said.

A decline in ad spending for the industry was a result of a big change last year when the commercial station iTV went off the air. Later it was transformed to commercial-free Thai PBS (Thailand Public Broadcasting Service) in February. Ad spending on TV shrank by 4.8% year-on-year in the first four months of the year.

But this was a windfall for existing free-to-air TV operators, channels 3, 5, 7 and 9 (Modern Nine TV), because their commercial revenues went up when a competitor vanished.

BEC World's Channel 3 reported increased ad revenues of 18% in the first quarter. MCOT's Modern Nine posted an increase of 14.5% in ad revenues.

However, the third quarter is regarded as the low season for the advertising industry.

The Euro 2008 football tournament was supposed to give the media industry a lift but overall response has been below expectations.

MCOT president Wasan Paileeklee said that to cope with hard times, the broadcaster was already offering below-the-line marketing options to complement clients' conventional advertising. It would arrange on-ground activities to help clients create brand awareness.

Marketing activities invariably increase costs. But Mr Wasan argued that if the activities were sound, they would drive airtime utilisation and advertising, making the investment worthwhile.

"Politics is beyond our control, so MCOT should not worry. We should do the best that we can do," he said.

Grammy Group, the country's largest entertainment firm, is also worried that uncertainty among people will get stronger during the fourth-quarter high season. They hope products and events to celebrate its silver anniversary will push revenues to its target of eight billion baht or more.

An analyst said that falling consumer confidence would be the only negative factor for the media and entertainment industry in the second half of the year.

"Some might see opportunity in the crisis. Probably, it will be the other way round. Advertisers may spend more on advertising amid intense competition to encourage consumers to spend," the analyst said.

BREADCASTING

Broadcasting Act gives advertisers more choices

The September 2006 coup has been blamed for many problems, but television operators are celebrating the passage by the military-backed government of the long-awaited Broadcasting Act late last year.

The law came into force in March 2008 with the aim of reforming the country's broadcasting industry. It liberalises the industry by legalising more than 300 cable TV operators. Pay-TV operators are also allowed to earn incomes from advertising for the first time.

Sellers of satellite dishes are expecting a pickup in business as pay-TV operators look to attract more customers. The opportunity to sell advertising has stoked new optimism among an estimated 300 operators, many of them small.

This will change the TV industry landscape in the long run because channel choices will expand from six to hundreds. Unlimited content will be available not only through TV outlets, but also digital media from the internet to mobile phones. Advertisers will have plenty of choices as well, instead of free-to-air TV controlling their airtime fees.

The Thailand Cable TV Association (TCA), with about 300 members nationwide, is the most enthusiastic supporter of the new law. It estimates the industry's value will double in two years from an estimated 10 billion baht currently. They hope to cash in on some of the 53 billion baht spent on free-to-air TV commercials.

There are roughly 3.3 million pay-TV subscribers in Thailand now. The single largest operator is TrueVisions, making up 19% of the total market. The TCA members claim 74%, and the rest belongs to Samart and Thaicom, offering satellite TV services.

The current 3.3 million pay-TV subscribers represent 17% of the market.

In theory, cable operators should have to wait until the interim Broadcasting Committee is set up, which grants them the licences. But in practice, they are already benefiting from six minutes of hourly advertising airtime, though their average advertising time for a whole day cannot exceed five minutes per hour.

The association and content providers also for the first time have hired AGB Nielsen Media Research to measure pay-TV programme audience shares. The first report from Nielsen is expected by the third or fourth quarter this year. That should help put pay-TV on advertisers' radar screens.

TV industry liberalisation has prompted many to look at the satellite TV business, even daily consumer product makers such as Saha Group and Osotspa Group. The pair mainly use satellite TV to advertise their products, avoiding the high advertising costs of free TV.

Pay-TV advertising charges average 10,000 baht a minute, but free-to-air TV operators, such as BEC World's Channel 3, charge as much as 450,000 baht.

Certainly, the biggest entertainment firms, Grammy Group and RS, will not miss this opportunity, but they are taking a wait-and-see approach now. Media of Medias and Saha Mongkol Film have launched their own channels. Each operates more than one channel thanks to digital technology.

The proliferation of satellite TV should not concern free-TV providers in the short term, but it could in the long term.

Phatra Securities in May predicted that if pay-TV penetration increases at 20% per year, the subscription rate will reach 34% by 2012. With 30% growth, penetration would reach 62% by 2012. Once pay-TV reaches critical mass, it will bring down barriers to entry and the lofty ad rates that free TV now commands.

On the flip side, liberalisation will also provide opportunities for free-TV operators such as BEC World and MCOT as they too can enter the pay-TV market.

"However, we doubt if the extra revenue will be enough to offset the loss in revenue," the Phatra review said.

BEC, the operator of Channel 3, enjoys an advertising rate premium because of the lack of competitors on which to advertise. Its return on equity is high compared to other broadcasters in the world.

MCOT's Modern Nine Channel, focusing on knowledge-based content, could lose some market share to pay-TV.

BREADCASTING

Thai PBS optimistic about the future

When TITV closed at midnight on Jan 14, it signalled a brave new beginning for Thai Public Broadcasting Service (Thai PBS), the new model for public television.

TITV was last owned by Shin Corporation and was seized last year by the former military government for non-payment of fines exceeding 10 billion baht levied for concession violations.

Giving viewers a sense of ownership will be the key to keeping Thai PBS free of meddling by politicians, says journalist and acting director Thepchai Yong.

The order to establish a commercial-free Thai PBS puzzled people as much as the order to close down a decade-old station. The Surayud Chulanont government was criticised for lack of preparation on both fronts.

However, Thai PBS would never have happened if the previous government had left its People Power Party successor responsible for its creation.

Just six weeks after TPBS went on the air, PM's Office Minister Jakrapob Penkair also turned the stodgy state-owned Channel 11 into NBT (National Broadcasting Service of Thailand), which he regarded as a public channel too.

Mr Jakrapob, who resigned after an allegation that he committed lese majeste, regarded Thai PBS with suspicion because it was created by the military who had expelled Thaksin Shinawatra from power.

NBT aimed to challenge Thai PBS. Allies of Mr Jakrapob tried to scrutinise the public broadcaster, but were unsuccessful because the station's independence is protected by the newly enacted Public Broadcasting Act.

Thepchai Yong, the acting director of Thai PBS, admitted that everything did not run smoothly for the country's first public broadcaster. It had to deal with brain drain, as some staff moved to Channel 7 and NBT. Most of its staff are former iTV/TITV employees.

However, Mr Thepchai, a former group editor of the Nation Multimedia Group, was satisfied with what TPBS has been showing on the screen. He said the station was able to report in-depth news and increase people's participation by introducing "People News".

"I think the only way to prevent interference is to build up Thai PBS as the people's station so they will have a sense of ownership and want to protect it," he has said.

Senator Somchai Sawaengkarn, who was involved in drafting the Public Broadcasting Act, said he gave Thai PBS a score of six out of 10. The low score was based on external rather than internal factors.

"Prime Minister Samak (Sundaravej) and Khun Jakrapob always attack Thai PBS. They confuse and mislead people that NBT is a public broadcaster similar to Thai PBS. Indeed, it (NBT) is still a state-owned TV station with a facelift," Mr Somchai said.

Civil servants change their master when the government changes, he said. Thai PBS didn't receive co-operation from the PM's office to transfer some assets from the defunct iTV operator, Shin Corporation. The firm was sold to the Singapore government investment arm Temasek by the Shinawatra family in early 2006.

Interim board members should share some responsibility for transforming iTV to public TV, Mr Somchai said. To be fair, it was hard for them to create a new perception about the public broadcaster. But they should be strong enough to resist the conventional TV rating system and try not to please audiences by offering them nothing but soap operas.

The station's new board, he hopes, will follow the principle of law. Public broadcasting, not only TV, but also radio, cable TV and the internet should be tools to build up a knowledgeable and democratic society, says Mr Somchai.

The dream of public broadcasters would be realised if they were free from politics.

As for NBT, the move to upgrade the unpopular state-owned channel is a welcome one but whether it can achieve its lofty objectives is another question. Mr Samak still has his own talk show on NBT every Sunday called Sonthana Pasa Samak or "Talking in Samak Style" from 8:30 to 9:30 am. He uses it to attack whoever criticises him or his cabinet.