What is pushing mass media into smaller towns?
This is a result of the confluence of three factors. The first is the rapid increase in purchasing power in small towns that almost coincided with the saturation in metros. Second, rising below-the-line spends are going to small-town India. The third is the growth of local small and medium enterprises (SMEs). In several categories, such as telecom, financial services and durables, the growth in the metros has been slower than in the rest of urban India, points out the Ernst & Young Report. In telecom, for instance, subscriber growth in the four metros is growing at 57 per cent, compared to 92 odd per cent in the rest of urban India. Until even a few years ago, communicating to this growing pool was a problem. Compared to Mumbai, Delhi or Bangalore, for instance, mass media options in towns like Karnal, Surat, Sangli or Madurai were limited. The options would invariably be a local cable channel, the local DD station, the local newspaper and All India Radio. As marketers started getting desperate to reach small towns, they began using out of home platforms and events. Of the $6 billion that was spent on advertising in 2006, more than 30 per cent went to non-mainline (below-the-line) options. Much of this was spent to reach small towns. Rising BTL spends boosted local advertising in the early part of this decade. Combined with the growth of regional brands, it triggered the growth of hundreds of local dailies and catapulted local cable stations into Rs 800-crore ad vehicles. Media companies are yet discovering gold. “The trend of BTL going to small towns will increase,” thinks Atul Phadnis, CEO, MediaE2E, a media services firm that has done work on media in small town and rural India. There is an interesting twist to the tale. “Advertiser interest in small towns is driven not just from Mumbai and Delhi; but from regional SMEs wanting to go national,” says Tarun Katial, CEO, BIG FM. One of BIG FM’s largest advertisers is Aligarh-based Pavna Computers. Katial points out to local brands, such as the Rs 250-crore Wagh Bakri Tea (it has a brand ambassador in Smriti Irani and is popular in Gujarat) or the Punjab State Cooperative Milk Producers’ Federation’s Verka cheese. Each spends a few crores on advertising every year. Katial reckons he gets one-third of his revenues from national brands, one-third from purely local SMEs and the rest from regional (across the state) brands. Then there is the strong retail push. “Thirty per cent of our business comes from retailers. For many marketers, the decision-making has shifted to regional,” says Prashant Panday, CEO, Radio Mirchi, a part of Entertainment Network India (ENIL). Sanjay Gupta, editor and CEO of Jagran Prakashan concurs. He points out that there has been a lot of decentralisation of national budgets over the last few years, with dealers and local offices deciding how to spend the money. Many companies do not release ads through national agencies. His flagship daily, Dainik Jagran, taps into this trend with 32 editions and 230 sub-editions across the country. Party poopersHowever, the scenario is not all rosy. There are thorns too. Two of the biggest are infrastructure and the rates that a media owner can charge. “Electricity is the main issue. The switchover to consumption will happen when there is infrastructure feeding into that consumption,” says L.V. Krishnan, CEO TAM Media Research. TAM’s biggest challenge in large audience markets such as UP is the lack of electricity, which makes it difficult to capture viewership patterns (the upside is that this makes UP and Bihar great markets for radio). The second problem is getting better yields. Radio Mirchi has 32 radio stations. When it sells them as a network, the bulk rate is, say, Rs 15,000 for 10 seconds. This works out to roughly Rs 500 for a station. But when it tries to sell space on individual stations, for instance, only Jabalpur, advertisers expect the same rate. This makes it less lucrative to sell local media to national advertisers. This is where the growth of regional and local advertising is a godsend. Gupta of Jagran Prakashan reckons that local advertising offers better margins. A regular 100 cc ad in a regional daily, for example, would bring in 50 per cent more from a local advertiser, because there is no discounting on the card rate. Earlier, even if the local advertiser paid the card rate, it was not as tempting as the national advertiser, because volumes were not enough to justify a separate brand. Now they are. “The local advertiser is more demanding, because he wants to see walk-ins. Once you succeed locally, you succeed nationally,” says Gupta. Remember Aaj Tak? It began as a beacon of hope for small and local advertisers. Today, it commands more than half its viewership from outside of Delhi and Mumbai, but 70 per cent of its ad revenues come from advertisers in these two cities. TV Today’s CEO, G. Krishnan points out that most of this ad spend is aimed at small towns. Is regional proving to be the ace in the pack for media-owners? Some certainly believe that it is. The biggest money spinner in Zee’s stable, after its flagship Hindi channel, is Zee Marathi. Nitin Vaidya, director, regional channels, Zee Network, says that Zee Marathi delivers not just in non-metros, but has been ahead of STAR Plus in Mumbai (till May 2008). Many ‘small-town’ media brands have a higher audience share than national brands. It is when these brands start becoming bigger than ‘national brands’ in revenues that the fun will begin.