Ad spending cut batters media, leisure firms
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Media and entertainment firms are facing big business losses this quarter due to an expected 20-per-cent drop in advertising expenditure because of the devastating floods.
Media agency GroupM’s trading partner Rathakorn Surbsuk told The Nation that ad spending would fall by at least 20 per cent during the quarter, compared with the same period last year, because of the natural disaster.
Automobiles, beverages, government business, events, travel and leisure are among the categories experiencing the largest reduction.
Though it is still a mixed picture, Rathakorn said: “Generally, we can group the reasons advertisers cut their ad spending into three key categories. The first group is advertisers whose factories have been damaged by the floods, so they don’t have any products to sell. This group has the biggest drop [in ad vertising spending].
“The second group is those advertisers whose factories are not damaged by the floods, but the water prevents them from distributing or selling their products or services.
“The last group is the biggest [in terms of businesses affected] and quite similar to the second. They can sell their products and services but they will cut back on budgets because their revenue will be reduced because of lower demand from consumers this year.
“Advertisers with flood-damaged factories may take three to six months to recover, but the other two groups may take just a few months to resume spending.”
GroupM expects to see low ad spending in December into January, then an improvement later that month and during February.
Rathakorn added that the second and third quarters next year should be a period of very high demand.
GMM Grammy, BEC World, MCOT
Giant media and entertainment companies inevitably face a slowdown in revenues during the current quarter because of the flooding.
GMM Grammy estimates it will miss its profit target of Bt200 million for the quarter, even though it had generated more than Bt600 million in earnings in the first nine months, higher than its gross profit for the whole of 2010.
“This [fourth-quarter profit fall] will be the worst loss recorded in the company’s 28 years,” GMM Grammy chairman Paiboon Damrongchaitham said yesterday.
He said the first quarter next year also remained at risk, though the company would focus on relaunching a series of events and shows to stimulate consumer spending.
Meanwhile, BEC World vice president for finance Chatchai Thiamtong said ThaiTV3 was facing the same fate as other media and entertainment companies.
Postponement of events this quarter is costing BEC about Bt10 million in lost business, while ad revenue from ThaiTV3 is expected to be low due to five key advertisers cutting back their budgets.
MCOT chief financial officer Jessada Promjart said the company could lose Bt200 million to Bt400 million in gross profit this year, even though first-nine-month performance had seen a 13-per-cent rise to Bt2.73 billion.
The company enjoyed a 36-per-cent surge in third-quarter revenue to Bt1.77 billion.
Kematat Paladesh, vice president for marketing at MCOT, said Modernine TV was reducing production costs and revamping programming this month in a bid to persuade advertisers to maintain spending, especially those in the auto, furniture and insurance sectors.
