The latest study on media inflation indicates that advertising spending in South Africa is set to exceed R4,6-billion, reports Neil Bierbaum
IF advertisers think they can increase their budgets for next year in line with the Consumer Price Index (CPI) they will find themselves losing their share of voice, particularly if they are spending most of their money in the electronic media. This is the word from Mike Leahy, managing director of Ibis Media Data Services (IMDS), which is about to release the latest Media Inflation Watch study.
Projections based on the study predict that advertising spend in South African media will exceed R4,6-billion for 1995, if advertisers increase their spend according to the projected media inflation figure of 17,1 percent.
The study reveals that the weighted average cost of reaching audiences for 1995 over 1994 for all media in South Africa looks to be heading for 17,1 percent. However, not all media have gone up by the same rate.
Leahy emphasises that while the study refers to “media inflation”, it in fact measures “the effect of supply and demand on reaching audiences through different media, or the changing allocation of resources due to changing values within a free market”.
Therefore, a change in the cost of a medium which attracts a high percentage of total advertising money (such as TV1, which attracted R684-million in 1994, or 44 percent of all money spent in television) can have a significant effect on the overall figure for that medium.
The performance statistics include: for print, the Audit Bureau of Circulation (ABC) figures for the first six months of 1995; for radio, the radio diaries for the first six months of 1995; and for television, Amps meter figures for January to August 1995.
Television: TV1 appears to be heading for the highest inflation rate of all the TV stations. According to Leahy this is attributable to “modest rate increases allied to a performance decline, resulting in the advertiser having to pay up to 25 percent more to buy the same audience as last year”. CCV’s cost per point (CPP) increase, at 13,3 percent, is significantly lower than that station’s increase last year of 23,2 percent. The station had a substantial rate increase in 1994 and has stuck to its promise of conservative increases this year.
M-Net is heading for a 22,7 percent increase and has shown an audience increase of 2,5. The rate card, meanwhile, showed a 25,7 percent increase.
Advertising spend on M-Net went up by 28 percent for 1994 over 1993, compared with a 14,3 percent increase for TV1. This means that M-Net has become proportionately more expensive than TV1, but through superb marketing, the smaller pay station has managed to attract a real increase in advertising spend and has taken market share from TV1. The latter’s share of total advertising spend has declined from 18,2 percent in 1993 to 17,3 percent of all media for 1994, while M-Net has gone from 9,7 percent to up to 10,4 percent. M-Net has successfully taken advantage of the advertiser uncertainty surrounding the future of TV1.
BopTV becomes the only TV station ever to have declining revenue. The doomed station has decreased its CPP by 12,5 percent and yet suffered a drop in revenue, from R15,4-million in 1993 to R12,3- million in 1994.
Radio: “Radio stations generally accepted as being targeted at white, coloured and Asian (WCI) audiences are heading for rate increases below the CPI,” says Leahy.
The average cost-per-thousand (CPM) increase for WCI radio is 8,8 percent. “On the other hand,” continues Leahy, “black radio looks set to increase by 36,3 percent this year. This clearly indicates the avowed intent by the SABC to make more money out of these stations’ large audiences, and to equalise the cost of reaching black and white audiences.”
Until now there has been a high premium in terms of rates placed on reaching white audiences. This change is partly ideological, but also in response to the recognition by marketers of the need to communicate to black consumers who hold most of the purchasing power.
Within the WCI radio stations, 5FM is heading for a 32,5 percent CPM increase over 1994, after a decrease the previous year of six percent. Leahy points out that this is made up of a 19 percent rate increase and a 10 percent decrease in listenership.
Other historically WCI stations to show large increases were Radio Algoa (64,7 percent), Kfm (61 percent) and SAfm (47,6 percent). The former are not large stations and so do not significantly affect the weighted figure for WCI radio. The SAfm increase is based on a nine percent decrease in rate and 38 percent decrease in listenership, which followed the reformulation of the station earlier this year.
Among black radio stations, Radio Zulu is expected to reach a 42,4 percent CPM increase over 1994. This follows a 54,8 percent increase the previous year. Radio Metro looks set to end up with a 35,1 percent increase which is much lower than its 127,6 percent increase for 1994 over 1993. Radio Sesotho is expected to show a 42,9 percent increase.
“The smaller stations have not gone up in cost as much as the bigger stations, indicating that South African advertisers still like big stations; they still want numbers,” says Leahy.
Print: Among newspapers, the Independent titles show the greatest increase. This is in line with their strategy to increase rates and cover prices while “focusing” circulation.
The latest ABC figures reflected decreases in almost all the Independent titles. This can be attributed to eliminating circulation in outlying areas where the cost of delievery could not be justified by the returns. This in turn was the result of Irish accountants improving the company’s ratios.
The Mercury shows the highest inflation of all the dailies at 36,9 percent. This is on the back of a 17 percent drop in circulation for the first six months of this year compared with the average circulation for 1994. The average rate of increase for the dailies is 15 percent. Other titles expected to show increases in excess of this amount were the Argus (25,9 percent), Cape Times (18,9 percent), Daily News (22,4 percent), The Star (20,9 percent).
Among the weeklies, the Sunday Times, which makes up about 25 percent of total circulation in this category and attracts almost 50 percent of the advertising revenue, is showing a 14,1 percent CPM increase over 1994, which is slightly below the average for weeklies of 14,4 percent.
The biggest increase comes from Imvo, which experienced a circulation drop from 53 965 for the first six months of 1994 to 19 350 for the same period this year. However this will not have a significant effect on the (weighted) average increase for weeklies as its share of the advertising spend is extremely small.
Community newspapers are showing a very low CPM increase of 6,7 percent, marginally down on the previous year’s 8,43 percent. This is based on a basket of 27 of the biggest community newspapers.
Inflation in consumer magazines is at a low 12 percent. A number of titles actually showed CPM decreases. These include De Kat (-2,1 percent), Drum (-29,4 percent), Keur (-3 percent), Living (- 13,0 percent), Personality (-4,8 percent), Thandi (-6,9 percent) and True Love (-2,4 percent). Some of these — Drum and True Love in particular — were the result of circulation increases more than compensating for rate increases. Others were the result of joint rate decreases on the back of circulation decreases.
Drops in readership were experienced by magazines which have not been able to compensate with rate decreases. These include Cosmopolitan, which is expected to reflect a 25,2 percent CPM increase over last year, Penthouse (45,6 percent), Scope (82,1 percent) and Rooi Rose (24,7%).
Outdoor is expected to reveal a below average 11,8 percent increase, which is lower than the 14,2 percent increase for the previous year. Cinema is also below average at 12,8 percent, although this is significantly up on last year’s 0,9 percent increase.
Leahy believes that these figures hold some clues to the conundrum that print media is facing. As print loses share of advertising spend to electronic media, it is trying to fight back by not increasing its rates as fast. This in turn reduces its share of advertising spend, according to Leahy, who adds: “Any medium which increases its rates at the same rate as the market will maintain market share. Broadcasters are increasing the CPP and rates faster than print. In doing this they are expanding the media industry and their own share of it. Print is a victim of its own conservatism.”
Perhaps this takes us back to the original point: that these figures reflect the value the market places on reaching audiences through the different media. This is ultimately determined by the audience delivery and the perceived effectiveness of the medium.
Either the market is placing greater value on electronic because of its numbers and its effectiveness, or, if Leahy’s theory holds, there is a certain amount of cognitive dissonance operating: advertisers saying that if I am spending so much on this medium it must be because it is delivering the goods. If this is the case, then print would certainly benefit by increasing its rates above the market rate. If not, it will have to settle for a continued decline in market share.