The basic arguments of this article:
- The licensing process for the TV Channels will consume the major part of 2016 – if accomplished. Thus, an eventual scenery change will affect only the latest part of the year.
- Airtime supply showed again in 2015 a very high elasticity. Thus, without excluding seasonal price (CPR) increases, also due to sports events in June, overall cost will not change much
- Legislation on the relationship between advertisers, agencies & media/ mainly the pending decision on whether or not shift invoicing directly to advertisers, did not gather momentum, does not have the blessing of the advertisers and is very unlikely to be enforced separately from the new TV environment that the government is set to create.
What is the timeframe?
It has been leaked that the call for submission of participation credentials for the tender will be announced in March 2016. Since this will be an international tender, there will be a period of 45-60 days for the submission of credentials, including ownership details of the participating entities, going up to the level of actual persons/ shareholders of each company. Therefore, the deadline is expected to be set not earlier than the end of May 2016, not forgetting that the Orthodox Easter & holiday is intervening.
It is expected that the process will be challenged vigorously by various entities in front of the Supreme Court (Symvoulio tis Epikrateias), on grounds of being contradictory to the Greek Constitution that clearly mentions that the licensing process is carried out by the relevant independent authority, i.e. the National Radio & Television Council. However, the NRTC is not in operation, since its members have to be approved by an almost unanimus parliamentary majority and there is a deadlock there. It is not possible to anticipate the decision of the StE. However, the same court has previously ruled consistently that this process is the exclusive responsibility of the NRTC.
If the process is not suspended, it is expected that all 8 currently broadcasting nationwide TV stations will submit credentials. Moreover, it is highly probable that there will be at least 5-10 new entries, both from locally based companies as well as foreign ones (EU based). Therefore, the ministry will have to examine all submitted documents, in order to filter the candidates who will have the prerequisites to participate to the tender.
More legal claims (enstaseis) are expected during the procedure, with each one taking its time, summer vacations are in the middle, so deadlines will prove soft and will be continuously pushed back.
Thus, although there are no concrete answers, there are at the same time strong arguments suggesting that for the major part of 2016, advertisers will navigate in familiar waters.
Elasticity of supply:
Always buyers’ behavior will depend on how much inventory of a product is available. The greater the inventory, the less responsive buyers will be.
But on Greek TV, only 12 minutes of advertising are allowed per hour and the figures say that the top 5 channels, apart from the summer months and January, are working almost to capacity. So we are in a situation that additional inventory cannot be produced and the only component that may increase is not the quantity of advertising airtime, but price.
Furthermore, currently the last minute buying has peaked, moving capacity to almost 100% and in spring time, demand always leads to the same result.
In January 2016, a number of factors led viewership down. The weather was warm, so people spent more time out of home vs. Jan 2015. Then also content was a bit less attractive. But the remarkable result is evident on the table: Since Average rating per spot (last line) went down 15%, the channels offered 15% more spots (1st line), or 15% more duration (2nd line), to cover the gap. For those of us that have ways to estimate real advertising investment it was evident that “grosso modo” investment was stable, or marginally down.
So clearly, the phenomenon is a proof that the TV market is characterized by elasticity.
Back to our university notes! The price elasticity of supply is used to see how sensitive the supply of a product or service is to a price change. The higher the price elasticity, the more sensitive the market is to price changes. What it means a high price elasticity: That when the price of a good goes up, sellers will supply a great deal less of the good and when the price of that good goes down, sellers will supply a great deal more.
So what was the situation in 2015? It was not a “business as usual” year for advertising on TV: An additional 20% tax took effect on Jan 1st (13.6% was the effect on bottom line), two National elections and a referendum took place and capital controls were imposed in July!
What was the cumulative result in the demand of TV airtime and in prices? In general terms demand bended marginally (6%) and prices (CPR) went up by 3%, with the channels practically absorbing the new tax, even when most of them are in the red. So again, at the present levels of the media scene, we have a re-confirmation that the market is governed by elasticity.
The future: Clients and especially the multinational ones are not feeling comfortable without having a clear idea about the rules that are going to be in place. How to support their businesses? How to commit budgets and go for TV buying optimization, when it is not known if all of the existing channels are going to have a license in this running year? Rumors and speculations offer conflicting views every day! Are we going to continue as up to now, or is invoicing going to be shifted directly to advertisers, thus requiring new infrastructures in systems and people? And what about TV prices? Will they go through the roof if competition among channels is restricted to only 4 channels?
It is evident that in this article we cannot go for political speculation. What we would though predict, is … what we know! That we have a market that elasticity is very strong. Thus, the thesis of this article is that … when dust settles down, CPR will not be very different from what we have seen in 2015.
This is of course if things develop within a logical time-frame. But if the process is delayed by bureaucratic obstacles beyond logic and channels are not left to operate, then a total catastrophe cannot be excluded, the way the outdoor market was destroyed. At that point, the state that officially claims that is motivated by the desire to regulate a market that remains unregulated for 25 years (an argument that is not self-proven), will see unemployment rising by the thousands and tax income to lose big in direct and indirect revenues. Advertisers will look for alternatives to TV and if these work, TV will never recover. Google probably will gain big and once more, Greece will be the “out of the ordinary” place in Europe to do business.