Africa’s broadcasters face ad recession but mobiles may be the silver lining

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Africa’s best economies have had their biblical five years of “good harvests” and are now facing the consequences of a global economic downturn. The level of broadcast advertising is a function of disposable income and how well consumers feel about that element of their income. The inflation shocks on both food and oil have not yet fully hit home. The silver lining is the increase in competition in the mobile market is seeing these “big spenders” ramp-up their marketing budgets. Russell Southwood takes the pulse of these changes.

You always know a recession’s on the way when companies start assuring their investors that they are recession-proof. This week’s Naspers’ results saw the company assure analysts that Pay-TV had in the past been resistant to the economic cycle. It is probably true but statements of this kind always generate of frisson of unease.

South African economic commentators have been saying for a while that the economy is headed for a downturn and faster moving African economies like Kenya and Senegal cannot be far behind. The picture is patchy as those with oil – like Angola, Gabon, Nigeria and Sudan – will benefit from higher oil prices whilst having to struggle with its inflationary consequences. The same will also actually be true for certain countries in terms of food exports.

Consistent data over time for media spend is hard to come by so it is difficult to make completely authoritative statements that will hold true for all countries. Nevertheless the data available for five countries – Ghana, Kenya, South Africa, Tanzania and Uganda – shows that there has been modest overall growth over the last five years. However, this needs to be qualified by the fact that the analysis of income does not take into account discounting, a factor that will have key importance as economic conditions get choppier.

However, within the top ten spenders, the key increases have come from FMCG companies like Unilever and Proctor and Gamble and the mobile companies, all of whom appear in the lists of top ten spenders irrespective of country. However, their spend on radio and television is often balanced by a considerable investment in roadside billboard advertising and outdoor branding. But whereas in South Africa, a recession might see cut-backs or changes in overall spending for the smaller economies like Zambia – where Top 10 advertising spends are small – it may be that overall ad spends will go down as smaller local companies cut their cloth accordingly.

The balance of spend between different media in different countries is not consistent. Liberalisation of broadcasting has different consequences in different places. Uganda’s wide spread of vernacular radio stations (another one of which was launched this week – see Broadcast News below) takes a disproportionate percentage of available spend whereas elsewhere television has largely held its own rather than expanded against other media. With the adoption of broadband, the Internet will increasingly become a medium and Africa’s smaller circulation newspapers, which are expensive to produce and charge high rates for what they deliver, will be increasingly vulnerable.

And the silver lining? In Kenya, the mobile sector – with two new entrants, Econet Wireless and Orange – is set to account for about 30 per cent of Kenya's total advertising budget that stands at about Sh15.6 billion. Celtel, which is not fighting from a position of strength, is expected to cross the one billion shilling mark this year from Sh660 million last year.

Increased competition is a market trend which has seen new entrants in a wide range of countries including among others: Cote d'Ivoire, Togo, Equatorial Guinea, Congo-Brazzaville, Uganda, Benin, Mauritania and Senegal.

There are three key factors in selling mobile telephony – price, coverage and service quality – and for new entrants these are all things that money can buy. This makes it difficult to differentiate newcomers on anything but price unless they create the all-important branding “mindspace”. All of the mobile companies have to create an emotional bond with their brand which goes beyond basic product and service features.

Luckily for Africa’s broadcasters, mobile companies in this competitive climate are becoming increasingly brand-conscious. Orange and Moov have been steadily rebranding the old company names they inherited through acquisition and Celtel will become Zain this autumn in a complete brand makeover of their African operations. (The change has already occurred in Sudan.)

The difficulty for African broadcasters in a recession will be that the “big spenders” will have plenty of clout in a buyer’s market. You can expect to see substantial discounting and free airtime giveaways out of peak periods to keep them on board with the same level of spending, let alone attracting higher levels of spending.

Africa’s TV broadcasters in particular suffer from lack of differentiation problems themselves and these will be exacerbated in a tight market. Too many channels look like each other both in terms of programming structure and the types of programmes themselves. The best international programming is undoubtedly in the hands of the increasingly competitive Pay TV channels. Africa’s TV broadcasters will need to box clever through commissioning well-targeted youth-oriented programmes that attract the critical “product-changers” in this group. In this key demographic sector, fashion plays a crucial role in establishing both market share and brand credibility: new handsets are the “candy” that mobile companies will need to advertise.

The winners in this tough market will be those that can establish their ability to deliver a range of key demographics at different times of the day rather than seeking to continue to deliver just the old-fashioned, mass market audiences. The BBC News in the UK used to be referred to as “the nation at prayers” because nearly everyone who could watch it did. Those days are gone and increasingly broadcasters need to become more sophisticated about the niche demographics they deliver and the evidence they provide to advertisers to validate their assertions. Local content has to become a key differentiator in this struggle.