MEDIA & ENTERTAINMENT

Not a lot to celebrate

Unfavourable economic and political conditions have dealt blow after blow to an industry where two-digit annual growth rates are a norm rather than an exception

by WORANUJMANEERUNGSEE JARURATMANCHAROENSIRI

Although 2006 was hardly a fun year of Thailand’s media and advertising industry, some industry players have predicted that even less fun is in store for 2007.

An economic slowdown, mainly due to political change and rising oil prices, has worried marketers, advertisers and people in the entertainment industry, who view it as the main factor eroding consumer sentiment and spending.

Keep smiling: iTV’s woes, the ad ban on alcoholic drinks, and the change of guard at MCOT have made 2006 less than a banner year for the media industry.

Although politics at home has become more predictable after the Sept 19, 2006 coup that deposed Thaksin Shinawatra, more assurances are needed, they say.

The interim government led by Surayud Chulanont has rolled back Thaksinomics, which focuses on driving up gross domestic product, in favour of sustainable growth and the overall happiness of the people based on the sufficiency-economy philosophy envisioned by His Majesty the King.

Actually, the change has been warmly embraced by the public, including the media and entertainment industry. But one of the policies adopted shortly after the new government took office in October 2006 — a total ban on alcoholic-beverage advertisements— has shaken the industry, sparking an outcry from alcoholic beverage producers, importers and distributors.

Bowing to the pressure, the government agreed to back down and suspended the Public Health Ministry’s announcement that would otherwise have imposed the ban starting on Dec 3, 2006. However, alcoholic-beverage companies, in particular foreign-based ones, voluntarily opted to ban their ads to avoid any potential troubles with the military-installed government.

As a result, some three billion baht worth of promotional budgets for alcoholic beverages would be spent on other channels rather than the conventional ones.

Elsewhere, the resignation of Mingkwan Saengsuwan as president of the SET-listed broadcaster MCOT Plc after the coup rattled the broadcasting industry.

The newly appointed board of directors, comprising mostly civil servants and media academics, pledged reforms that would turn the state owned media group into a ‘‘role model’’ for Thai media by shifting the focus to education rather than ‘‘edutainment’’ as promoted by Mr Mingkwan.

A marketing veteran with an impressive track record, Mr Mingkwan, is credited for turning the loss-ridden MCOT into a lucrative operation. Together with other directors, Mr Mingkwan resigned shortly after the coup because Channel 9 aired the state of emergency declared by ousted Prime Minister Thaksin from New York the night the tanks rolled.

Shortly after the first meeting of new board of directors in late October, MCOT’s share price dropped sharply.

Just before 2006 drew to a close, investors responded negatively to a news report that Channel 9’s two popular programmes Kui Kui Khao and Thueng Look Thueng Kon would be removed by the end of the year. The two political and news commentary programmes were hosted by Sorayuth Suthassanajinda, who will likely move to Channel 3 operated by rival BEC World Plc in 2007.

Likewise, the fate of iTV, the broadcaster under the umbrella of Shin Corp, is in the balance after the Supreme Administrative Court in December upheld a Central Administrative Court order to void an arbitration ruling on concession fee payments won by iTV.

This means that iTV will have to pay 94 billion baht for the next 20 years of the concession term. As well, its programme mix will have to be restored to 50% news and 50% entertainment, from 30:70. Critics said that either iTV would face bankruptcy or Singapore-based Temasek would have to hand the station back to the government, depending on negotiations between the Office of the Prime Minister and iTV.

The share price of iTV dropped nearly 50% in two days, from 2.80 baht on Dec 12, the day before the ruling, to 1.47 baht.

Given such developments, the local media industry will continue to struggle in 2007. Besides, due largely to the interim government’s policy, marketers and advertisers will have to change their strategies and choice of media to spur sales to suit the smaller marketing budgets of advertisers and lower purchasing power of consumers.

Unlike during the Thaksin government, media companies can no longer pin hopes on the state budget to help lift their billings at a time when private companies tighten their purse strings. An advocate of the sufficiency economy, the Surayud government will likely scale down the state budget used to promote the government’s activities.

Witawat Jayapani, president of the Advertising Association of Thailand, is pessimistic, saying net billings of the media industry for 2007 will contract by 10% to 85 billion baht on top of the 5%net decline in 2006, already the worst year for the media industry since economic crisis in 1997. (Reported billings that are in the black, industry people say, are due mainly to media rate inflation and not to new business.)

Narong Tresuchon, the general manager of OMD Thailand, is a bit more optimistic, predicting5%growth in 2007. ‘‘I would say, however, that it depends on the political and economic situations in the first quarter of next year. If there are no more surprises, the industry will grow 5%,’’ said Mr Narong.

Meanwhile, the international media agency Universal McCann (Thailand) said the Thai market would grow by 4% in 2007, following3%in 2006. In addition to more stable politics, the opening of Suvarnabhumi Airport is expected to have a positive impact on the resilient tourism sector, helping drive incremental media spending both from multinational and Thai companies.

Below-the-line advertising, including event marketing, will also face another tough year.

Kriengkrai Kanjanapokin, co-chief executive officer of Index Event Agency Plc, the country’s third-largest event management company, said that unlike the ousted Thaksin government, the military-appointed government would unlikely use events as a tool to communicate with public, a very popular driver in the previous government.

A conservative government with a sufficiency economy programme is expected to trim the state budget for communications by 30-50% from several billion baht in 2006.

Nevertheless, event-marketing spending by alcoholic-beverage firms may offset losses in the government’s spending on communication.

‘‘Looking ahead to 2007, we may see zero growth for the event-marketing business. Operators will face intense rivalry and competition. We’ll see fewer events organised only for entertainment purposes next year. Instead, functional events aimed straight at consumers in order to increase sales will increase significantly,’’ said Mr Kriengkrai.

He added different idea specialisation and tangible results in sales improvement would be key success of marketing event organisers.

In 2007, online advertising, new media advertising and cinema advertising will be rising stars thanks to Internet broadband penetration and the number of blockbuster movies, said Vichai Suphasomboon, CEO of the media planning firm Carat Media Service (Thailand).

Growth of specific cinema ads would reach 15-20% next year from the estimated two billion baht in 2006.

In preparation for the expected change, Major Cineplex Group Plc recently integrated its marketing communication by combining its existing 22branchesin anticipation that cinema ads and below-the-line activities would be more popular in the coming year. Overall, 2007 will continue to be another challenging year for the Thai media and advertising industry. Political change will influence not only the methodology of advertising, but also the trend in advertising content and the ideas of ad creators.

Humour-based commercials that are a unique strength of Thailand would likely to be replaced by advertising based on serious, educational content with the aim of convincing the public to show more responsibility to society.

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Fuzzy picture on two fronts


As the coup unfolded on Sept 19,MCOT Plc’s Channel 9 was the only TV station that aired a live announcement of a state of emergency from New York by ousted Prime Minister Thaksin Shinawatra.

Consequently, Mingkwan Saengsuwan, the former president of the listed broadcaster, and the rest of the MCOT board members, announced their resignations on Sept 26, in a move to take responsibility for their actions.

Unfortunately, Mr Mingkwan’s resignation caused more trouble for MCOT than expected, with share prices plummeting. MCOT shares on the Stock Exchange of Thailand on Dec 8 stood at 24.30 baht, down from 31.25 baht on the day the resignations were announced. MCOT employees wore black T-shirts to express their dissatisfaction with the new board of directors, fearing the new crew might ruin Mr Mingkwan’s work over the past few years to improve and update the state-owned organisation.

This was further exacerbated by the sharp fall in share prices..

Analysts expect the continuing issue of seeking a successor for Mr Mingkwan will put pressure on MCOT’s performance in 2007, partly because it is clear to investors that Mr Mingkwan had a strong influence over MCOT.

The replacement of two magnet programmes Tueng Luk Tueng Kon and Kui Kui Kao, will also be a challenge to the organisation’s executives over the next year. The two shows generated around 360 million baht in commercial revenue per year for MCOT, or 15% of its total TV advertising revenue.

Meanwhile, the proposed total advertising ban on alcoholic beverages under the interim government led by Gen Surayud Chulanont has become another negative factor for the media and advertising industries, as well as producers of alcoholic beverages.

Public Health Minister Mongkol na Songkhla made a strong attempt to enforce the Food and Drug Administration’s announcement regarding alcoholic drinks in a move to reduce consumption and with it alcohol-related accidents and underage drinking.

But the FDA had to suspend the announcement when the Council of State ruled that the agency did not have the authority to issue the ban. The ministry, however, still wants to go ahead with the policy and will work hard in the coming year to pass the Alcohol Control Bill, which aims to control liquor sales, advertising and the behaviour of drinkers.

Will the ban on booze ads really make people drink less? Producers have their doubts.

Witawat Jayapani, president of the Advertising Association of Thailand, said an advertising ban on alcoholic beverages would certainly be implemented in 2007.

The measures would not affect the 85 billion baht spent on advertising per year as spending on alcoholic beverages accounted for only 3% of total annual advertising billings, he said.

‘‘The other ways to reach the target market [alcoholic-beverage consumers], such as new media (Internet) and satellite television, will become popular,’’ added Mr Witawat.

He noted that the ban would affect all traditional media channels such as TV, radio, newspapers and billboards. Entertainment and sports could not avoid feeling an impact since alcohol companies were their major sponsors, he added.

Several concerts have already been cancelled because of the advertising issue.

Singha Corp, the brewer of Singha beer, has made a bigger fuss than other brewers because the new law might prevent the company from using its famous lion logo.

Branded alcoholic-beverage distributors all agree that the most effective method to reduce consumption is to educate people about how to drink responsibly, as well as raising ‘‘sin taxes’’, in particular on cheap white spirits which are the most heavily abused drinks.