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By Darwin G. Amojelar, Reporter
AMID rising prices and the anticipated slump in
the domestic economy, the Philippines’ two largest broadcasting
companies are faced with a possible top line squeeze, as diminishing
revenues from big ad-spenders force them to look elsewhere for
growth.
Last week, the National Economic and Development
Authority (NEDA) conceded that economic expansion in the first
quarter may have slowed to between 5.2 percent and 6.2 percent,
weaker than last year’s 6.9-percent growth.
The inflation rate last month rose to a
three-year high of 8.3 percent, breaching the Bangko Sentral ng
Pilipinas’ forecast of between 6.4 percent and 7 percent.
For the country’s top two broadcasters, higher
inflation coupled with slower growth spell trouble, as companies are
likely to hold off discretionary spending, including advertising.
In the first quarter, GMA Network Inc. and ABS-CBN
Broadcasting Corp. reported flat growth in advertising revenues.
“The most unstable [cost] is ad spending that
can easily be reduced by producers. If nobody buys the product,
what’s the point of advertising?” Felipe Gozon, GMA president,
admitted.
Indeed, the country’s top broadcaster saw ad
revenue contribution to total revenues drop to 93.4 percent in the
first quarter from 93.65 percent in the same period last year. The
network’s advertising revenue inched up 1.2 percent to P2.39
billion this year. Consolidated revenues were up by 2 percent to
P2.56 billion, while profits rose 6 percent to P453.6 million.
Rival ABS-CBN saw its ad revenue crawl up 4
percent to P2.83 billion from last year. The percentage share of
airtime revenues to consolidated revenues during the period however
rose to 66.58 percent from 65.45 percent last year.
ABS-CBN’s revenues were up 3 percent to P4.3
billion, while its net income fell by 14 percent to P242 million.
Although ad spend usually is weak during the
first quarter, both companies also blamed the early onset of Holy
Week this year, and the absence of political ads—a non-recurring
gain last year on account of the 2007 elections.
Ad rate hike to drive growth
Prince Yeung, equities analyst at AB Capital
Securities told The Manila Times that growth for the two companies
this year will come mostly from their planned increase in
advertising rates.
Despite the rate-card adjustments, advertising
revenue growth would remain flat as companies are putting on hold
their media spending to reduce expenses, he said.
The networks last month implemented a 15 percent
hike in advertising rates.
Vivian Tin, ABS-CBN vice-president for research
and business analysis, admitted that growth would come from the
increase in advertising rates and the consolidation of Central CATV,
the operator of SkyCable, under the ABS-CBN group.
Besides the 15 percent increase on
advertising rates, Gilberto R. Duavit, Jr., GMA executive vice
president and chief operating officer, said non-volume advertisers,
which are usually expensive, will also drive the company’s growth.
Duavit said the non-volume segment or the
second- to third-tier advertisers include Liver Aide, VitaHeart,
Fitrum, 4G, Splash, among others.
“These are non-volume advertisers, who are now
starting to see the cost efficiency of television as [an]
advertising medium,” he said.
From May 1 to 20 alone, GMA generated more than
a billion pesos in sales.
As of April, the company posted a net income of
P649 million, representing a 10-percent growth over the same period
last year. Gross revenues for the first four months stood at P3.5
billion, up 5 percent from last year.
Even with the gloomy macroeconomic forecasts,
GMA is targeting a 20 percent increase in net income this year.
Tapping new revenue sources
The two networks are also tapping new sources of
revenues, including merchandising, films and music recordings.
ABS-CBN’s sale of goods such as magazines,
audio, video products and phone cards in the first three months of
this year boosted the company’s revenue. After a 17 percent
decline last year, sale of goods jumped 55 percent year-on-year to
P158 million in the first quarter.
Gozun said GMA also began installing its own
retail modules in SM Department Stores last year, offering a wide
array of merchandise, including T-shirts, toys, bags, wallets, caps,
slippers, comics, books and candies.
The network capitalized on its lineup of popular
programs such as Asian Treasures, Princess Charming, Super Twins,
Lupin and Zaido to establish the company’s mark on retail.
For this year, the company will likewise
strengthen its regional operations and assert the network’s
presence in key areas.
“Our priority in 2008 is to continue to
strengthen our signals, expand our reach and increase the ratings of
our programs in South Luzon, Visayas, and Mindanao. This will
prepare the company to meet the demands of advertisers who are
increasing their presence in these areas,” Gozun said.
Indeed, expansion for the networks increasingly
has meant tapping overseas Filipino markets.
In the case of GMA, it enjoyed a 32 percent
increase in its subscriber base last year.
“We entered new markets in the United States,
Papua New Guinea, British Indian Ocean Territory of Diego Garcia,
Canada, Singapore and started negotiations with various carriers for
the company’s second international channel,” Gozun said.
GMA’s international operation registered P118
million in cumulative revenues in the first three months of the
year, up 19 percent from P99 million last year.
For its part, ABS-CBN sees overseas demand to
remain resilient. Despite the US economic slow-down, the company
expects the pace of subscriber growth to hold. “We still expect
subscription to grow double digit,” Tin earlier told members of
the press.
ABS-CBN Global, the company’s international
unit, registered a 22 percent increase in its subscriber base with
viewers abroad now hovering at 1.7 million last year.
Controlling production costs
The two networks also have announced plans to
control production costs.
ABS-CBN’s production costs were up 10 percent
to P1.51 billion in the first quarter. The 10 percent growth this
year was slower than last year’s 14 percent rise.
Tin said that if not for the uncertainties of
the economy, the industry should have a good year.
GMA’s production costs already dropped by 8
percent to P808 million in the first three months this year.
Gozun, however, expects these costs to increase
this year as competition with rival networks heats up.
“ It will depend on how we operate. But as
much as possible we are trying to put our production cost down,”
he said.
Last year, the network reduced costs by
tightening production schedules, reduced taping days and managing
work hours.
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