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Johannesburg - When the going gets tough, the soft get stupid. Facing falling audience figures amid the worst economic crisis in two decades, what do media owners do? They increase their ad rates.
The result is that the cost of reaching readers and listeners this year has risen sharply - in some cases by as much as 23% - as most media owners blithely ignore the realities of the marketplace.
The biggest loser has been the biggest offender. On average, radio broadcasters hiked their rates by over 16%, while audiences declined an average of 6.1%.
Net result: the highest increase in the cost of reaching 1 000 audience members (cost per thousand) of all media. This inflation is known as the MIW (Media Inflation Watch) rate.
By media category, the MIW rates (first quarter 2009 on first quarter 2008) were:
- Radio (22.8%)
- Cinema (20.3%)
- Daily newspapers (18.6%)
- Weekend newspapers (16.5%)
- Business-to-business publications (15.7%)
- Community newspapers (10.6%)
- Outdoor (7.2%)
- Television (0.5%).
And the change in the consumer price index? Seven percent. Most media exceeded this by a big margin.
The most astonishing figure is that for television, which results from slashing its ad rates by 16% to 20% this year (depending on time and channel).
Advertisers love it of course, but Gordon Patterson, CEO of media-only agency Starcom, says the SABC has set the industry back two years. Patterson argues that it is doing immense harm to the production industry.
"It would require significant media inflation in order to bring rates back into line with the long-term trend as we go into 2010," says Patterson. "That's not going to happen. Projections for next year will not produce a profitable SABC."
The high inflation levels shown for radio, and particularly the five stations for which air time is sold by RadMark, have set off a storm of argument.
Rate-card row
MIW's big flaw is that one basis of its calculations is the increase in published rate-card rates, complains RadMark MD Graham Willcock.
Most people assume MIW measures an increase in actual rates year on year - but it doesn't, he says. "MIW measures the change in published rate-card rates compared with the change in audience figures, and calculates the change in cost per thousand.
"If MIW used actual rates, not rate-card data, we would be comfortable with the results. But it doesn't."
Rate cards are at best a starting point for negotiations, many would agree. Hardly anybody pays rate-card rates.
Patterson, however says there's been a tightening of the gap between rate card and reality.
"There's been a general reduction in the discounts this year. The difference is now probably not more than 10%."
Willcock takes issue with MIW on a couple of other counts. "RadMark's average rate-card increase was 10.3% across its five brands - well below the radio industry increase of 12%. But this ranged anywhere between 8% up and 8% down, depending on advertiser's packages.
"To combine five very different radio stations into one agglomerated figure is mischievous. Four of RadMark's brands had a cumulative MIW figure of 16.15%.
"The other is in the process of repositioning itself to focus on its core which creates value - the exact opposite of the impression created by the incorrect use of the data."
- Fin24.com