Focus. No More Reliance on Medicine for China Advertising Market

Transcription

1 Focus No More Reliance on Medicine for China Advertising Market In point of Achilles, the hero in the Trojan War, even though he was trained to be bulletproof, he still would be killed by the arrow that shot at his heel. Presently the new policy from State Administration of Press Publication, Radio, Film and Television on medicine advertisements already reaches a point of no return. This is undoubtedly another hammer blow for the TV and Radio media industries following the policy of cut-in advertisement restriction. This issue we will focus on the impact to advertising market upon the launch of this new policy. Pattern of Advertising Was Growing Fiercer in Pharmaceutical Companies According to the 2012 annual reports of the listed pharmaceutical companies, advertising expenditure of 108 listed pharmaceutical companies totaled billion yuan in 2012, increased by 19.7% over billion yuan in Based on the advertising data monitored by CTR, pharmaceutical advertising keeps a stably growing momentum this year. Advertising becomes a panacea to drive the sales of pharmaceutical companies. The advertising spending of Harbin Pharmaceutical Group, the largest advertiser, was almost proportional to its sales volume. In 2011, its sales volume was 13.5 billion yuan while the advertising spending was 440 million yuan. In 2012, its advertising spending soared to 890 million yuan, and its sales volume also rose to 17.5 billion yuan. The pattern showed the trend of low level competition among China pharmaceutical companies that lack of core technology and competiveness. Thus it is no surprise to the emergence of illegal false advertisements that overstating the potency. It is just a matter of time for the government to launch the policy to intervene. Page 1 of 8

2 Effect of the Policy Showed Up In fact, the intention of official restriction towards pharmaceutical advertising was being considered for a long time. Backtracking to December last year, China Food and Drug Administration (CFDA) announced that they were going to restrict the broadcast of OTC medicine advertisements. In March this year, the departments including the Industrial and Commercial Administration jointly published an official document, Comments on Special Management on False and Illegal Advertisement 2013, to emphasize on the strict management on pharmaceutical advertisements. Then from Apr to Jul, the eight departments conducted the special controlling action on false and illegal pharmaceutical advertisements. The latest news in this regard is even more shocking that the broadcast frequency and length of pharmaceutical advertisement on TV and Radio will be strictly regulated. Once the policy was released, the medicine advertisements on TV and Radio will largely reduce. This is such a radical solution! With a series of control policies, advertising expenditure of medicine fell ahead. According to the monitoring data from CTR, advertising expenditure of medicine dropped by 8.9% in the first half of 2013, changing from the last 2 years steady growth. The decline has even deepened in the second half of the year, particularly after the special control campaign conducted by the Industrial and Commercial Administration from April. Based on the data of the first half year, advertising spending of medicine fell in all traditional media. The decline in press was largest, while TV and Radio media were less impacted. Page 2 of 8

3 Upcoming Policy Will Result Huge Loss to Television Media Looking from the current policies, the impact to TV media is the least. However, once the new policy restricting the advertisement frequency and length is launched, TV media will be undoubtedly blown heavily. As per monitoring data from CTR, the pharmaceutical advertising expenditure, including advertising of medicine, healthcare food, medical and healthcare organizations, accounted for 19.6% of the total and the advertising length accounted for 26.5%. How TV media depends on pharmaceutical advertising can be seen. If adding lengthy advertisements and shopping advertisements, I am afraid the proportion of pharmaceutical advertising will be even bigger from the real income. It is conservatively estimated that the advertising income of TV and Radio stations will be plummeted by 30 billion yuan at least when the ban is staged. The ban on drama cut-in advertisements, which was called the toughest advertising ban in 2012, only resulted a loss of 18 billion for TV media, you know! Page 3 of 8

4 Looking from the grade of TV stations, as the oligarch in TV industry, the ability for CCTV and top four Provincial Satellite TVs to resist risks is stronger. From Jan to Aug in 2013, CCTV had only 6% of its advertising income from pharmaceutical industry while the top four Provincial Satellite TVs also had 11% only. Comparatively, the situation was much severe for other TV stations. Overall Provincial Satellite TVs had 17.6% of advertising income from pharmaceutical industry in the same period. Meanwhile, for Provincial Capital TVs, the proportion of pharmaceutical advertising income reached 24.8% of total, and 26.5% for length. The situation of Provincial Terrestrial TVs was the worst with over 30% of the advertising length from pharmaceuticals. Therefore, Provincial Terrestrial and Provincial Capital TVs will take the first hit once the policy restricting the pharmaceuticals TV advertising is staged. Page 4 of 8

5 As discussed earlier, the ban will bring a great impact to Provincial Terrestrial and Provincial Capital stations. Regionally, media in cities like Beijing, Shanghai and Nanjing will be impacted very limitedly, especially for Beijing and Shanghai, the pharmaceutical advertising only accounted around 2% of the total income there. However, the scene is contrary in Kunming and Xining region, where over 40% of advertising income was from pharmaceuticals. The gap between regions is huge. It is nearly an impossible task for those media in the regions to find advertisers to make up the huge loss of advertising income in a short period. Generally speaking, northwest regions have the highest dependence on pharmaceutical advertisement, following by northeast and southwest regions. The impact from the policy to eastern coastal cities will be least. Page 5 of 8

6 Although the top four Provincial Satellite TVs have stronger ability to resist risks, there is an obvious differentiation among other Provincial Satellite TVs. For example, Hunan Satellite TV has only 4% of its advertising income from pharmaceuticals while Yunnan Satellite TV has more than 30%. The dependence on pharmaceutical advertising for disadvantaged Satellite TVs is much higher than Provincial Terrestrial and Provincial Capital TVs. According to the monitoring data from CTR, over 10 Provincial Satellite TVs have more than 20% of their advertising income from pharmaceuticals from Jan to Aug in this year. It can be conceived that the impact to these Satellite TVs will be destructive once the ban comes into being. Page 6 of 8

7 Being Survivor of the Disaster Although the State Administration of Press Publication, Radio, Film and Television has not officially launched the ban policy yet, there is no simple and quick cure for TV and Radio stations to seek survival once their dependence on pharmaceutical advertisement is disconnected. Presently, the traditional media is surrounded by enemies in all range. On one hand, with the rapid development of smartphones and internet technology, the media habit of audiences is changing fast. They are attracted by powerful we-media such as Weibo and WeChat. On the other hand, the internet media is now developing towards maturity, its advertising model is being clearer and the demand of integrated marketing from advertisers is being stronger. The growth of traditional advertising market receded under the extrusion of new media. Last year, the overall growth rate of traditional media advertising market witnessed the first being lower than the GDP growth. Newspaper and magazines even declined by double digit year-on-year while TV and Radio media just grew at a low rate. Therefore, it is a must for TV and Radio media to seek ways other than advertising income in order to further develop. For TVs, if generating more income by expanding the issuing channels of programmes is seen to be slightly conservative, then utilizing new media and technology should be a daring attempt. Page 7 of 8

8 For example, offering QR code in the products discount information during the TV program broadcast to realize the transformation from offline media to online and from TV to a marketing platform. Besides, it will also be helpful by building media brand to expand the marketing scope. For more information: 1. Please visit CTR official website ; 2. Visit CTR official Weibo: CTR China Insight Page 8 of 8