Broadcast Inflation Booms

The cost of advertising is soaring across all channels, with TV the most obvious

While the debate over the reach and influence of digital media over traditional offerings such as television and radio intensifies, advertisers need to keep an eagle eye on rising costs. New data from the local Media Inflation Watch is worrying. Overall media inflation for the first quarter of 2022 is just under 17%.

Television media inflation, though, is just under 25%. Though average TV rates have decreased within this quarter, the overall performance of the medium has declined by 16.67%, increasing overall TV inflation.

Globally, the new World Advertising Research Center (WARC) analysis has found that media inflation is driving up the cost of advertising across all channels, with TV most affected. Globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 — the steepest incline in more than two decades — and are up 9.9% year-on-year in 2022. The trend is especially pronounced in the US, where TV CPMs are forecast to reach $73.14 in 2022, an increase of 40% on pre-Covid costs.

Alex Brownsell, head of content at WARC Media, says: “As linear TV’s share of total media consumption declines, particularly among younger audiences, brands are looking elsewhere for incremental reach. However, the efficiency of delivering reach via non-TV channels is being threatened by inflation across the media ecosystem.”

Brownsell says that as the global economy teeters on a recession sparked by soaring inflation, media costs are unpredictable. In a local industry note, media agency group Meta Media says increasing media costs can be attributed to factors beyond the control of stations, media owners and agencies such as the effects of load-shedding, the pandemic lockdown, the July riots last year and flooding.

Meta Media says media remains a highly volatile business with ever-increasing competition rapidly changing rates, performances and calculated cost efficiencies. Digital and video on demand are further increasing fragmentation, it says. This has led to an abundance of viewing platform options, which means additional costs to reach the same audience as before.

While all media has undergone an increase in media inflation in Q1 of 2022, print and radio had a below-average increase. Print increased by 11.12% and radio by 4.17%. Radio has achieved a stable overall performance that has contributed to single-digit inflation.

Veteran media planner and strategist Gordon Muller tells the FM the entrenched formulaic approach to reporting media inflation (a function of rate-card increases and fluctuations in audience) is beginning to sound a little bit like the proverbial “the dog ate my homework story told by an errant schoolboy”. He says one needs to recognise that real media inflation is as much a function of poor planning strategy and retained discounts, or rebates, as it is about rate cards and audiences.

Muller believes there is an unparalleled set of circumstances prevailing in the media-buying market in SA right now and Media Inflation Watch doesn’t take into consideration variations in discounting.

Muller says that while in the past, there may have been consistency in the volume discounts given to advertisers, this is no longer the case. “More and more advertisers are availing themselves of short-deadline deep-discount packages that mitigate against any increase in media cost,” he says.

He says the media rate card is no longer relevant, and media inflation is as much a function of supply and demand elasticity as it is about rate cards and audiences. He says the key to resolving this issue is to view media strategy through a holistic lens.

In a robust buyer-centric trading environment a decline in audience should lead to a corresponding decline in the asking price. WARC’s research shows the trend of declining linear TV viewership and rising TV media costs is now encouraging advertisers to look elsewhere for incremental reach — unique audiences delivered by additional channels (often online) on top of the audience reached by a brand’s primary mass media activity (often TV). But, says WARC, price pressure is also being felt across the online media landscape. Globally, paid social CPMs increased by 33% between 2019 and 2021.

This piece originally appeared in the Financial Mail