During its Q3 2013 earnings call, TVN Group confirmed IHS' outlook for the total TV net advertising revenue (NAR) growth trends for 2013 and 2014. The broadcaster forecasts a mid-single-digit decline of total TV NAR for the full year 2013 based on ad pricing and volume trends for Q4. TVN expects this to be followed by a low single-digit increase in 2014 as market confidence returns. Earlier this year, IHS estimated that total Polish TV NAR will see 6.5 per cent decline in 2013 and a 2.6 per cent rebound in 2014.
In Q3 2013, total Polish TV NAR declined by 3.3 per cent. TVN Group outperformed the market, ending the quarter with a TV NAR fall of 0.4 per cent. For the broadcaster, the declines came as a result of negative performance of its flagship channel. However, these losses were almost completely offset by revenues stemming from high increase in the sponsorship (26 per cent growth year-on-year) and TV spot advertising on thematic channels (15 per cent increase). Moreover, the broadcaster got an additional boost from brokerage revenues, which surged by up 50 per cent following the launch of an ad sales partnership with Disney (see previous commentary: 'Atmedia portfolio shrinks as international players seek help of Polish flagship channels').
The Polish TV advertising market has been seeing declines since the second half of 2011. Ever since, the market visibility and confidence amongst advertisers have remained low. The situation began to change in the second half of 2013 when advertisers began to sign medium-term commitments to buy advertising space. Before that, they acted on a short-term basis, which undermined market confidence. Yet although this increased broadcasters' market visibility from about two weeks to two months, it was still a far cry from normalcy, where at least a proportion of budgets is made on an annual basis and shorter-term bookings are usually conducted within a three months framework.
Q3 2013 brings more optimism. As shown by the quarterly results, the rate of decline is decelerating. Moreover, after a near-zero growth in the first quarter and a modest acceleration in the second quarter, the third quarter sees positive macroeconomic developments. IHS estimates that Polish GDP will see an increase of 1.1 per cent in real GDP for the full year 2013 and 2.7 in 2014. This created increased consumer and business confidence. In consequence, advertisers are looking to up their investments. We observed an increasing number of advertisers signing 12 months advertising budget commitments for 2014.
This is echoed by a renewed focus on the quality of advertising space bought, which is expressed through a change from GRP-based to ratecard-based advertising. TVN Group in particular sees this benefit.
TVN Group offers advertising on two bases: ratecard and GRP (gross rating point) pricing. The former reflects the timing and duration of the advertising. It offers a more targeted advertising in a particular slot, length of the advertisement and its time of the day and year when it is broadcast. Its cost is usually also much higher than those purchased on the GRP basis. Advertising based on a cost-per -GRP pricing allows the customers to specify the number of GRPs they want to achieve, however it does not allow for a specific time and programme allocation. Moreover, for each GRP purchased during peak time, the client must also purchase at least one GRP during off-peak time. Therefore the shift to the rate card sales is a sign of increased investment and confidence in the TV ad market.
In addition to the increased number of revenues purchased on the rate-card basis, TVN Group is also experiencing an increase in the sell-out ratio for the non prime-time slots. This is an indicator for increased demand in the TV advertising market.
Taken together, these trends signal that there is finally the light at the end of the tunnel for Polish TV advertising.