PRIMA EXPECTS TO INCREASE ADVERTISING PRICES BY UP TO 20% NEXT YEAR

Vladimír Pořízek; Zdroj: mediaguru.cz

2. 9. 2024

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advertising inflation inventory target group TV Prima Vladimír Pořízek

Trends in the TV advertising market remain unchanged, and advertisers must prepare for further increases in the price of advertising space.

The increase in the price of TV advertising in 2025 could be as high as 20% on Prima Group stations and therefore in Media Club, said Prima Group’s CCO, Vladimír Pořízek, in an interview with MediaGuru.cz. The reason is the continued growth in demand for TV advertising space, its decreasing volume, and maximum occupancy.

He also points out that advertisers should take into account the changing behaviour of the 50+ target group that is still neglected but has sufficient funds to invest. “There is a recurring schematic thinking among advertisers that they need to target the younger ones on TV because the older ones will be targeted anyway. But this is not the case today,” adds Petr Miláček, Research Director at Prima Group.

Market reports on the development of TV advertising in the first half of the year suggest that demand for TV advertising is not slowing down and that the main commercial TV channels are struggling with the advertising space being sold out. From Media Club’s perspective, how do you see the development in the first half of the year?

Vladimír Pořízek: According to our estimates, the TV advertising market grew by about ten percent year-on-year in the first half of the year. The increase was driven by both higher advertising prices and higher volumes. Regarding primetime sell-out, we no longer see a difference between the length of our breaks and the length of our competitors’ breaks.

Your competitor TV Nova stated before the summer holidays that the price of TV advertising for 2025 will certainly increase. I assume you see it the same way...

Vladimír Pořízek: There will be inflation because demand is rising, space is shrinking, and it is sold out.

How much more do you expect advertising to cost in 2025?

Vladimír Pořízek: We expect the increase to be in line with this year when we increased the list price by 20%.

This year's announced increase in TV advertising prices was the highest in several years. In the case of Media Club, it was 22%, while CPP growth ranged between 12 and 30%, depending on the advertisers’ volume. How have advertisers responded to these increases?

Vladimír Pořízek: We haven’t lost any clients because we have made things more expensive, and we don’t see clients leaving the market. Again, we expect the highest price increases to be with large advertisers where the price is low, and we have to be efficient and increase the price more substantially. We have increased prices dramatically for clients in tenders, and we will be uncompromising again this year. We know that we have a long-term problem with large clients, so we are increasing prices more significantly there.

We know that we have a long-term problem with large clients, so we are increasing prices more significantly there.

How big is the decline in inventory and why is inventory declining?

Vladimír Pořízek: There is less and less space as viewers move away from TV to VOD services. In the first half of the year, space was down more than 7% of GRPs in 15-54 and around 5% in 18-69.

There is a limited option to skip ads in the IPTV operators’ offerings. Does this measure you have taken help?

Vladimír Pořízek: Breaks can be fast-forwarded after 5 minutes, so they are shorter than in linear broadcasting. For operators that insert online advertising instead of GRP advertising, breaks are reduced to 3.5 minutes. Of course, this has helped us, we were losing over 200 million a year and managed to reverse that. It’s about 3 thousand GRPs a month. However, the space that we saved is less than 5% of the space we sell, but that is also equal to the space we lost in linear broadcasting because of the drop in viewership, so it was just a one-off help.

Which operators insert online advertising?

Vladimír Pořízek: Sledování.TV, Lepší.TV and from this autumn it should also be Skylink where we can replace and target advertising. We also insert online advertising in Canal+, which we have been representing since this spring. We also use it in HbbTV applications and smart TV applications. [Editor’s note: An overview of the operator solutions is given in the box at the end of the interview.]

Media Club has adjusted the target group for this year from 15-69 to 18-69 years, and Nova’s Sales Director, Jan Ulrych, told our website in June that Nova was also considering changing the target group for next year. What kind of target group are you counting on for next year?

Vladimír Pořízek: We expect to maintain the upper limit of 69 years. We have also prepared scenarios for a shift at the lower limit of the target group. It will also depend on what our competitors will do.

Given the declining inventory, would it be a solution to expand the target age group by five years, making it 18 to 74?

Vladimír Pořízek: Yes, there would be more GRPs, but client behaviour would have to change. We fear that it would be difficult to monetise such GRPs.

Are you referring to the fact that the idea of primary targeting of younger target groups still prevails in the perception of advertisers?

Petr Miláček: We can see what our clients are targeting, and which groups have enough money to use according to their preferences. The MML data clearly shows that the purchasing power of people aged 50+ is growing, and these so-called empty nesters [Editor’s note: people aged approximately 50-65 whose children have become independent] have more disposable money than people aged 35-50. Moreover, it is significant that the purchasing power of young people aged 18-35 is declining. In 2015, it was a quarter of that and last year, it was only 20%. The 18-35 age group is still being targeted by a large group of advertisers.

What is your explanation for the decline in the purchasing power of people aged 18-35?

Petr Miláček: The main reason is that their number is decreasing, by about 20% in the last ten years! On the contrary, the number of people in the 50+ group is growing. “Husák’s children” [Editor’s note: people born in the 1970s when Gustáv Husák was president] will start to live to 55 next year and approach senior age. For advertisers, however, such people are “dead”. Apart from being large in numbers, it is a generation that has worked hard, earned money, accumulated wealth since the 1990s, and now wants to buy, even for their children and grandchildren.

Do you want to encourage advertisers to focus more on the 55+ group?

Petr Miláček: We want them to be aware of the reality and to see that even though the consumers they targeted five to ten years ago have shifted to a different target group, they still behave like young people. They have an active lifestyle, as confirmed by OMG Research’s Silver Generation study. The behaviour of the generation has shifted by a decade and the 60-year-olds are now the new 50-year-olds. That’s why we maintain a buying target of 69 because we think this target group is overlooked. From the Buying Audiences pilot that we have been doing, and which we want to develop further, we can see how our channels are reaching people who are buying.

Byron Sharp’s lesson from 2002 notoriously repeated in agencies is that every brand should target all consumers in a given category. We have tried to quantify this, and the available data confirms that the people who are actually buying are watching Prima channels. There are a lot of them in the 50+ age range and we can see from the affinities that proportionally, these people watch more our channels than our competitors’ channels, and the ads in our channels show a higher affinity. It works out 39% better for us on average. A brand should speak to all people who buy the category, not just 18-35-year-olds. Plus, there are fewer of them, and they have less money. There is a recurring stereotype among advertisers that you need to target the younger ones on TV because the older ones will be targeted anyway. But that was true twenty to thirty years ago, it is no longer true. Young people are not on TV today.

The behaviour of the generation has shifted by a decade and the 60-year-olds are now the new 50-year-olds.

Petr Miláček

Vladimír Pořízek: Considering that the 55-69 target group includes at least 27% of people, advertisers are only directing around 5% of their money to this group, which is wrong.

In addition to the Prima Group’s channels, the Media Club bundle also includes stations from the TV Barrandov Group, the Óčko Group, and the Atmedia sales house. Given the changes in ownership of these groups, will the composition of the bundle continue in 2025?

Vladimír Pořízek: Negotiations with both groups are ongoing.

Do you want to negotiate new terms given the new situation?

Vladimír Pořízek: I cannot comment on that.

What is the distribution of GRPs in linear TV and VOD? Is the trend of interest in VOD reflected in the composition of GRPs?

Vladimír Pořízek: There is a gradual increase in the share of VOD space sold worldwide. In our country, however, linear GRPs still clearly prevail, in a ratio of about 98:2. The VOD services on offer are mainly paid services such as Netflix, Voyo, Disney. We were the only one to go down the AVOD route [Editor’s note: Prima+ offers tariffs with and without advertising.]

Is the yield of a VOD GRP the same as that of a linear GRP?

Vladimír Pořízek: Online advertising is more expensive, up to ten times more in the West. In our market, the difference is much smaller. I estimate that online is about 30% more expensive than TV. In Spain, CPT on TV is €2 and online advertising sells for, say, €10. The UK market is somewhere around €4 for TV and online advertising at €20. Those are huge differences. Unfortunately, this is not the case in the Czech Republic.

Can you outline the outlook for 2025 in terms of advertisers’ behaviour?

Vladimír Pořízek: So far, there is no indication that advertisers do not need advertising. Television advertising still has the lowest CPT. We therefore expect the trend from this year and last year to continue.

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