Consolidation will benefit everyone in the long run: Shashi Sinha

Agencies are experiencing many challenges, said Shashi Sinha, CEO of IPG Mediabrands, during a fireside talk with Naziya Alvi Rahman, Editor, exchange4media, at the e4m Confluence - Media Investment Summit 2023.

Sinha was discussing the topic "Unlocking Success for Media Agencies: The Vital Role of Speed, Agility, and Simplicity in the Modern Landscape." 

He went on to say that most people don't realise how big India is in terms of volume compared to the rest of the world and that India's media is highly fragmented. "There are enough options compared to the rest of the world," he remarked. 

He added, “The value is low, and the market is underleveraged.  When using PPP (Purchasing Power Parity), our CPMs are maybe the lowest in the world, which is a good story for marketers.  I tell all of my clients that now is the time to invest since things will be drastically different in the next 10-20 years, similar to the United States. As media agencies we are transacting those kinds of volumes, we need to have the bandwidth and the ability and no technology can provide for that.”

According to him, one of the challenges is the volume value mismatch. “We are probably responsible because, on the media agency side, there are six-seven of us who buy 90% of television. While we may feel very happy we are  getting the best rates for our clients, fact is, we are transacting huge volumes.” 

Sinha mentioned three to four measures to solve these challenges. He stated that part of it will be addressed on its own. "With the expansion of MSMEs advertising, the value will begin to rise." It may take some time for this to happen on television, but it is occurring on support media. I sense that as there are more and more advertisers as the country opens up,  GDP improves and a lot of other categories come into advertising. Therefore from one side, there will be a pull for advertising and I think consolidation will happen.” 

As the industry is witnessing consolidation on the media and creative side, Sinha asserts that the consolidation for the industry is good. He added that it will hurt agencies' short-term interest but for the industry, it's a positive step. “The consolidation already happened on the agency's side now it's happening on the media side.” 

He said that the problem is that the agencies are chasing volumes and because their margins and commissions are so low, the entire focus is on quantity and not quality which is why quality.  

Further speaking on the remuneration, without sharing details he said, “We are already at it and finally the industry has realized that it's important.”  Sinha shared that in 2022 industry witnessed the maximum number of pitches called for and 80% of them were price-led, cutting either the pricing or commissions. “Better sense prevailed and a certain amount of course correction is happening around it,” he added. 

Speaking on how the role of television changed over the years, especially with the entry of digital, he said that these are formats and video consumption is what matters. It's not television versus digital; it is just the way the delivery happens.  “India will always be a big consumer of content. I generally believe in the power of television, if TV adapts and if we at BARC help them adapt in a particular way by giving them sizable meaningful cuts for segments. The problem with TV is unlike digital that all the trading is done on the third-party currency which is BARC. It's got so regimented that everything is CPRP nothing else matters.” 

Another point he mentioned is that since TV is mass, even niche genres are measured on a CPRP or CPT basis. But if BARC was capable of giving data in segments like on CTV, there would be a big hope for TV or CTV. “Consolidation will hurt us and our clients in the short run, but in the long run it will be good for everyone.”

Speaking on the growth of the industry, he said it's going to be a tough year. "Do things carefully and hope for the best because things are not going to improve overnight. For the next four to six months, just buckle up and don't lose faith in your people; that's the most important thing,” he concluded.