Media Inflation Watch: Watch it!

Would you pay 7% more for a can of beans with 2% less in the tin? John Bowles looks at media inflation from a different perspective.

Mike Leahy’s Media Inflation Watch (MIW) isn’t talked about enough. For the past 20 years the man has been analysing media inflation and producing qualitative reports on a very important subject – and for a small fee.

Sure, Leahy devotes his time to explaining the report but either advertisers don’t understand it or they simply have no problem paying more and more for media that continues to deliver less and less. If advertisers cared we wouldn’t see media inflation continue to outperform both PPI and CPI year in and year out.

What’s going on?

Perhaps marketers are only focusing on the rate increases that seem to be closer to the evil CPI. But Leahy explains over and over that you can’t only take rate increases into account. You need to look at the media’s performance. Its circulation, listenership, audience ratings – that’s where you see the real inflation.

So simply put, if I raise my rates 7% but my circulation falls 3%, my real increase is closer to 10%. Of course we can all get it but how is it possible that all media (MIW) continues year on year to inflate 3-5% above inflation?

In the latest comparison, January to June 2012 versus January to June 2011, all media MIW sits at 10.32%. CPI over the same period was 5.8% – close to 5% above CPI! Some have been better than others but how is it possible to explain and justify a 20.1% increase for cinema, 12.36% for radio, 11.86% for print media and 9.96% for TV?

I suppose you could put it down to category influences like the fact that newsprint prices have gone up 15% but no, when you look within the categories some media are closer to macro economics than others.

For instance, paid TV inflation is down 1.63% and free up 14.63%. CIW Radio (coloured, Indian and white radio listeners) is up 14.65% while black radio is only at 7.5%. In the print arena daily press with their failing circulations have posted a 15.76% increase while community, or local press only posted a 7.8% lift.

Well, we know advertisers wouldn’t really let this detail slip through the cracks. But how could it go on year after year? Yes you guessed it! D – I – S – C- O- unts!!! Our industry is notorious for them and love to use them when it comes to negotiations. Discounts, value add, free space, air, waves, we have it all at the media grocery shop.

But the question is what is a reasonable starting discount? If I use a well known weekly magazine which for instance cost R100 10 years ago for 100 copies, what would it be today? Leahy’s MIW tells us that this well known weekly magazine would cost R183 for 85 copies in today’s market, which means its real inflation is up to R216. CPI on the R100 today would be R152. So the starting point for discounts on this famous weekly magazine should be over 40% before the advertiser even started talking volume commitments.

Perhaps the real issue is in the method of evaluating media performance. This is the more relevant topic given the amount of media fragmentation experienced today. In Mike’s recent report All Media went backwards (-1.72%) and only three categories showed growth or no decline. Paid TV (4%), black radio (+1%) and community (local) press (0%). The rest showed decline.

Media are not baked beans but as it fragments, audiences decline and rates go up – the real media inflation (rates AND performance) needs to be taken into account. If we’re moving into a world where media is being commoditised, then so be it.

But media that have continued to perform well and offer genuine value by being close to CPI should be considered more than those that are not. Most importantly, media that reach and deliver to your markets should be the first priority, and then Leahy’s MIW report can be a very handy tool for the pending negotiation – depending which side of the fence you’re on!

Inflation Period: 2012 Jan-Jun on 2011 Jan-Jun