Impact of junk status on the media business

South Africa’s ratings downgrade might have been expected, but its impact is going to be felt for years to come, not least by media business.

Within the first 24 hours of the announcement, global media intelligence company, Meltwater, says “tremors” were felt across the financial world “that could be heard echoing across social and editorial media the world over”.

“It’s common to see mass mobilisation online when it comes to issues citizens are passionate about, but the scale of the reaction we’ve seen in response to South Africa’s credit downgrade has been paralleled by very few events in recent memory,” said Matthew Barclay, area director for Meltwater Africa.

Since the news of the downgrade broke on Monday, there were in excess of 40 000 social media mentions on the downgrade alone, says Barclay. “… when we combine this with the overall conversation taking place around South African political climate on social media, the volumes are astonishing”.

Barclay added, “The levels of engagement we have seen the last 24 hours confirm that social media is becoming the first point of call for all sectors of society to voice their opinions. Comments and posts are critical, vicious, emotionally charged, fake and factual as South Africans take to social media as form of therapy to come to grips with what has happened.”

South Africa dominated the global conversation, followed by the United States, United Kingdom, India and Nigeria. Meltwater reported that Twitter hosted the majority of the conversations.

“What’s interesting is that the conversation on Twitter is being driven by media houses and the public, rather than political parties,” he said.

The Media Online asked media professionals in South Africa to comment on the effects junk status on the business of media.

Media, a globally exposed industry in SA

The media is one of the most globally exposed industries in South Africa. The advent of technology has created a demand and taste for global content for most South Africans. The country’s credit downgrade will hit media owners the hardest! The cost of doing business will increase… whilst revenues decrease.

Buying international content, which is mainly priced in dollars, will be more expensive. DSTV subscribers felt the brunt in recent times due to increase repeats. The Rand was weaker and DSTV could not afford to buy as many new programmes, as they had previously done.

The upside though, is that there will be more opportunities for local content producers to get commissioned and have their work shown on both public TV and on Cable TV channels.

Still on TV, buying rights to big global sporting activities will also cost a fortune! Meaning there will be fewer live international sporting events shown on television.

Paying international music royalties for radio and TV will also be more expensive as the rand is weaker. We will probably have fewer international artists coming to perform in SA as promoters will not be able to afford them.

Revenues across media platforms are likely to decrease… Companies will cut down on spending. As we know, marketing budgets are usually the first to be cut when things get tough. The financial services industry is one of the largest advertisers on South African media. On the day of the downgrade, the Financials Index on the JSE lost R84bn and the losses are still accumulating! So we can see a pull back on advertising from this sector.

~ Thuli Magubane is host of My Money and Me on KayaFM.

Publishers will feel it in their pockets

Well, consumers will feel it in their pockets – and therefore so will publishers. Magazine and book sales, in particular, will take a knock as they are regarded as luxury items. Newspaper sales, on the other hand, have increased as South Africans try to make sense of recent political events. Reputable digital media properties are also recording record traffic. On Friday 31 March, the day after the late-night cabinet reshuffle, News24 recorded its single highest concurrent page view numbers ever, at some point serving nearly 300 000 pages per second. To put this into perspective, News24’s previous highest number was 133 000, at the time of Nenegate. In total 17.3 million unique browsers turned to News24 on Friday 31 March to get the information they needed to try and make sense of their world.

~ Esmaré Weideman, CEO of Media24

‘Green shoots’ will be undermined

Expenditure on advertising has always been a good barometer for the broader economy. The consensus from expert opinion seems to be that the downgrade will have a negative impact across the board and may well have undermined the promising “green shoots” we were seeing for growth in 2017.

If SA goes into recession then people will buy less, Advertisers will spend less, Agencies and the Media will see declines in revenue. Along with every other business in South Africa, when we make less money we pay less tax, our staff don’t get pay rises and the Government has less money to re-distribute. The cause and effect is so blindingly obvious to a normal person that obviously it can’t be that simple?

Our uniquely gifted political leaders must know something that the rest of us mere mortals are unable to comprehend.

~ Josh Dovey, CEO Africa Omnicom Media Group

Threat to budgets and jobs

The media in general seem to have been taken by surprise by this downgrade – in spite of the vast number of speculative stories in anticipation of the cabinet reshuffle – judging from the number of “experts” that have been rapidly trotted out with very few willing to offer a definitive opinion. This is probably more a result of the dearth of qualifications and experience in newsrooms than as a result of any impact of the downgrade.

I anticipate that the downgrade means less money for consumers to spend on print and a reduction in the budgets companies set aside for advertising with its knock-on effect for media owners and the subsequent threat to journalist jobs. This in turn enhances the appeal of “free” news platforms as a source of information and those sites will probably gain more followers.

~ Evelyn John Holtzhausen, president of the Public Relations Global Network and a director of HWB Communications

Impacts on staff

South African media is largely commercial. To the degree that the economy is shrinking, media buyers will have less money to spend for/on advertising. This will affect revenue. Media organisations that may have been contemplating expansions, this may be shelved for a while because of economic uncertainly. This could have an impact on freelancers, permanent staff and taking in interns.

~ Dr Musawenkosi Ndlovu, senior lecturer, Centre for Film and Media Studies, University of Cape Town

Which publications will fall by the wayside?

The impact on newsrooms across newspapers, online radio and television is obvious and our media is pretty good at delivering what South Africans need to know – the good and the bad.

The junk status announcement forms part of a politically driven agenda of state captures. The unfolding chain of events from the Nenegate fiasco to the removal of Gordhan are likely to be followed with further downgrades, interest rate hikes and a drop in foreign investment. South Africa has a volatile economic history. I envisage media brands will be under increased pressure due to loss of subscription and advertising revenue.

Could we see consolidation through acquisition? From the sale of Primedia at one level to the buying of assets in the OOH sector.

On the other hand, South Africa has enjoyed a glut of media choice and digital options litter the edges. A right sizing of choices may well continue as more magazine brands are shut down and marginal radio stations fall by the wayside.

~ Sandra Gordon, Publisher The Media and The Media Online

Media industry is highly leveraged to the growth cycle

I think the affect on the media will be harsh, particularly on the print media, which is already in challenging environment. The media industry is highly leveraged to the growth cycle since marketing spend is typically a variable cost within business. Marketing is normally the first to rise as the economy improves and the first to fall as the economy declines. Since junk status is likely to reduce SA’s economic growth, it’s bad news for the media industry, and particularly bad news since it will tend to reduce business confidence, which is already running low in SA. Government needs to demonstrate that “radical economic transformation” is not a byword for corruption and failed economic prescripts, and that it intends to focus as much on economic growth as it does on transformation in order to restore business confidence.

~ Tim Cohen, editor of Business Day

Business confidence drops, retail advertising affected

Any negative influence on an economy directly impacts on business confidence dropping and while it makes absolute rational sense for retail companies and major consumer brands to increase their advertising expenditure to compensate for a reluctance on the part of society to spend unnecessarily, history has shown that the exact opposite happens.

Tough economic times means corporate cost saving and one of the easiest way for any company to save costs without delay, is to cut back on marketing efforts – especially advertising spend.

Then, any reduction in the overall advertising pool usually results in media having to reduce costs as well and the only way they can do that is by shedding employees.

~ Chris Moerdyk, marketing analyst

It starts with the consumer

As with all things “communications related” – it starts with the consumer. If the consumer has less money, he will spend less on items. If he spends less, companies make less money. If they make less money, then they spend less on advertising. If they spend less on advertising we lose. So yes, most definitely, we do believe that the downgrade will have an impact on the market.