Ad rates may be down, but who’s counting anyway?
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by Ayat Basma
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 Industry insiders offer their take on the reported decline
Advertising rates on major free-to-air (FTA) broadcasters in the Arab world dropped by as much as 30 percent in 2005, according to research firm Arab Advisors Group.
The Jordan-based group faulted mammoth growth among the number of stations in recent months, particularly the introduction of new interactive channels for creating a “destabilizing” effect on the market: “These new channels are taking viewers away from other channels and indirectly causing advertising rates to go down,” said analyst Judeh Siwady, the author of the report.
The study says published rates for 30-second commercials on five of the Arab World’s most viewed channels dropped to $2,180 in 2005 from $3,103 in 2004.
But Jihad Fakhreddine, research manager at the Dubai-based Pan Arab Research Center (Parc), sees a different reason for the drop. He says a number of major channels actually slashed their own advertising prices to control the practice of back channel discounting – where published rates are cut by up to 75 percent. Thus by slashing their own rates, the stations were aiming to “stabilize the market.” However, the move also led “inevitably” to a slide in rates across the board.
Walid Azzi, publisher of ArabAd, offers a harsher criticism. He says the TV advertising market has turned into a “brothel” because of its “lack of respect” for rate cards. That is, he says, in addition to the absence of a standard and objective ratings system for measuring the audience and market share of each channel, and the massive proliferation of channels.
“Of course, there is competition and this is why they cut down on their rates. They give offers and packages and under-the-table deals. In other words, this is a market which has been highly prostituted,” he said.
Others see the reported 30 percent dip as a bit of an exaggeration.
Tarek Ayntrazi, general manager of Lebanon’s Future Television, said the new channels may have slashed their rates because most of them rely heavily on revenues from interactive services such as sms-chatting and voting. But this is not the case with the major channels.
“Based on what we know from the market, I find this number (30 percent drop) to be unrealistic at least for the leading satellite stations,” he told MEB Journal.
Ayntrazi says pan-Arab advertising revenues in 2005 were driven by economic growth in key sectors such as oil, telecoms, real estate and financial services. “The stock market also introduced new players into the ad industry and finally political campaigns in Iraq, Palestine, Egypt and Lebanon poured money into the media as well.”
But he too admits that ad revenues were affected by the “non-transparent” deals between media representatives acting on behalf of the TV stations and the media buying units working for the advertising agencies.
“The reason for the price cuts is the competition between the media and the lack of a unified and reliable currency to sell airtime,” he said.
“But more importantly, there is the role of the ad sales companies that have over the years based their strategy on non-transparent kickbacks that translate into lower net prices.”
According to Azzi, while in monitored figures, TV ad spend in the Arab world reaches the tip of $2 billion, the real figure, after factoring out the discounts, does not exceed $250 million.
With very little money to go around, the development of television in terms of quality content and creativity is being stifled. “Most stations are relying a great deal on political talk shows that are cheap and make a lot of money,” he said.
Fakhreddine agrees: “The market is saturated, there are so many look-alikes these days that the viewers can’t differentiate anymore. But as long as you have people still willing to pump in the money, the number of channels will keep increasing.”
The question many are asking is are all of the stations really concerned with a dip in ad rates, or profits at all for that matter?
“We have new channels entering the market with lower ad rates not to make profit but just to be there, for prestige or whatever reason,” said Siwady, from the Arab Advisors Group.
For Ayntrazi, many of the new stations are part of larger corporations or set up by wealthy Arab businessmen “eager to promote their business or political ambitions.”
Azzi concurs. “Mathematically, if you calculate the cost of running those TV stations and their return from advertising, it’s a crash landing —unless they are supported by invisible money,” he says.
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