China's media marketplace is full of chaos and uncertainty right now -- so much so that a powerful provincial satellite TV broadcaster has scrapped some results from its recent advertising auction and announced a do-over.
The central government is putting the squeeze on China's previously freewheeling TV industry, clamping down on content and advertising. In recent weeks, China's State Administration of Radio, Film and Television (SARFT) regulator has restricted "overly entertaining" shows, then announced an end to commercial breaks during dramas. Earlier, time travel was banned from TV plots because it treats history in a frivolous way.
The result: less supply, more demand for ad minutes and even greater inflation in an already heated market, with some prices now jumping as much as 50% over last year, according to estimates.
"All of this has happened after most marketers had established their budgets for 2012. ...They may find themselves in a position where they may not be able to expand but [will] even get less for their money than they were getting last year," said Seth Grossman, managing director of Aegis Media's Carat China.
"China is the growth engine and to have nothing less than rapid growth is unacceptable for most marketers in China, so we're all trying to figure out how to do more with less," he said.
The new rule barring commercial breaks during dramas was announced last month, as state broadcaster China Central Television and the four biggest provincial satellite stations were holding their annual advertising auctions for 2012. The auctions are similar to the upfront market in the U.S., but crammed into a single frenzied day; the CCTV auction on Nov. 8 lasted 14 hours.
CCTV raised a record $2.25 billion at its auction, representing 12% growth in ad rates over the previous year, though that 's down from annual increases of 15% to 18.5% over the past five years.
Since the new restrictions were announced, CCTV and three provincial satellite stations have met privately with advertisers to make arrangements for purchased time slots that no longer exist. They have offered previously unsold airtime or created some new spots.
But Hunan provincial satellite TV -- hugely popular with its audience-pleasing shows -- hosted another auction Friday instead of trying to negotiate with buyers.
It seems it was a clever move: Prices at Hunan TV's first auction were already up about 30% over the previous year. At the do-over, prices went up an additional 20% for the most in-demand ad slots before and after dramas, according to preliminary estimates from Carat China.
There's also talk of creative ways to skirt the new rules banning commercials during dramas, which apply only to programs 45 minutes and longer.
"It's classic China; people will just make shorter dramas," said Greg Paull, principal at independent marketing consultancy R3 in Beijing. "There's discussion of making half-hour dramas instead of the full hour. It's going to be interesting."
Cary Huang, managing director of UM China, said while some clients adjust their media budgets to keep pace with double-digit inflation, others can't keep up with increases and are leaning on media agencies to dilute the effect through consumer-insight strategies and other means of optimizing ad dollars.
"The digital space will really benefit from this," he said, but added that ad rates on some of the most-popular sites have already started to climb.
Among marketers, McDonald's is still assessing the impact of the new rules on the TV advertising the company purchased for 2012, though none of its slots has been scrapped because of the new regulations, said Gavin Quan, McDonald's China media director.
But he pointed out that any shifts to digital aren't really related to changes within the TV industry. "We were already stepping up our digital efforts," Mr. Quan said, though he would not give specifics on how the budget breaks down.
The reasons behind the growing TV restrictions remain unclear. China's industry regulator has claimed they stem from viewer demand, though many observers think they are aimed at ensuring politically correct broadcasts in the lead-up to the upcoming government leadership transition in Beijing. Some also say it's a government move to protect CCTV by restricting entrepreneurial provincial satellite stations, though the rules seem to be driving advertisers to digital instead of back to the staid national broadcaster.