SHANGHAI (AdAgeChina.com) -- October is the season for annual budget meetings, always a stressful time of year for advertisers and media agencies in China.
But mapping out plans for 2010 is demanding a "disconcerting" amount of guesswork, said Seth Grossman, Carat's managing director, eastern China in Shanghai.
That's because China is changing regulations for advertising and sponsorship for local and regional TV stations, many of which have near-national reach through cable and satellite syndication. There are a lot of them, too. China has 55 provincial channels, 770 local TV stations and 144 cable channels. The new rules threaten to make reduce the amount of prime time ad slots available, and make them more costly.
"Satellite TV is becoming more popular and more relevant as a way into third- and fourth-tier markets. Now there will be more pressure in terms of getting premium airtime on those channels," said Malcolm Hanlon, CEO China, at Zenith Media in Shanghai.
New guidelines issued by the State Administration of Radio, Film, and Television (SARFT) will bring regulations for those stations in line with the rules at China Central Television (CCTV), the country's state-run national broadcaster.
Based in Beijing, China's capital, CCTV has little choice but to adhere to the Communist Party's wishes. Broadcasters farther away, however, particularly in southern provinces like Guangdong and Fujian, have operated with more leeway -- until now.
Restrictions on airtime
SARFT's new rules, starting Jan. 1, 2010, will affect advertisers and station owners in myriad ways.
Commercial airtime in TV should not exceed 20% of airtime per day and will be limited to 15% -- nine minutes per hour -- during prime time. Only one ad break is allowed per show in a 45-minute drama outside the 7 to 9 pm slot, and that break can't be longer than 2.5 minutes.
Ads for tobacco products and many pharmaceuticals will be banned, and it could become harder to advertise spirits on TV, although this is one area where the new regulations are open to interpretation by the broadcasters, who ultimately are held responsible for what airs on their channels, not advertisers.
This is creating confusion around Chinese New Year, coming up in mid-February 2010. Spots for that major holiday period usually are reserved now, but buyers don't know exactly which ads will be allowed during prime-time, or how much they will cost.
Advertisers will no longer be allowed to sponsor news and political programming, and it will be harder for broadcasters to show brand logos in the corner of TV screens during entertainment programming.
Another new rule would take away naming rights. Hunan Satellite TV's former top hit "Mengniu Yoghurt Super Girl Contest," for example, would have been called something like the "Super Girl Contest sponsored by Mengniu."
Television shopping programs will be re-classified as advertorials that count as commercial airtime, not programming, and are banned from news and educational stations, like the Beijing Science and Education channel, and other niche stations. That decision is a blow to smaller channels that currently air home shopping as inexpensive programming during non-peak hours.
Prime time will get more expensive
Always eager to maintain tight control of its airwaves, the government is cracking down on operators with a renegade approach. But the lack of clarity and specifics is common in China's media industry.
The meaning behind some of the regulations introduced this fall remains cloudy for broadcasters. It's also unclear whether some broadcasters will follow the new rules to the letter.
"Bigger players change almost immediately, smaller players don't," Mr. Hanlon said.
What is clear is that prime time advertising will become more scarce and costly. But new rate cards won't be issued for several weeks, leaving media buyers in a fog when it comes to allocating TV budgets for next year. The situation is especially hard on medium-size advertisers and niche players like luxury goods, high-end sportswear and foreign spirits brands who rely on prime time exposure.
"On a market-by-market basis throughout China, we're determining inventory and estimating budgets for 2010, but for advertisers, the situation is really frustrating," Mr. Grossman said.
"Media vendors were already budgeting for some fairly hefty increases. The SARFT regulations will add a couple of percentage points on top of that," Mr. Hanlon said.
CCTV auction creates benchmark for smaller broadcasters
Local and regional broadcasters, meanwhile, are analyzing the implications and still figuring out their 2010 rate cards, even for airtime just weeks away in January.
They are unlikely to issue the new rate cards until after Nov. 18, the date of the annual auction CCTV holds in Beijing for prime time ad slots and sponsorships. The new regulations don't affect CCTV, but the auction gives smaller channels a sense of supply and demand for airtime.
"There's a collective holding of breath leading up to Nov 18th, when the rubber hits the road and China's advertisers bid at the CCTV auction. That will be the best barometer of China's growth," said Greg Paull, a partner at R3, a marketing consultancy in Beijing.
CCTV sets the benchmark, for advertisers and smaller media owners.
"If you're a local channel like Wuhan TV. They look at CCTV as a guideline for how much they can charge. [Waiting for the auction] will take us past Nov. 18 before we have real clarity, but we are expecting an inflation in the marketplace," Mr. Grossman said.
Marketers plan for tough negotiations
Marketers are bracing themselves for tough negotiations after the auction is over, he added. "The economy is good but it's not great, my clients will push back against significant increases."
The same is true at Zenith, Mr. Hanlon said. "Some of China's local and regional broadcasters didn't have such a good year in 2009. They probably achieved less than 10% growth and will try to make up some of the lost revenue. There is a mandate to maximize revenue next year during the World Expo , World Cup and Asian Games."
But media agencies "won't have too much tolerance" for increases, Mr. Hanlon said. "Advertisers aren't prepared to pay the increases anymore, because brands aren't growing at 20 or 30% like they used to. Our clients' media budgets aren't going up 25% next year, that's for sure."
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