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Hearing into Advertising Industry

DEPARTMENT OF COMMUNICATIONS TO THE PORTFOLIO COMMITTEE ON

COMMUNICATIONS

6-7 NOVEMEBER 2001

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ADVERTISING HEARINGS

• Department of Communications Responsible for:

• Policy Development• Draft Legislation• Linkages and Development of Broadcasting

Sector• Shareholder Responsibility for State Owned

Entities• Monitoring Gender Mainstreaming

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ADVERTISING HEARINGS

• POLICY FOCUS:• Meet the diverse language, cultural, educational and entertainment

needs of South Africans• Meets broadcasting needs of all society including marginalised groups,

women and other segments• Promote ownership and control of broadcasting services by all sections

of South African population• Ensure access to broadcasting facilities, services and programmes by

all• Ensure fair competition in the provision of programming and services• Ensure predominant South African content in our South African

programming system• Ensure that the public has an opportunity to receive a variety of

viewpoints on matters of public concern.

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ROLE OF RADIO AND TELEVISION

• Broadcasting critical in our society as the most pervasive means of communication

• Most important institutions in portraying South Africa, how South Africa is seen and perceived, which ideas get discussed and who in our society is heard

• Most important institution in fostering a democratic discourse and allowing for the expression of different viewpoints about our national life or different aspects of that life.

• Most important Transformation tools for social justice including gender transformation

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ROLE OF ADVERTISERSIN THE BROADCASTING

DISPENSATION

• Constitute life blood of the Broadcasting System• Constitute 90% of revenue for broadcasting entities• Critical for station profitability, ability to pay market

related salaries, ability to acquire content and to compete in the provision of services

• Critical in ability of stations to earn money and re-invest in people, content and technology

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Hearing into Advertising Practices

• Hearings into Advertising Practices fundamental therefore to the broadcasting system:– Advertising is critical for success of individual stations and broadcasting

system as a whole– Any discrimination will impede ability of some stations to achieve

objectives of the Broadcasting system– Any discrimination will raise barriers to entry in the broadcasting system

for some– Any discrimination will therefore hamper the choice of programmes and

services to South Africans– Any discrimination that impede competition, market entry, and access to

capital for Black-formatted station further compound the problem of inadequate Black ownership and representation in the media

– Any stereotyping along gender or cultural lines violates fundamental rights– Any discrimination based on gender violates the constitutional provisions

of equality

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ALLEGATIONS AND PROBLEMS

• Some Broadcasters are subjected to systematic discrimination• Some Broadcasters are overlooked or ignored• The advertising Industry has thus far failed to be reflective of the South

African diversity in its employment, management, ownership etc.• Black-owned Agencies bypassed, stereotyped and treated as if their

only business is appealing to black audiences• Environment not enabling for women to sustainably and substantially

own and operate business• Advertisers unmoved by market research indicating black patronage in

substantial numbers of the products of companies• Generally, advertisers pay less money for commercial time on stations

targeting Black listeners• Preconceived notion, on the part of advertisers that Black Consumers

are unimportant and do not represent a lucrative market

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ISSUES

• Stations targeting blacks are unable to earn as much revenue per customer as stations that air programming targeted at whites

• Black owned stations earn less revenue per listener than white stations

• Anecdotes collected suggest that media buying process is guided by stereotypical perceptions of Blacks, women and others, presumptions about blacks’s disposable income, the desire to control product image.

• Black women in particular are under-represented as strategic decision makers

• Gendered meanings are conveyed by advertisements that reinforce societal stereotypes

• Advertisers refuse to back local content and willing to back foreign content

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Analysis of Advertising Spend over 5 Years

• DoC commissioned study

• Analysis of Trends over a five year period

• Focused on FMCG

• Broadly categorized stations into Traditional White and African stations

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Analysis of Advertising Spend over 5 Years

• The primary advertising spend categories as defined by AC Nielsen are as follows:

• Food

• Beverages

• Health and Beauty

• Home 1 ( including household appliances)

• Home 2(including print and electronic media, furniture, paints, pool cleaners,etc)

• Banking and Insurance

• Travel and Transport

• Retail

• Business to Business

• Education and Miscellaneous

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Selected traditional African and White radio stations used for the analysis

Traditional African radio stations Traditional White radio stations

Metro FM SAFM

Thobela FM RSG

Lesedi FM Jakaranda 94-97 FM

Munghana Lonnene FM 5FM

Motsweding FM Radio 702

Umhlobo Wenene FM Highveld 94.7

Ukhozi FM Good Hope FM

East Coast Radio

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Selected traditional African and White radio stations used for the analysis

Radio Stations 7 day Listeners (100% = 29 013 000)

J ul 1999 - J un 2000

J an 2000 - Dec 2000

J ul 2000 - J un 2001

% '000 % '000 % '000 Traditional African Stations 67,3 19171 67,0 19074 65,8 19102 UKHOZI FM 23,2 6612 23,8 6771 23,2 6732 METRO FM 18,9 5395 19,6 5572 19,1 5549 UMHLOBO WENENE FM 17,4 4970 17,5 4987 16,3 4730 LESEDI FM 13,5 3845 13,5 3858 13,1 3807 MOTSWEDING FM 11,5 3275 11,5 3265 11,4 3299 THOBELA FM 11,4 3238 11,1 3153 10,2 2947 MUNGHANA LONENE FM 5,2 1479 5,1 1465 5,2 1501

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Selected traditional African and White radio stations used for the analysis

Radio Stations 7 day Listeners (100% = 29 013 000)

J ul 1999 - J un 2000

J an 2000 - Dec 2000

J ul 2000 - J un 2001

% '000 % '000 % '000 Traditional White Stations 67,3 19171 67,0 19074 65,8 19102 SAfm 1,7 479 1,7 490 1,6 477 RADIOSONDERGRENSE 5,4 1529 5,2 1482 5,4 1572 J ACARANDA 94. 2 FM/RMFM 4,0 1153 4,5 1296 5,0 1438 5 FM 4,7 1349 4,7 1335 4,7 1362 702 TALK RADIO 1,4 409 1,4 392 1,2 357 94.7 HIGHVELD STEREO 2,8 800 3,1 885 3,1 907 GOOD HOPE FM 3,1 878 3,0 842 2,9 850 EAST COAST RADIO 3,5 998 4,1 1166 4,1 1186

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Year-on-year annual growth rates for FMCG

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

1996 1997 1998 1999 2000 2001

White

African

Year

White y/y

growth%

African y/y

growth%

1995   

1996 21,37 17,09

1997 12,20 2,62

1998 11,00 5,87

1999 7,77 0,76

2000 23,18 40,68

2001 –18,89 –32,19

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Radio advertising spend analysis

White and African radio stations generally indicate general directional increases and decreases. However, the magnitude of the increases and decreases differ significantly, particularly after 2000.

More advertising spend for Food and Beverages on African radio stations. Note, White radio stations are increasing advertising spend “share”.

Radio stations both White and African are prone to seasonal fluctuations in January of each year.

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A comparison of total advertising spend on African and White radio stations

0%

20%

40%

60%

80%

100%

Total white

Total African

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Results of Analysis

• Research shows that there are total 28 565 000 million total Black audience and 8 149 000 million White audiences respectively for the above stations

• Therefore practices in the advertising industry:

– Values Black and White audiences differently

– Pays less for Black audiences

– Prepared to pay a premium for White audiences

– Is an acknowledgement of divisions of the past

– Has not taken into account context changes over in the Broadcasting system over past five years

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Key findings of the analysis of television advertising spend

-100.00%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

SABC 1

SABC 2

SABC 3

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Year-on-year annual growth rates for FMCG

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

1996 1997 1998 1999 2000 2001

White

African

Year

White y/y

growth%

African y/y

growth%

1995   

1996 21,37 17,09

1997 12,20 2,62

1998 11,00 5,87

1999 7,77 0,76

2000 23,18 40,68

2001 –18,89 –32,19

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Key findings of the statistical analysis

Increase in total advertising spend over the period 1998 to 2000

African radio stations: 59,7%

White radio stations: 60,0%

Year-on-year growth analysis for FMCG

November 1999 – October 2000: African radio stations achieved

higher growth than White radio stations – 56,2% vs. 30,3% December 2000 – July 2001: Decline of 28,9% and 14,7% for African

and White radio stations respectively

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Key findings of the statistical analysis

Food Advertising:

African radio stations have a larger “share” of Food advertising spend than White radio stations;

“Share” of advertising spend lost by African radio stations from October 1997 to January 2000 regained during 2000;

White radio stations attracting more advertising spend on Food during first half of 2001.

Beverage advertising African radio stations claim large “share” of beverage advertising

spend; Over the period 1995 to 2000 White radio stations or other media

eroded the advertising spend of African radio stations by about 25%.

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Findings obtained from an analysis of television advertising spend

Channel 1997

% of total 1998

% of total 1999

% of total 2000

% of total

SABC 1 26.33 27.59 27.99 24,41

SABC 2 23.22 21.79 19.78 18,07

SABC 3 16.34 19.08 18.21 18,16

MNET 33.03 29.76 27.63 28,57

All spend 98.92 98.22 93.61 89,21

CSN = 1995; E-TV = 1998 and DSTV = 1999

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FUTURE SCENARIOS

• LIFESTYLES

• LANGUAGE

• CHANGING DEMOGRAPHICS

• ECONOMIC ACTIVITY

• AUDIENCE

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Population distribution per province for 1999

20.7

18.1

15.5

12.4

9.7

8.3

7.0

6.3

2.0

0.0 5.0 10.0 15.0 20.0 25.0

% of total population

Kw aZulu-Natal

Gauteng

Eastern Cape

Northern Province

Western Cape

North West

Mpumalanga

Free State

Northern Cape

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Population growth per province (1991 to 1999)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

19911992

19931994

19951996

19971998

1999

Po

pu

lati

on

('0

00)

Western Cape

Eastern Cape

Northern Cape

Free State

KwaZulu-Natal

North West

Gauteng

Mpumalanga

Northern Province

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Gender distribution per race (1999)

193

2,222

536

1,84416,019 17,221

1,948

556

2,317

198

20,000 15,000 10,000 5,000 0 5,000 10,000 15,000 20,000

Africans

Coloureds

Indians/Asians

Whites

Other

Male ('000) Female

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The main race groups in South Africa (1999)

Africans76%

Other/Unstated1%Asians/Indians

3%

Coloureds9%

Whites11%

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Percentage distribution of home-language

Sesotho

6. 9%

Xitsonga

4. 2%

SiSwati

2. 6%

isiZulu

22. 4%

isiXhosa

17. 5%

Af rikaans

15. 2%

Sepedi

9. 8%

English

9. 2%

Setswana

7. 2% Tshivenda

1. 7%

isiNdebele

1. 5%

Other

1. 8%

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Percentage distribution of economically active

population by main race group (1999)

Africans/Blacks73%

Whites13%

Other/Unstated1%

Indians/Asians3%

Coloureds10%

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ECONOMIC ACTIVITY

• Household expenditure by population group

0

10

20

30

40

50

60

% o

f to

tal

exp

end

itu

re

1993 34.9 53.5 7.7 3.9

1999 43.8 43.1 7.7 5.4

Blacks Whites Coloureds Asians

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Annual household expenditure by main expenditure group

Income tax & funds16.6%

Communication2.0%

Education1.8%

Recreation0.6%

Furniture 3.8%

Medical4.1%

Clothing 4.1%

Alcohol & cigarettes 4.2%

Transport8.7%

Reading matter0.4%Other

11.9%

Food19.7%

Housing and electricity

22.1%

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Content Issues

Future scenario stress the importance of local content Local content programmes increasingly are dominating the

broadcasting system. Trend to intensify. Local languages to achieve more significance. Markets are people not

products. No global motivations for buying brands. Rising levels of awareness in terms of gender and responsible

advertising against perpetuating negative stereotyping \

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Conclusion

Changing nature of society demands:

An advertising industry that is responsive to change

A diverse advertising industry

Diversity to include ownership and control from all genders, racial, cultural backgrounds

Diversity to include proportionate representation at all levels of the value chain

Diversity to translate to fair representation of all languages of choice

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Recommendations

TRANSFORMATION FORUM

To include major advertisers, agencies, media companies, Commission on Gender Equality, government and regulator

Terms of Reference:

To adopt a transformation agenda

Sets standards and norms

Adopt a skilling and training agenda

Monitoring and evaluation of transformation

Undertake ongoing survey to gauge extent of diversity in the industry

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Recommendations:

ICASA TO CONDUCT PERIODIC INQUIRY INTO ADVERTISING PRACTICES IN BROADCASTING

Inquiry to look at advertising practice in as much as it constitutes barriers to entry of black-formatted stations

Inquiry to look at advertising industry in relation to fair competition in broadcasting stations

Inquiry to look at Gender transformation

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Recommendations

Restructuring of the Complaints Structures, procedures and systems.

Statutory bodies to participate in partnership with self regulatory bodies in hearing complaints

Mandate of structures to preside on cases relating to gender stereotyping, unfair discriminatory practices, unfair treatment of stations and segments audiences

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Recommendations

Public and Professional Awareness Campaigns

Gender and Diversity sensitive programmes in training professionals in advertising industry

Public education to create a critical mass able to understand and analyse advertising context, messages and content

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Recommendations

ANNUAL INDICATOR/BAROMETER OF ADVERTISING INDUSTRY

Barometer to track advert placements and match to channels

Barometer to track products against stations and target consumers

Barometer to track major government/private advertising contracts

Barometer possibly produced by the Transformation Forum