VIG to Suffer USD 3.5 Million Loss from Cancelled Ads

VIG to Suffer USD 3.5 Million Loss from Cancelled Ads

The FINANCIAL -- All advertising has been suspended at Imedi TV since the November 7 raid on the News Corporation owned TV station. Video International Georgia (VIG) exclusive media seller of Imedi TV estimates USD 3.5 million losses from the cancelled ads in November-December 2007.


imedi-tv-tatia.jpg“All advertising is suspended as of now since we have no way to run any commercials,” said Lewis Robertson, the head of News Media Caucasus, Imedi’s parent company.


“We don’t do pre-payment and moreover, ProCredit Bank Georgia doesn’t have a direct contract with TV channels. The bank manages these issues through a media agency. The money we invested in advertisements on Imedi TV will be reallocated to other channels. We won’t have any losses and even if we would, they wouldn’t be that much as ProCredit doesn’t spend a lot on advertising. Last month the total TV budget was USD 35 thousand, which is not a big budget anyway,” Philipp Pott, General Manager of ProCredit Bank Georgia, told The FINANCIAL. 


“It’s not the right time to speak of the financial losses and obligations Imedi TV should take. Taking into account the official statements that are being made, Imedi will come back on air in the near future. Hence, we don’t think it’s a big problem for the companies since as soon as Imedi TV reopens, it’ll naturally start carrying out the obligations the TV station’s responsible for, whether it’s those of TBC Bank or any other ad client company,” Maia Dzirkvelishvili, Head of TBC Bank’s PR Department, told The FINANCIAL.


“There’s a rather simple solution to the subject. The contracts we sign with the companies envision different types of force-major situations like earthquakes and other natural disasters. In the case of such unpredictable developments, we take the responsibility to compensate each cancelled ad twice. VIG suffered a minimum of USD 3.5 million losses for the cancelled ads in November-December 2007,” Nikolai Sosnowski, VIG General Director, told The FINANCIAL.


Video International Georgia began operations in mid-April 2005 as exclusive seller of advertising for Imedi.


According to the FTM November 5, 2007 report, Video International, Russia’s largest and politically well-connected media sales-house, opened an office in Tbilisi in 2005. At the time annual television ad spending in Georgia was estimated at less than USD 10 million; growing, but still very small. Imedi Media was its first client.


According to Sosnowski, the companies that have a prepayment contract with VIG get special discounts that are more affordable than banking credit. Additionally, in the case of a sudden rise of prices, so called “media inflation,” the minimum level of which could be 35% in Eastern European countries, there is no effect on companies that have signed a prepayment contract with VIG.


“Twice a year, on April 1 and October 1 prices on ads increase. An additional comfort for our prepayment clients is that as soon as Imedi is back on air, they’ll be able to enjoy the old prices before the contract expires. If we consider the worst case scenario where Imedi is never reopened, all prepaid money would of course be returned to the companies,” claimed Sosnowski.


As Sosnowski defined, 30% of the companies prefer Gross Rating Point (GRP) to the Per Minute payment services. Media House, which sells ads for Rustavi2 TV Company, also operates GRP.


GRP is the sum of ratings achieved by a specific media vehicle or schedule. It represents the percentage of the target audience reached by an advertisement. If the advertisement appears more than once, the GRP figure represents the sum of each individual GRP. In the case of a TV advertisement that is aired 5 times reaching 50% of the target audience, it would have a 250 GRP = 5 x 50% -- ie, GRPs = frequency x % reach.


A related metric, TRPs, or Target Rating Point, is a measure of the purchased targeted rating points representing an estimate of the component of the targeted audience being reached by an advertisement.


“Since the closure of Imedi TV, Rustavi2 has become the 95% leader of the market. As for the other TV companies, we see no reason to start partnership with them as these TV companies are capable of handling the little percentage of airtime that they sell themselves,” said Sosnowski.


Up untill November 7, according to AGB monitoring, Imedi was selling 53% of the total GRP, that’s the real product bought by the ad client companies, while Rustavi 2 statistics were 47%, and all remaining TV companies- less than 3 %, which is a great decline for the latter since their statistics of 20% in 2005.


“In Georgia people watch TV rather more intensely than in Europe, which points to the low social development of the country as the population has no alternative means of entertainment. In the U.S people watch on average 3 hours and 20 min of TV a day, in Europe- 3 and a half hours, and in Georgia- 4 and a half hours.


“The most rating programs on Imedi TV are TV serials and news broadcasts, Droeba in particular. The same goes for Rustavi 2, where P.S is the best rated news program,” noted Nikolai.

As Sosnowski stated, the official price per minute of an ad in Droeba is USD 2 500. As for GRP, per rating point costs USD 60 for prime time and USD 47 non-prime time. Since the special discounts an average cost has been defined as USD 15-16.


“No ad sales company actually sells air time in exact accordance with the price list. In Ukraine, for instance, one could get an 85-90% discount and in Russia 95%, which is an unprecedented discount. In Georgia during the last three years an average discount ranges from 40-70%,” said Sosnowski.


Sosnowski claimed that the bigger ad buyers are generally: mobile operators, construction companies, pharmaceuticals, and banks. It’s an indicator of the country’s priorities. In the U.S.A banking services and automobiles are the top most advertised products. While in Georgia I can recall early times when lotteries were at the top, today banking products and services are generally the most advertised on TV.


“In Georgia we don’t have that big a difference between the prices offered to big companies and those to relatively smaller ones whereas in Russia there’s a 4 times difference. Large global companies like Proctor & Gamble aren’t making much of an effort to boost their advertising activity at the moment while local companies are generally following more aggressive advertising approaches,” noted Sosnowski.


“The government might have the right to close down any TV channel but I just can’t understand the reason for their destroying the equipment,” said Sosnowski.


“Our lawyers are looking into the ruling and will prepare a response as soon as possible. We will obey the law! The ruling against Imedi is totally rubbish. They have to have something to blame the raid on and this is a very convenient response. Proving it in a court of law will be something else for them to have to face though,” declared Robertson.

Meanwhile Imedi TV journalists remain temporarily unemployed.

“All of our employees will be paid full working salaries,” said Robertson.


Meanwhile Inga Grigolia, a host of popular political talk shows at Imedi TV, said she had quit the television station. “I am starting cooperation with an independent [TBC] TV studio and our products will be aired by various TV stations, including by Rustavi 2, Mze and I hope by Imedi when it is back on air,” Grigolia told Rustavi 2 TV on November 23.

Grigolia also said that the major reason behind her decision to quit Imedi TV was, as she put it, inability to host real political debates in that television station. According to Civil Georgia website another anchor of political talk show at Imedi TV, Eka Khoperia, has also announced couple of days ago about intention to quit the television station. She said she would only continue hosting a program at one of Tbilisi’s FM radio stations, Ucnobi.