Hearing into Advertising Industry

1. Hearing into Advertising Industry DEPARTMENT OF COMMUNICATIONS TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS 6-7 NOVEMEBER 2001

2. 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

3. 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.

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. Selected traditional African and White radio stations used for the analysis

12. Selected traditional African and White radio stations used for the analysis

13. Selected traditional African and White radio stations used for the analysis

14. 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 Year-on-year annual growth rates for FMCG

15. 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.

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

17. 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

18. Key findings of the analysis of television advertising spend

19. 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 Year-on-year annual growth rates for FMCG

20. 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

21. 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%.

22. Findings obtained from an analysis of television advertising spend CSN = 1995; E-TV = 1998 and DSTV = 1999

23. FUTURE SCENARIOS • LIFESTYLES • LANGUAGE • CHANGING DEMOGRAPHICS • ECONOMIC ACTIVITY • AUDIENCE

24. Population distribution per province for 1999

25. Population growth per province (1991 to 1999)

26. Gender distribution per race (1999)

27. The main race groups in South Africa (1999)

28. Percentage distribution of home-language

29. Percentage distribution of economically active population by main race group (1999)

30. ECONOMIC ACTIVITY • Household expenditure by population group

31. Annual household expenditure by main expenditure group

32. 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 • \

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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