By Lucy Hornby
BEIJING, Nov 8 (Reuters) - Growth in advertising sales by China’s state television has softened to the slowest in at least six years, a sign of corporate caution and an indication that the pace of economic growth could slow further too.
China Central Television’s (CCTV) annual advertising auction doubles as a barometer for the Chinese economy, with ad spending rising by about one and a half times GDP growth in each of the past several years.
CCTV’s total ad sales for 2012 rose by 12.5 percent to a record high of 14.26 billion yuan ($2.245 billion) in the auction held Tuesday. By contrast, growth ranged from 15 percent to 18.5 percent in each of the past five years.
“We definitely see a more rational GDP growth this year and heading into next year as well,” said Wei Zhou, chief financial officer for Charm Communications , the agency representing about a third of the 100 companies bidding at Tuesday’s auction.
China’s GDP growth has already slowed, to 9.1 percent year-on-year in the third quarter of 2011, from 11.9 percent in the first quarter of last year.
Still, as much of the rest of the world copes with waves of debt crises, the rose-festooned CCTV auction hall buzzed with advertisers trying to reach deeper into China’s hinterland to grow sales.
Foreign brands like Procter & Gamble , which held pride of place as CCTV’s biggest buyer from 2003-2008 , have given way to Chinese firms carving out a domestic brand.
Bidders were mindful of the lessons of the November 2008 auction. Then, international firms that cut spending due to the global financial crisis ended up losing market share once the Chinese economy recovered, Zhou said.
In an increasingly competitive market, big Chinese banks are moving from corporate lending to selling wealth management products, while regional manufacturers yearn for the sheen of a national brand.
This year, Bank of China battled it out with a Chinese meat producer for the coveted 10-second spot that comes just after the evening news.
It bid 76 million yuan for the right to air in that spot in January and February, the months that include the Lunar New Year celebrations.
Ad spending in China has increasingly flowed to more daring provincial satellite channels, whose dating shows and talent contests are wildly popular. Over the longer term, online advertising is also eating away at TV budgets.
But CCTV could get a boost as foreign and domestic brands, which originally only focused on the wealthiest cities, reach out to those consumers in the hinterland who still tune into CCTV’s period dramas.
“One of the things driving CCTV is that as clients move to 50 cities rather than 15. No regional channel can reach them the way CCTV can,” said Seth Grossman, China managing director for ad agency Carat.
State-owned CCTV also enjoys a little help from officialdom.
China’s broadcast regulator last month limited satellite channels from airing more than two hours of entertainment programs during prime time.
The directive against “excessive entertainment” also forces them to air at least two hours of news during evening hours.
That levels the playing field to some degree for CCTV, which is kept on a tighter leash and must air “harmonious” programming.