CCTV advertising revenue is set to rise — Companies pledge to spend $1.6 billion to run commercials on the Chinese national network next year

By Sky Canaves
The Wall Street Journal Asia
© Dow Jones & Company, Inc.

BEIJING — Advertising revenue on China’s national broadcaster is poised to continue to rise in 2010, as domestic and international companies pledged to spend $1.6 billion to run commercials on China Central Television next year.

The commitment was made during CCTV’s annual version of the U.S. networks’ “upfront” ad sales Wednesday, which saw about 250 advertisers participating in the auction, most representing local Chinese brands.

Xia Hongbo, director of CCTV’s advertising department, said about 50 multinational firms were present this year. Among them was PepsiCo Inc., which joined the auction for the first time, but declined to say how much it spent. Rival Coca-Cola Co. participated in the auction for the first time last year.

“Despite the significant growth in media channels across China, CCTV remains a formidable force and provides impressive national reach,” said Andres Kiger, head of marketing for Coca-Cola China.

The CCTV ad spending figures are often described as a barometer for the broader advertising market, and even as a proxy for the Chinese economy.

“The result of today’s auction fully reflected our entrepreneurs’ confidence in the Chinese market and in the Chinese economy for next year,” said Mr. Xia.

But the state broadcaster’s special status may overstate its impact somewhat and may also distort the market for ad buying.

“In many ways, CCTV isn’t a good indicator of confidence in Chinese consumers because it is the only national network,” said Shaun Rein, managing director of Shanghai-based consultancy China Market Research Group, adding that the return on investment for CCTV ad slots is difficult to measure. Still, Chinese companies tend to see advertising on CCTV as a source of pride, said Mr. Rein. “It’s like a Super Bowl ad” in the U.S.

The live auction of mainly prime-time ad slots drew an increase in revenue of 18.5% over last year’s auction, although figures aren’t directly comparable because of year-to-year variations in the inventory, or available advertising slots. Next year, for example, will see special broadcasts such as the soccer World Cup, the Vancouver Winter Olympics and the Guangzhou Asian Games on CCTV. Media buyers estimated that prices for prime-time slots increased about 15% over last year’s prices.

Despite the rising competition for ad spending from other broadcasters and the digital sector, Seth Grossman, managing director for eastern China at Aegis Group PLC’s media-buying agency, Carat, said, “CCTV is still the single most efficient way” to reach customers across the country.

Mr. Xia of CCTV said 2010 will see the biggest increases in advertising by companies in the home-improvement and appliance sectors, as well as from the auto industry.

Television ad prices are expected to continue rising across the board after new regulations take effect on Jan. 1 that impose restrictions on how much broadcast time can be allocated to advertising. The rules will have less of an impact on CCTV than on some other broadcasters, however, because it is already largely compliant with the new standards.

Xu Xinjian, chairman of Jiangsu Sunrain Solar Energy Co., said his company had spent about 140 million yuan ($20.5 million) on CCTV ads at Wednesday’s auction, compared to 100 million yuan last year. “It’s a bit expensive,” said Mr. Xu, but “the power of CCTV’s influence is beyond comparison with other media. It’s still worth it.”

A year ago, ad spending at the government-controlled TV station’s prime-time auction grew 15% and media buyers say they saw about a 10% increase in ad rates.

Hong Kong-based analysts Media Partners Asia expect total 2009 net ad revenue in China of $21 billion. The firm said it expects 2010 revenue to increase by 10% to 15%.