CCTV’s strategy of offering more events and more flexible packaging paid off handsomely as the national broadcaster rang up RMB6.7 billion (US$855 million) in ad revenues from its annual prime time auction for 2007—15.7% more than the previous year.

The participation of more multinational advertisers and keenly sought-after packages leading up to the the 2008 Beijing Olympic Games contributed to the record result.

“As CCTV bidding is the benchmark for all advertising in China, it appears the outlook for 2007 is very optimistic,” was the bullish assessment from media agency Mindshare. “Without question there will be an increase in advertising around the Olympics, and it appears the competitive environment for banking and insurance will be vibrant. Furthermore, the fast moving consumer goods industry will see great activity in 2007. CCTV continues to be the envy of the media industry. But we should expect competitors, such as Hunan, Anhui and Dragon Satellite TV, and local strong television stations to compete with CCTV Prime Time Resources.”

“CCTV is still a powerful brand in China media scene,” says Juliana Tang, national buying director at Carat China. “It still has a monopoly in certain genres, for example, in sports programs. It is also able to secure all the best dramas on an exclusive basis with heavy investment - which is difficult for local and provincial stations.”

According to Tang, the average inflation in base bidding price is about 10% for general resources excluding specials, in line with China’s GDP growth of 8-10%.

Carat noted that CCTV’s advertising revenue in 2005 was RMB8.6 billion, of which 61% was generated from the prime time bidding auction. Simon Huang, deputy general manager, GroupM Trading Beijing, says the special units this time covered more key events such as the Olympics, sports packages on CCTV5 and the Chinese New Year Party.

“Cumulatively, these special packages accounted for 27% of total bidding versus 3% in 2006,” says Huang. Huang adds, “CCTV is winning the game. National viewing share is climbing up, from 30.4% of 1999 to 36.07% in the first half of 2006. CCTV is targeting to take this share to 40% by 2007.”

He praises the broadcaster for leveraging its monopoly TV resources via exclusive reporting of news events, big sports games and events, and exclusive dramas. Apart from improving the programming quality and the environment for ads (through high-standard censorship and limiting the duration of ads, it is also focusing on making more tailor-made ad projects for clients.

Overall, P&G emerged as the top spender at the auction, shelling out US$53.6 million. Other top buyers included Wang Lao Ji Herbal Tea ($48.4 million), Mengniu dairy ($31.6 million), Minsheng medicine ($25.39 million), Haier ($23.6 million), Longliqi ($21.7 million), Yili dairy ($21.1 million), Lenovo ($21 million) and China Telecom ($19.7 million). Multi - national companies collectively accounted for 17.4% of the overall advertising spend, forking out $150.6 million. MindShare said this is the third time P&G led CCTV’s auction as the firm continued to focus on buying the Focus Review program and drama slot packages.

“This year saw many more multinational brands participating in the auction, suggesting an increased interest in advertising on CCTV. Brands such as Avon, Colgate, Motorola, Nike and VW participated, for example. However, given careful evaluation and overall ROI, MNC involvement is still fairly conservative.” MindShare stated.

In product categories, food and beverage accounted for 25.9% followed by FMCG (15.1%), medicine (12.8%), finance and insurance (8%), electronic products (6.8%), clothing (6.2%) and telecommunications (5.3%).

Specifically, there were four exclusive title sponsorship related to the Beijing Olympics. These were Countdown to Olympics (taken by Lenovo for $20.7 million), My Olympics (by Bank of China, $10.54 million), Olympics Torch Relay (Yili Dairy for $10.22 million) and Olympics Host Selection (Bank of China for $5.74 million), according to Annie Yuan, Research Director, Carat China. Three other main attractions were Sports Events Live Telecast (new), Chinese New Year Party Time Report (new) and Voting of My Favorite Chinese New Year Party Program. Yuan added that Sports Events Live Telecast garnered $70.8 million, with Wang Lao Ji herbal tea committing $38.3 million.

“In terms of inventory, the major change this year is that advertising slots after 7pm News Report increased from 5-second to 7.5 second - a total increase of 30 seconds per day (2.5 sec per slot x 12 slots). This way advertisers can include more information in commercials aired during the highest rating regular program on CCTV. Also, ads before 7pm News Report have been reduced from five to four pieces - a reduction of 15 second per day,” says Yuan.

CCTV is expected to benefit immensely in run-up to the Olympic Games in 2008. “One thing is certain that most Olympic sponsors, companies associated with it and their competitors will invest in CCTV, trying to block each other in certain degree in CCTV, which is one of the main platforms in limited resource,” says Huang.

Huang says CCTV needs to develop new bidding resources. “There is need to design higher rating, more coverage/reach generation platform, more valuable and flexible bidding packages. From clients’ perspective, we think this is the step CCTV is taking, and we are glad to see it is happening,” he says.

MindShare acknowledges that sustaining the revenue growth for CCTV Prime Time Resources would be a big challenge for CCTV. “While the concept of “pre-selling advertising” has been a vision for CCTV, this has not become a reality to date, and CCTV continues to depend on the “bidding auction.” However, we believe in the future CCTV will adopt pre-selling advertising once they figure out the right model for this,” the agency stated.

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