A decline in annual advertising revenues in 2014 has resulted in losses of $50 million for television stations in Lebanon, according to Talal Makdessi, chairman and CEO of Tele Liban.
“Total expenses of television stations in Lebanon reached $110 million in 2014 while their revenues amounted to only $60 million, which left them with a deficit of $50 million,” he said during an interactive discussion held at the Beirut Traders Association to discuss the major difficulties undermining media and advertising in Lebanon.
Makdessi said this wide deficit was also partly due to Lebanese television stations trying to compete with international cable networks by spending huge amounts of money on their programs because the Lebanese population is very particular.
Makdessi stressed that some of the TV stations which are affiliated with certain political parties are directly funded by these parties to compensate for the deficit. He added that other commercial TV stations that do not belong to any political parties are sometimes obliged to prepare news items in return for payment from certain influential groups.
He said that the deteriorating political and economic situation in the country also weighed heavily on revenues generated by TV stations.
He said that based on the rate cards, advertising run by the eight Lebanese TV stations is valued at $1.259 billion but the actual revenues are only $60 million, 5 percent of the monitored amount.
“While this percentage is too low in Lebanon, it reached 75 percent in UAE, 70 percent in Saudi Arabia and 50 percent in Kuwait,” he said.
Makdessi explained that one of the reasons behind this low percentage in Lebanon is that local companies allocate huge amounts for their advertising plans but the actual money they spend on ads is much less.
“The mother company located outside Lebanon, for instance, promises to pay $500,000 for a TV campaign on condition the local distributor also pays the same amount for advertising,” he said.
“The total amount allocated for the ad would be $1 million but the local distributor ends up sending a study to the mother company saying the value of this advertising campaign is $4 million according to rate cards and that he managed to get a discount,” he said.
“The local distributor ends up paying around $250,000 for his ad instead of $1,000,000 and he puts the rest in his pocket,” he added.
Makdessi believes the best solution to this problem is the installation of telemeters in a bid to determine the exact rating for each program. “This would help TV stations in revising their rate cards according to these ratings and to avoid cutting their prices randomly in a bid to compete with one another,” he said.
He recommended the installation of 800 telemeters for this purpose in addition to the formation of a committee to visit houses and make sure the machines were working properly.
Makdessi added that discounts by TV stations for broadcasting ads should not exceed 20 percent of the cost mentioned on the rate card.
He said that such a strategy would lead to an increase in the revenues of TV stations by $40 million in the first year, $60 million in the second year and $80 million in the third year. “TV stations would then start by generating good revenues instead of incurring deficits year after year,” he said.
Makdessi said cable subscribers in Lebanon would soon be asked to pay an additional fee to TV stations in exchange for access to their channels.
LBC Chairman Pierre Daher said the most serious challenge facing TV stations today was competition on the Internet. “Today people can download programs without having to go through ads,” he said. “They do not have to run to their houses at a specific time to watch a program.”
Meanwhile, Nicolas Chammas, president of Beirut Traders Association, warned that the sharp drop in advertising spending has become identical to backward countries. “This drop is impacting both the trade and media sectors,” he said.