Media International Service, an Armenian-Ukrainian joint venture in the business of selling TV ads, launched in Armenia on Apr. 1, 2013, developing in the market a new model of advertising sales (not per minute of advertising but per rating; that is GRP). 

Media International Service Director Tigran Safaryan finds that a sales house sells not advertising but conditions, by which it sells advertising to ad agencies. “We collaborate with nearly all (more than 10) of the agencies in Armenia,” he stresses. 

According to Safaryan, the entry of a sales house in the Armenian market made the market more open, transparent, and simple — and most importantly, there was a reassessment of the entire television market.

Was there a need for a reassessment of the market?

It turned out, yes. Actually, the market is smaller than we had imagined. First, it was small to begin with, and second, in recent years, it’s gotten smaller. Armenia’s advertising market is valued at $40 million USD, and we can consider that $30 million covers the television advertising market. This figure had become so dear to us that we couldn’t even imagine that the real figure is much lower — by about 30–40%.

In the past, there weren’t the measurement tools there are now, and assessments were made by experts, who couldn’t precisely say what the channels sold, at what price, and how. 

There was a myth in Armenia that the global economic crisis didn’t impact our market. This odd situation was favorable to some TV station owners, who, based on their own interests, inflated the market figures. The TV companies wanted to assure everyone that everything’s great, there’s no crisis, and the ad is getting into the channel. 

The stations receiving funds from large donors can permit themselves to take steps not arising from business interests and constantly compete with each other for ratings. But the problem is because of this senseless competition, the market had become inflated, especially the expenses. It was being declared that actors are receiving millions, expensive decorations are being prepared, and hosts are being “kidnapped” from other stations. This race led to the fact that nearly everything in this sector was being overvalued. 

Today, we are second only to Russia in the CIS [Commonwealth of Independent States] in producing soap operas, which is not normal, since in other indicators we’re not close to second place at all. For comparison’s sake, let me say that Moldova, the advertising market of which is $15 million, apart from new releases, has only one domestically produced program and it’s a morning show. That is to say, it’s the only program that the stations can allow themselves [to produce]. 

So, what is the abundance of soap operas an indicator of?

An arms race or a “Cold War.” One station did it; the other repeated it; the third, continued. The debts began to accumulate, double. I repeat, the television market was overvalued. Those monies that the stations presented as expenses didn’t really exist. 

In the television market, bartering was common: that is, exchanging airtime with goods or services. 

I wouldn’t call the situation bartering. The stations were used to working with this somewhat vague scheme: you’ll give the money; then I’ll give it; then one day we’ll give it to each other… They didn’t consider all the expenses, the taxes — they paid off debts with debts. And that, at a time when 12 soap operas and soap opera–like programs were being broadcast at the same time. The three leading stations, H1, Shant TV, and Armenia TV, each had four soap operas (as per the May figures), which didn’t make any business sense. 

Basically, the sales house also plays a unique role of an auditor?

Of course, we are engaged in advertising sales, that is, purely commercial activities, but it turned out we are also reshaping and reinterpreting the sector, since we’re showing the reality. Thanks to us it became clear that the current figures in the television sector were inflated and need to be reviewed. And [this refers to] first of all the monies spent on soap operas. 

Why soap operas?

Soap operas are very important because they ensure 40% of the channels’ rating, its GRP [Gross Rating Point]. Imagine, an ad placed in a soap operas is viewed by about 250 thousand people!

“The current situation is an indicator of an arms race or ‘Cold War’ of soap operas”

The correct implementation of the sales by GRP model revealed also another pattern: it turned out we didn’t even need [to measure] GRP. Imagine, Yerevan with its one million inhabitants consumes one million loaves of bread per day. If we transpose this situation onto the television sector, it would mean that for a population of one million viewers, two million ‘loaves of bread’ are being produced; that is, the TV stations are producing twice as much as can be consumed. And every day the loaves of bread (the TV programs) that are not consumed are taken to the trash and burned.

Since the stations have sold not ratings but minutes [of advertising] no one has done any follow-up research to determine how much “excessive” product television has produced; consequently, more money has been spent and less income has been received. 

There’s a simple explanation: if 50% of the rating isn’t sold, then it’s not needed. I’m speaking now purely from the business point of view. The stations haven’t sold the [full] extent of their product and for years have thrown half of their product in the trash, using ratings for a bogus race. It’s of no interest to anyone which channels are in first, second, or last place…

Is it possible for the next step to be a reduction in the number of channels?

There have been a lot of channels from the start, especially if we consider that about 95% of the advertising “cake” belongs to three, four channels (at least that was the case before we entered the market), while the remaining channels had to be satisfied with the negligible percentage of the market. 

How to do it so that the money received from advertising assists the smaller channels, including also local, regional channels, contributing to their financial independence?

The primary issue is to exclude that 50% market bubble from the calculations. At this time, we’re not prepared to share ads with the smaller channels. A few channels’ ratings are quite high (though really it shouldn’t be like that) and when the market is reshaped, the inflated ratings will lower automatically and the expenses will drop. 

Of course, this process might be accompanied by cuts in programming and staff (Shant TV and Armenia TV are already in that process), but that too is a natural urge. Forgive me, of course, [but] they gather people off the street, call them actors, and spend the television industry’s money. That’s illogical. 

I would call this entire process a return to reality. If the station, say, produced a product valued at $5 and somehow sold it for $100, then it should know that one day this deception will be uncovered. We found out that there were programs that were overvalued and those that were underestimated (mainly analytical programs and talk shows). 

Let me also say that the TV stations are quite displeased with our findings. First, because the truth is not always pleasant, and second, there’s the illusion that the seemingly huge sums of money are preferable to small, but real monies. 

It’s noticeable that the advertising ratio has changed — foreign ads have increased while local ads have reduced.

The whole meaning of the correct implementation of advertising sales is to bring in money from outside. Clearly we can say that the budget of foreign advertising has increased, while the local [advertising budget] has remained the same. Our goal this year is to preserve the local budget, while next year we predict a 30–35% increase in the local market. 

The existence of a sales house prompted foreigners to add to the budget, since the system at work is understandable and acceptable for them. Our market is no longer “black,” as it was for many years, and due to this, international brands are ready to spend more.

In the past, it was common practice to spend residual funds on advertising in Armenia: when it came to our region, a large part of [clients’] budgets were spent on Georgia and Azerbaijan, while we got the crumbs of the large amounts. But now major foreign companies are increasing their expenditures. And consider that an increase of 5–10% of funds is a formidable amount for us. 

Procter & Gamble, for example, increased its investment by 35% (and that’s a serious amount of money). You undoubtedly will find this company’s products in every household, which means that one way or another we buy those goods. That is, it took its money home, but didn’t spend it in Armenia. But now it will. 

What is the reason for the decrease in local advertising?

The total volume of local business has decreased (the fewer the people, the less the consumption). It’s like this in the whole world. Recently, I was in Portugal, where it’s the same situation: in stores, fewer products are sold, advertising is cut, while half of the population goes to Spain — for work. In turn, half of Spain goes to other countries in Europe for work. 

Will reassessment [of the market] lead to a change in the content of the programs?

Advertising sales is a basic commercial activity, which indirectly impacts the shape and quality of the actual product.

“There was a myth in Armenia that the global economic crisis didn’t impact our market. This odd situation was favorable to some TV station owners, who, based on their own interests, inflated the market figures”

It can be noticed that many channels, apart from filming never-ending soap operas, think also about showing films and producing their own films and analytical programs. There’s just one problem: the channels have to come to an agreement and simultaneously be able to abandon soap operas. If any channel continues to keep four soap operas on air (using not television but other financial sources), it will always be the first. And regardless of what valuable things the other channels do, all the same, people will watch the soap operas. And so, the market itself has to come to a common denominator and cut back, deciding with what sort of programs it will fill the gap. 

I think, the next step is the channels’ conceptual development. Now the channels are working without a clear concept. Many channels’ target audience is uniform; meanwhile, it shouldn’t be like that. It is advisable for the channels to have their own target audience; that way it will be easier to sell their product. 

Some people are also considering the idea of creating a second sales house. Let it be set up, if the need for it is felt. I think, it’s more important that all channels move to the model of selling ads based on GRP, since doing otherwise disturbs everyone. 

Word is that Media international Service also sells radio and internet advertising.

The Ukrainian Media International Service began selling internet advertising, but not the Armenian one. Our [local] media wrote about that, but that’s not accurate. 

Radio monitoring is done, and we will see what figures the measurement company will be able to provide. To tell you the truth, I’m quite displeased with the work of our two measurement companies: the data supplied by both AGB Nielsen and Telemediacontrol (which two months ago I was heading) needs to be improved.

More and more, there are fewer TV viewers. Don’t you think there’s a need for internet measurements, since many watch television programs online?

Of course there is, but that is future work. The opinion that all are migrating online is a myth. Actually, the drop in TV viewers is negligible, about 3–4%.

Heavy TV viewers and consequently the main consumers of advertising are 18–44 year-old women. This is a global trend, which will continue probably for 5–10 years. The move toward the Internet is completely different in nature, since TV viewing itself and acquiring information in general is becoming split and personalized. People with higher education prefer getting information from the Internet, but mass production, all the same, is in the television sector. 

Why was it decided to establish Armenia’s sales house jointly with the Ukrainian company? Media International Service in the Ukraine mainly sells advertising to smaller channels and doesn’t have a successful reputation.

Media International Service in the Ukraine very successfully sells to 4–5 channels; it operates in Moldova, which, by the way, in terms of the nature of business and market structure is very similar to us [Armenia].

We didn’t want to collaborate with larger foreign sales chains, since their conditions were unacceptable for us (the use of patents is also quite expensive). Either we had to do everything ourselves or appeal to experts. And Media International Service was the most desirable option. After all, our market is not that big.

How did the business sector react to the creation of a sales house?

[The reaction was] mainly positive, except for a few companies, which were displeased since for years they had gotten accustomed to placing quite strict, oppressive conditions for the channels. But the main market is positively inclined.  

Recently, I noticed something interesting: comparing our and Russia’s blocks of advertising aired, I discovered a 90% concurrence. That is to say, that which is advertised in Russia is also advertised here. 

What does that mean?

It means we’re building a classic market (I’m talking about the structure of the advertising market, not about the business sector). 70–75% of the advertising in a classic market has to be comprised of familiar, global brands. That is, the majority of airtime is allocated to the top brands commanding a large part of the international economic sphere and not to local lotteries or small wine productions. Two months ago the picture was completely the opposite… 

It can be said that we fulfilled our main function: a certain culture of advertising sales was shaped in the market (which had never happened before). There are now favorable conditions for the development of the TV advertising market. 

Interview conducted by Nune Hakhverdyan.