The vodka effect
Yesterday the National Assembly passed the bill on TV and Radio advertisements through the first reading with 66 votes for, and 2 – abstained.
The bill was initiated by parliamentarians Samvel Pharmanyan, Arman Sahakyan, Levon Martirosyan, Naira Karapetyan, Arthur Gevorgyan, Edmon Marukyan and Tachat Vardapetyan. This law will allow TV companies to advertise alcohol (more than 20%) and cigarette between 10:00p.m. and 06:00a.m. Currently TV and radio companies cannot advertise any alcohol higher than 20% but cognac / brandy only. The parliament did not accept the opposition’s statements opposing to the bill. The parliamentary majority believes that this law will allow TV and radio companies increase their budgets. They also believe the law will not increase the consumption of alcohol much “as Armenians know how much alcohol they should consume.”
Why would alcohol producers order advertisement if it does not increase the volume of sales? What is the real benefit of this bill?
The ban on alcohol advertisement on TV was adopted in 2002. TV and radio companies have been working without alcohol advertisement for the past 12 years. Why do they understand that alcohol advertisement is good now?
According to official statistics, the income of TV companies from airing broadcast was 10.5 billion drams in 2011. In 2012 the income was 8.5 billion, and in 2013 – 7.8 billion. Maybe the financial situation of TV companies has dropped much, and now they want to compensate the loss in profits with alcohol advertisement.
Announcements of MPs in the parliament during the discussion of the bill may create an impression that the ban on alcohol advertisement is the reason why TV companies are not lucky and do not make much money. As a result, the misfortune of TV companies becomes the Misfortune of viewers as they have to watch low quality TV programs. According to supporters of this bill, if proclaimed the law will provide one billion more income for Armenian TV companies, and there will be more payment to the budget.
Let’s assume this is reality and TV companies are losing money due to the ban on alcohol advertisement. If this is true, how did it happen that in 2012 the profit of TV companies grew not by per cents but by several times?
In 2006 the profit of companies in Television and radio broadcast industry was 2,9 billion, in 2007 – 3.1 billion, in 2008 – 3.3, and in 2009 – 4.7 billion drams. In contrast, in 2011 the profit of TV companies only was 10.5 billion drams.
Throughout this entire time alcohol advertisement was banned on TV but it did not stop TV companies form making money. This means that the ban on alcohol advertisement is not the reason why incomes of TV companies are declining. It is not certain either that this new law will help TV companies to solve this problem.
It is a fact that TV companies do not have much income as they do not pay a lot in taxes either. There are a couple of dozen TV channels that cover Armenia’s entire territory, however, only 7 out of them were included in the last of the largest 1,000 taxpayers. The largest taxpayer TV company is Armenia TV with 537 million drams (207th place). The Public TV is in 236th place with 465.7 million. Shant TV is in the 452nd place with 441 million. The other companies that were in the list of 1,000 largest taxpayers are A-TV (170.9 million drams), Armnews (139.9 million drams), AR TV (125.1 million) and the Second Armenian TV Channel (124.4 million drams). Many universities and hospitals paid even more tax than these TV companies.
There is no reasonable explanation why TV companies are losing their profits, however one of the main reasons may be competition with Internet advertisement. During the past three years the Internet has become very popular in Armenia. TV companies started losing money in 2011. There are news portals now that have more visitors than TV companies have viewers. People prefer not to watch TV as they can find whatever they want in the Internet. People also watch movies on the Internet, and TV companies are not compatible with web-based web sites in news coverage. TV companies and news channels have done everything to lose their rating, and now people prefer electronic media.
This is the reason why a large portion of potential advertisement orders has moved from TV companies to web-based media. As a result, in some news portals in Armenia banners are more expensive than advertisement on TV.
The effect is that increased orders in the Internet are on the account of potential orders for TV companies because people’s purchasing power is going down, and companies have started earning less now.
This means that the problem is more serious and deeper, and alcohol advertisement may not help TV companies in the long-term perspective.
By Babken Tunyan
