Television has many different affects on the economy in both positive and negative ways. One of the biggest effects television has on the economy is advertisement. More and more people turn to television for advertisement. Advertisement has a huge impact and effect on viewers. After watching an advertisement on television people are heading to the store, looking on the internet, or trying to purchase the product. It only takes a few seconds to convince someone that the product, good or service they are advertising is worth buying and bam people purchase it. Television is unique because it allows people to see the product that is being advertised. Television advertisement affects everyone including children, teens, and adults because they spark the interest of a person instead of pointing out the products features.

1. Title : Economic Study of Television Advertising Market in
Bangladesh.
Name : Mohammad Tawhidur Rahman
Date : February 29, 2016

2. Mohammad Tawhidur Rahman P # 2
Abstract:
Television has many different effects on the economy in both positive and negative
ways. One of the biggest effects television has on the economy is advertisement. More
and more people turn to television for advertisement. Advertisement has a huge impact
and effect on viewers. After watching an advertisement on television people are
heading to the store, looking on the internet, or trying to purchase the product. It only
takes a few seconds to convince someone that the product, good or service they are
advertising is worth buying and bam people purchase it. Television is unique because it
allows people to see the product that is being advertised. Television advertisement
affects everyone including children, teens, and adults because they spark the interest of
a person instead of pointing out the products features.
Now TV is available at every home in Bangladesh. Today, the product and service
manufacturers are spending a lot of money to launch an attractive advertisement; one of
the important criteria of TV ad is dependent on sponsor program. Advertisements play a
major role in sponsorship program at the same time as manufacturers purchase the
time span of television brand paying huge money. Similarly, advertisements are also
significant for the manufacturers to promote their sales in the competitive business
environment. Currently business environment is very much competitive because of
globalization. This is why manufacturers are to pay out great deal of money on this
function. TV ad is as old as the birth of TV. People like to watch various TV programs
because it telecasts various messages to its audiences. But most of the programs (drama,
cinema, talk show) are sponsored program. Usually the advertisers’ perception is that
the message they send through TV will have extensive coverage and highest reach of any
of the media. This is why the manufacturers of products and services are spending large
amount of money in this media.
Key Words:
Advertising, Television commercial/ TVC, TV advertising, Advertising market,
Economical impact of TVC, Advertising Revenue Bangladesh.
Introduction:
Bangladesh is a country of 56,977 square miles; the estimated population of the
country is 169 million making it the eighth most populous nation in the world. Its
nominal per capita GDP is very low, at only $ 1,314. Bangladesh gained its independence
from Pakistan in 1971, following a 9-month armed struggle. The country has a deep
cultural heritage, including a rich tradition of language. Freedom to use Bangla began as
a language movement in 1952, and continued as the cultural-political base for the War
of Liberation. With an impulsive response from the mass people, the country has moved
away from the dictatorship of the 1990’s towards a more democratic form of political
rule.
Regardless of much poverty, corruption and political instability, Bangladesh is the
first case in South Asia of the ‘TV media boom’ trend. Phenomenally, 46% of households
in Bangladesh own a television, with 76% ownership amongst urban dwellers and 32%

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amongst rural people. Above 70% rural and 90% urban people aged 15 and above
manage to watch TV at least once a week. This means almost all people, both, rural and
urban, have access to television. Despite a huge expansion of print and electronic media
in the country, media experts argue that ‘due to lack of a proper broadcasting policy’
there has been deepening commercialization within the media industry and a growing
information divide between urban and rural people. There is also a dispute that the TV
media boom costs the country of a political disparity, and a market orientation trend has
undercut the independence and impartiality of the media. Moreover, the escalating
commercialization is creating a divide between the actual role of television channels and
the role it could playing a progressive society.
Growth of the television industry in Bangladesh:
In the last decade, a great deal of support of local and transnational corporations in
the way of advertising revenues and investment endorsement has encouraged the
political and business tycoons of Bangladesh to expand their television outlets, leading
to media conglomeration. Consequently, ‘the diagonal concentrations of ownership’ are
being resulted in the development of a political monopoly and the growth of business
lobbying powerhouses. This power network led market-liberalization has made an
impact on the content and process of program and news production within every TV
channels, more or less.
There are currently three terrestrial television station in Bangladesh, Bangladesh
Television (BTV), Bangladesh Television World and Sangsad TV. BTV has emerged as a
powerful and effective mass medium since its inception in 1964 as it is the first ever TV
station of the country. At present, BTV is the only television station that the
overwhelming majority of Bangladeshis can watch. Advertising on BTV is the most
expensive television ad space in Bangladesh (because the station has by far the greatest
reach) – up to 75,000 Taka (1088 USD) per minute.
Bangladesh entered the era of satellite broadcasting in 1992, by giving access to
CNN and the BBC to broadcast on the government-regulated channel – BTV. In the
context of a dominance of foreign satellite channels in the country, ATN Bangla came
into being on July 15, 1997. The first Bangla private satellite channel, ATN Bangla aimed
at telecasting programs in Bangla for viewers in more than a hundred countries across
the world. Channel-i, established in 1999, is the first-ever digital Bangla television
channel. At present in Bangladesh there are more then 35 private television channels
are broadcasting.
Increase of Advertising:
Growth in the cable and satellite television industry has been in turn driven by
massive growth in the telecommunications sector. Television viewership is growing at a
rate of 15-20% a year. Because of the huge spending by telecom companies and some
local and multinational companies, the advertisement market has also doubled in five
years. According to the Advertising Agencies Association of Bangladesh (AAB), the
advertising market in Bangladesh is of about 154 billion USD and the market is growing
in volume by 10% a year.

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The Katalyst survey found that television commercials are largely dominated by
multinational companies’ consumer products, mobile telecom services and products of
leading local business houses (Figure 1). Multinational company Unilever (33%) topped
the list of top 10 advertisers in television, followed by local corporate houses–Square,
Kohinoor, Partex, Pran-RFL, Basundhora, Transcom and Meghna Group–with 56%
together, and then mobile phone operators (11%). Private television channels earn most
of their revenue from the peak time commercials.
Figure 1: Top 10 multinational and local advertisers of Bangladeshi TV channels
Advertisements or commercials are lifeline of the media industry. It is one of the
continuing financial sources of running the media organizations. There are about 500
advertising agencies in Bangladesh; this sector employs more then 10 thousand people.
Among the leading players are Unitrend Ltd, Asiatic MCL, AdCom Ltd, Grey Advertising
Bangladesh Ltd, Interspeed, Bitopi Advertising, Matra, Creative Media Ltd, Expressions
and Bindu. Most of the commercials in Bangladesh media, both print and broadcasting,
are on mobile phone companies, real estate, private universities, perfumery and
toiletries industries, home appliance selling organizations, government and private
banks, and beverages.
Ad agencies usually have some fixed clients. New clients need to come to them with
their proposals. Ad agencies conduct promotional as well as publicity campaign on
behalf of their clients. Different ad agencies take commissions at various rates from the
media organizations in exchange of giving advertisements on behalf of their clients.
Clients give money to ad agencies for putting up the advertisement. Ad agencies also
take money from the client for any publicity campaign. As part of the publicity campaign,
ad agencies also get commission from the media (newspaper or television or radio).
Most of the ad agencies get 15% commission from the media. Through this process, a
pact has developed between the media and ad agencies.

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Commercial or Private TV advertising has existed in the Bangladesh since the launch
of ATN Bangla in 1997. Over the past two decades the TV advertising market has been
through numerous structural changes as it is going to be matured as an advertising
medium and the number of commercial TV broadcasters has increased. In order to
analyze the economic impact of advertising market of Bangladesh we require a realistic
model of how this advertising market works - which must be based on sound economic
theory and be calibrated to match the dynamics we have witnessed in the past.
The supply of TV advertising:
Private TV channels create advertising opportunities for advertisers by
broadcasting advertisements at regular intervals during their programming schedules.
The amount of TV advertising that is supplied by the broadcaster or agencies is defined
to be the number of advertising impacts, which is a function of audience viewer-hours
and the average number of advertisements per hour. Supply can therefore be boosted by
attracting large audiences or broadcasting more advertisements.
In the short to medium term, the traditional commercial broadcasters can do little
to affect the supply of TV advertising impacts. The size of audiences is determined by
programs scheduling and production decisions often made many months in advance,
and cannot be easily changed. We therefore, in the diagrams that follow, draw a vertical
short term supply curve, to indicate that supply is fixed.
In the longer term, broadcasters should have some influence on the supply of TV
advertising impacts, through their influence on viewer numbers (e.g. through
investment in programming).
Competition with other broadcasters may, however, make it difficult for a channel to
increase significantly its share of viewers (and hence impacts) even in the long term,
although there have been a few cases where broadcasters have been able to change the
profile of their viewers over time. In diagrammatic terms, we might expect the long term
supply curve to be upward sloping, as higher prices would provide the revenues
required to improve program quality and hence attract larger viewers.
One might expect the supply of advertising impacts on multi-channel channels to be
more flexible than for traditional channels. Multi-channel is not regulated to the same
extent as traditional channels, allowing more control by the multi-channel operators
over the number of advertisements per hour (although multi-channel broadcasters do
tend to employ all of their available advertising slots). Control over audience numbers is
still difficult, however, due to competition with other broadcasters.
Other factors outside of the control of the broadcaster will also affect the supply of
advertising impacts. Audience numbers are dependent on population size and
demographic structure (e.g. young adults tend to watch less TV than older generations),
and socioeconomic factors may also affect TV viewing (although broadcasters can
commission and schedule programs that appeal to these audiences). The audience for a
particular group of channels can be negatively affected by the success of other channels.
The demand for TV advertising:
Demand for TV advertising comes primarily from private sector companies selling
consumer products, although demand from government and NGOs is also significant.

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For companies, advertising is a type of investment in future sales, and therefore the
value of advertising (in real terms) is determined by advertisers’ expectations of the
future strength of consumer spending (often called “animal spirits” by economists). A
strong empirical link between advertising expenditure and corporate profits has also
been observed, possibly reflecting the tendency for companies to be more willing to
undertake discretionary spending of any sort when profits are strong.
Corporate expenditure on TV advertising is relatively fixed in the short term.
Companies usually determine marketing expenditure on an annual basis and contracts
are usually agreed one year ahead. In the longer term, however, one would expect
companies to be able to shift their marketing expenditure between different forms of
marketing (which includes traditional advertising media, such as radio, print and
outdoor, and other marketing activities, such as direct mail, interactive and sales
promotions). Demand should, therefore, be more flexible in the longer term.
Expenditure on TV advertising:
To model the TV advertising market, we need to understand the relationships
between supply and demand, both in the short term and the long term, and how these
relationships determine expenditure on TV advertising. In this section I set out my
approach to modeling the relationships between supply and demand.
In the market for TV advertising, advertisers purchase opportunities to present
their products to TV viewers from the commercial broadcasters, often through the use
of intermediary media buyers. Typically, advertisers will pay according to the number of
impacts that are achieved for their target audience (or, in some cases, expected number
to be achieved), and the price negotiations begin at the prices indicated on the relevant
advertising ‘rate card’, expressed as ‘cost per thousand’ impacts. But the true price paid
is determined through negotiations that determine a discount on the rate card,
considering many factors (including deal size, share of expenditure on the channel,
nature of the product and timing of the advertisements). The rate card does not strictly
dictate the true economic price of TV advertising (i.e. revenue per impact). Ultimately,
the price is determined through the relationship between supply and demand, as with
most other products in the commercial environment.
Importantly, TV channels tend to sell all of their available advertising slots, and
therefore all of their available advertising impacts to advertisers. As the supply of
impacts is relatively fixed in the short term, the price of TV advertising impacts is
therefore determined by the highest price that will just clear the market, so that all
advertising impacts are sold. We might characterize this as being similar to price setting
in an auction process in which “everything must go”.
As we suspect that total expenditure on TV advertising is also relatively fixed in the
short term, we might expect to find that the price shifts in the opposite direction to
short term changes in quantity so that total expenditure remains broadly unchanged.
This would suggest that the price elasticity of demand for TV advertising should be close
to minus one in the short term. Consequently, a change in the supply of impacts would
have little overall impact on TV advertising revenues in the short term (as it would
result in a roughly equal but opposite shift in the price).

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In the longer term, the TV advertising budgets of companies will be flexible and we
might expect companies to increase their advertising budgets (or sign new contracts) if
TV advertising becomes more effective. Therefore we might expect a rise in viewers
(and therefore the quantity of advertising) to result in an increase in advertising
revenue in the longer term – implying a long term price elasticity of demand in excess of
minus one. Consequently, a change in the supply of impacts would have a larger impact
on advertising revenues in the longer term, compared to the short term.
For example, in Figure 2 below, an increase in viewers results in the supply of
advertising impacts rising from q1 to q2, which results in the price falling from p1 to p2
in the short term.
But in the longer term, the demand curve may shift from D1 to D2 (as advertisers
increase their advertising budgets), resulting in the price rising to p3. Consequently, the
supply increase would have little effect on advertising revenue in the short term, but a
larger positive impact in the longer term.
Figure 2: Demand and supply of TV advertising revenue
Audience fragmentation and changes in viewing patterns:
In this analysis I separate the TV advertising market into two sections defined by
two types of commercial channel: ‘State owned/ terrestrial/ traditional’ and ‘Private/
satellite/ multi-channel’. As satellite TV captures an increasing share of audiences, the
terrestrial channels will face increasing competition in the TV advertising market, and
they will be less able to supply the large audiences that they have previously been able
to do. Consequently, one might expect to find that satellite TV channel viewing is a

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negative driver of the price of terrestrial channel advertising, and I have therefore
included this variable in my analysis.
As depicted in Figure 3, an increase in multi-channel TV viewer’s results in a drop in
traditional channel viewers, that reduces the supply of traditional channel impacts from
q1 to q2. All other things being equal, this would result in a short term rise in the price
of traditional channel advertising from p1 to p2. But the multi-channel channels are now
able to offer a greater supply of impacts to advertisers, and therefore are better able to
compete with the traditional channels. We would expect this to reduce demand for
traditional channel impacts from D1 to D2. This pushes the price of traditional channel
advertisements down, to p3. Price p3 could be above or below the original price p1,
depending on the extent of competition between traditional and multi-channel TV
advertising markets.
Figure 3: Impact of multi-channel audiences on traditional channel TV advertising
References:
1. https://en.wikipedia.org/wiki/Bangladesh
2. Advertising Agencies Association of Bangladesh (AAB)
3. Electronic Media Marketing Association (EMMA)
4. ATN Bangla
5. Brand Forum, Bangladesh
6. Social science research network
7. Management study guide
8. a2i.pmo.gov.bd
9. Ministry of Information, Bangladesh
10. A Political Economy of the Emerging Television News Industry in Bangladesh- Anis Rahman