Why Russia Will Regret Its TV Advertising Ban

News that the Russian government is forging ahead with plans to ban TV advertising on cable and satellite channels could have severe ramifications for small businesses and, ultimately, the national economy.

According to the state’s proposal, only channels of a "national, compulsory and universally accessible" standing will be exempt from the ban, which supporters say will eliminate unfair competition in the TV market formed as a result of dual revenue streams enjoyed by the cable and satellite stations – namely subscription fees and advertising. Free-to-air channels rely upon advertising only.

Yet there is a fundamental problem at the heart of the ruling, in that the Russian government is seemingly failing to acknowledge the value that privately owned paid TV channels offer SMEs, and, as a by-product, the national economy.

Russia was mired in economical difficulty throughout 2013, with Prime Minister Dmitry Medvedev citing the growth of small business – which contributed 20% of the country’s entire GDP last year – in 2014 as key to dragging the country back into financial prosperity.

Interesting, then, that the Russian government, despite seeing the number of small businesses drop from 4 million at the start of 2013 to 3.5 million by the year’s end, is now intent on removing an invaluable source of consumer engagement and brand visibility for such companies, many of which rely heavily upon cost-efficiency in their TV advertising.

Why Are Smaller TV Channels Important?

Smaller cable and satellite TV channels offer highly niche, specified audience groups for businesses looking to grow without breaking the bank. What this means is that companies with tighter budgets can pinpoint precise customer bases, reducing wastage and, subsequently, TV advertising costs. At the same time, the relevance of a product to the viewer is improved, boosting response rates and sales.

It is vital that small businesses are provided with admittance to such marketing opportunities in order to evolve. Advertising on national, federal-funded TV channels is prohibitive for many companies due to the large outlays required, thus it stands to reason that, by eliminating affordable access to the most effective medium available,  it's the businesses so crucial to economic growth that will suffer.

TV Advertising is key to the UK’s economic recovery.

Russia need only look at the UK market to see how and why cable and satellite channels are so important to the national economy.  According to Deloitte analysis, every £1 spent on advertising benefits an SME 8x more than it does a larger corporation. When considering the fact that 99% of all UK businesses qualify as SMEs, and 40% of all UK turnover is attributable to these, then the need to support small business development becomes even clearer.

TV advertising is the proven king of growth, generating £1.76 in profit for every £1 spent on television in the UK. Whilst a comparison between the current Russian and UK markets is problematic, the models are similar. Russia's move will result in businesses with considerable growth potential being purged of the opportunity to make it a reality. Concurrently, the state takes complete control of the TV advertising landscape, constricting the freedom needed for SMEs to flourish. Through the lens of context, it isn't difficult to see the absurdity of this situation.

If the Russian government is to witness a return to economic health, then its government must develop an environment designed to support and accelerate small business growth. However, by passing this law, it is simply asphyxiating itself. Only time will tell how severe the outcome for both SMEs and Russia itself is.

To learn more about how TV advertising can support the growth of your business, call Guerillascope today on 0800 357 675, or submit your enquiry online.