Bleak prospects make advertising agencies seek Putrajaya’s help

The reduced advertising spending is believed to be one of the reasons that led to the reported retrenchment exercise by Media Prima Berhad, the second such exercise in less than six months.

PETALING JAYA: The country’s largest group representing advertising agencies has urged Putrajaya to help them through a bleak 2020 through tax and non-tax initiatives.

In a statement, the Association of Accredited Advertising Agents Malaysia (4As) said it recently submitted a joint memorandum to the government on the matter.

The memorandum was prepared in consultation with Commercial Radio Malaysia, Malaysian Media Specialists Association, Malaysian Advertisers Association, Malaysian Newspaper Publishers Association and Outdoor Advertising Association of Malaysia (OAAM).

Among others, they are seeking sales and service tax (SST) exemption and double deduction relief for advertising expenditure incurred by all Malaysian-owned companies.

They also want the Malaysian-owned companies to be exempted from claims submission, with extensions on qualifying criteria for tax deduction.

“In the last four months, only 80% or less of businesses were operating at full capacity while some temporarily suspended operations (due to Covid-19).

“This led to many advertisers cancelling or rescheduling campaigns and slashing budgets as they used their advertising expenditure to shore up employee salaries and defray accumulated debts.“

To date, 4As said there has been a 20% decline in advertising spending for the first five months of 2020 on the back of decreased revenues of between 20% and 50%.

They estimated that advertising spending will drop by 20% year-on-year by the end of 2020 and revenues are expected to flatline.

“It is also estimated that most of the industry’s creative and media agencies, including some media owners, have experienced pay cuts ranging from 10% to 30% while an estimated 5% to 10% of employees have been laid off.

“It is also believed at least 10% have closed down or re-engineered themselves to offer different services.”

The association added a further 20% of agencies are expected to downsize or close over the next three months if conditions do not improve.

The reduced advertising spend, 4As said, had a huge impact on companies going through difficult times, like the reported retrenchment exercise by Media Prima Berhad, which would be the second such exercise in less than six months.

“Blu Inc Media, which published more than 20 print titles, had to close down at the end of April this year after being in existence for close to 40 years.

“These are just two examples of distressed media companies. These conditions are expected to remain over the next six to 18 months.”

So, it said, short to medium-term assistance from Putrajaya would be crucial in mitigating unemployment in the industry.-  FMT