Impact of currency demonetisation on the events industry
November 8, 2016 might go down as a significant day in the history of India. The entire country came to a standstill when it was announced late Tuesday night that existing Rs 500 and Rs 1,000 notes would be demonetised beginning midnight, November 8. This decision was directed towards curbing corruption and the black money issues in the country and sent out shockwaves and sense of panic and confusion throughout the country.
The panic was valid, as 86 per cent of the total Indian currency was frozen overnight. The timing of the decision was very critical – just after the festive season, late at night when people could not use the banking facilities, November 8, a date when most of the salaries have been paid, etc. This bold decision will have an impact across all income groups and industries. There are certain industries that might be the severely affected and some not so much. However, every industry in its own way will be affected, as liquid cash plays a very important role in the Indian economy.
The question arises – Will the event industry be affected by this decision? The answer being, ‘Yes, definitely’. The event industry, like any other industry, has two monetary components – revenue and cost. Majority of the revenue for any event is either via ticket sales and/or sponsorship. With majority of the Tier 1 city events, now, listed with one or multiple ticketing platforms, most of the transactions take place on these platforms via an electronic medium (Credit/ Debit card, pre-loaded electronic wallets), thus, involving no cash.
However, in the short run, the last minute sales and in-event expenditure would definitely be affected. Typically, the venue ticket sales and in-event expenditure with regards to food and beverage takes place through liquid cash. With more than 80 per cent of the currency being frozen and only limited withdrawal allowed for the next two weeks, spending freely at events will be a problem.
The sponsorship revenue, however, for an event would not be hindered or affected in a major way. According to Hitesh Gossain, CEO, Onspon, “Typically, brands/ sponsors for any kind of association with an event, facilitate monetary transactions electronically or via cheque or associate with events through a barter sponsorship. Therefore, we do not see much change in the sponsorship revenue, in light of the demonetisation decision by the Government.”
However, if we look at the cost incurred by the event management companies to produce an event, the consequences of this decision might be larger. Typically, the Tier 2 vendors, for example, the production team, installation team, etc., who are small/ unorganised firms, are generally outsourced by the event management companies. The dealing with these vendors involves mix mode of payments, if not the entire payment being made in liquid cash. This might not be due to the unaccounted money being in circulation, but due to the fact that this has been the trend for decades. We need to remember that we live in a country, which is heavily dependent on liquid cash flow and ‘in transition’ towards a cashless economy.
Gossain further said, “With the nation expected to take at least 10 days to return to normalcy, the inadequacy of liquid cash in the market due to this demonetisation would definitely affect the event industry, especially immediately.” Typically, November to January is a peak season for event companies, event organisers as well as wedding planners. There have already been numerous incidents reported where people have had to postpone weddings and cancel various music concerts.
Many event organisers and companies with forthcoming events have frantically started to look for solutions to this situation. With e-wallet companies expected to benefit the most from this decision, many events and IPs are looking at strategic barter alliances with either of the e-wallet companies like Paytm, Freecharge, Oxigen Wallet, Mobikwik, etc. Credit Card/ Debit Card machines are being provided by event organisers to all vendors selling at the event, especially, food & beverage.
Steps are being taken to curb the losses and make sure of a successful event but the negative impact in the short run cannot be fully nullified. However, in the long run, just like any other industry, this demonetisation of Rs 500 and Rs 1,000 notes would definitely make the event industry more structured and organised and prepared for such situations.