Media Analysis: Desirable Associations
Brand ties with high-profile shows are helping to make up the shortfall in TV channels' ad revenues.
With Morgan Stanley predicting that ITV will shed u124m of advertising revenue this year, news that its sponsorship income grew 19% in the first six months of the year provides some much-needed good news for the beleaguered channel.
A string of high-profile and successful TV tie-ups, from Baileys and Sex and the City on Channel 4 to Nokia and The X Factor on ITV, has signalled that sponsorship is now mainstream.
The recent announcement that ITV has secured Masterfoods' chocolate bar brand Bounty as the sponsor of the next series of Celebrity Love Island, now renamed Love Island, has given Gary Knight, director of brand partnerships at the channel, reason to be bullish.
'Sponsorship has moved to the top table and, as such, agreements are being made a lot earlier to allow time to create in-store executions, online and interactive support,' says Knight.
However, according to media agency Carat, broadcast sponsorship represents only 4%, or about u60m, of ITV's revenue. This suggests that the 19% increase will not be enough to fill the black hole in the channel's finances, even with the boost of the World Cup, which is believed to have delivered an additional u4m in sponsorship revenue, about 7% of the annual total.
While the sponsorship market as a whole is growing strongly, according to David Peters, sponsorship director at Carat, ITV is performing particularly well.
'With the threat of PVRs and growing concern about advertising avoidance, advertisers are increasingly looking at new ways to connect with consumers outside the traditional interruption model,' he says.
Channel 4 has also seen a substantial increase in sponsorship revenue. In 2005, it rose 40% year on year to u28m. This year, the channel believes it will achieve closer to u32m.
Although some of this growth is coming from digital channels, there is a clear increase in demand for sponsorship across the board, according to David Charlesworth, head of sponsorship at Channel 4. 'Agencies have become more sophisticated in stimulating demand for sponsorship and it has become a big business,' he says.
The rise of specialist agencies and sponsorship consultancies is testament to the growing popularity of the medium. And, inevitably, given the negotiation culture in broadcast, this is inflating the price for desirable associations.
'The cost of broadcast sponsorship is rising. In the early-90s it was sold at a 90% discount (on spot advertising), but now we are seeing an increase in price due to increased demand,' says Nick Walford, managing director of sponsorship specialist MindShare Performance.
Will there come a point at which broadcast sponsorship will cost more than airtime? According to agencies, a number of smaller sponsorship deals are still trading at a substantially lower rate, which is enticing some in. 'Certain clients are buying sponsorship because of the perceived media value and are using it simply for advertising messages, rather than developing a deeper relationship with the brand,' says Walford. …