Row over Ad Changes Shows ITV Still Cuts Ice; ADVERTISING & MARKETING ANALYSIS
Byline: Gideon Spanier
DANGEROUS, disappointed, bemused -- those were just some of the words being used by advertisers after the House of Lords called for TV regulation to be relaxed.
The Lords Communications Committee made two recommendations last week: First, the number of minutes of advertising per hour should be cut to seven minutes across all channels -- rules that apply at present only to ITV1, Channel 4 and Channel 5. Second, they called for the abolition of Contracts Rights Renewal (CRR), which ties ITV into tough contracts dating back to its 2003 Carlton-Granada merger and keeps a lid on ad prices.
The Lords say viewers will benefit because there will be fewer ads and, in return for the abolition of CRR, ITV will be forced to invest more in quality public-sector programmes such as drama. ITV is delighted but media buyers are far from happy. Shorter commercial breaks could mean prices rising significantly -- as much as 20% -- because there will be less advertising air-time. What's more, ITV, which already has 45% of the total TV ad market, would have greater bargaining power.
Change may not happen for a while. Regulator Ofcom will look at cutting ad minutage and expects to report back before Easter. But the abolition of CRR requires parliamentary legislation, which would take at least a year.
It is clear advertisers won't accept the Lords' report without a fight -- particularly because ITV is resurgent. Ad revenues at ITV bounced back 15% last year and are up nearly 10% in the first quarter of this year. Morgan Stanley today upgraded its full-year ITV ad forecasts for both 2011 (up 4.4%) and 2012 (up 5.4%) as it expects a pre-Olympics surge. It is all proof, says the City, that the brutal downturn in free-to-air TV in 2008/9 was cyclical -- not structural.
Meanwhile, Downton Abbey, X Factor and even Dancing On Ice have won record ratings under the direction of programming boss Peter Fincham.
So why do the Lords want to relax regulation? They agree with ITV that the rules are out of date in an era when the number of channels and websites has exploded and viewers can skip the ads on Sky+ or Virgin Media's new TiVo.
Crucially, ITV claims it has cut cerebral programming in favour of talent shows and soaps because CRR incentivises the broadcaster to get the biggest audience. ITV complains it is a vicious circle because ad buyers demand cheaper rates whenever share of viewing falls -- and it can't rip up the deals because agencies have the right to renew contracts on the same terms. …