Media Forum: Is the end nigh for cheap TV?

campaignlive.co.uk, Friday, 26 March 2010 12:00AM

Does inflation in the market signal a good year ahead, Alasdair Reid asks.

Yet more good news from the TV market. Good for some, that is. Whisper it - but if this goes on, we'll soon be talking about a full-blown market recovery. Media buyers are predicting that revenue for May will be up year on year by between 15 and 20 per cent.

It's still valid to point out that 2009 was so bad that this is, in some respects, a modest achievement. But let's not quibble about that. We're no longer bumping along the bottom and with May seeing the return of top-rating shows including Britain's Got Talent on ITV, audiences are expected to be high.

The first six months are projected to be up by just over 10 per cent - and if the May figure is replicated going into the summer, then the second half of the year could see some real revenue momentum building in the TV market.

This can be seen as good news for both sides of the buying/selling divide - because advertisers need a healthy TV medium and another year of 2009 prices would have been the beginning of the end. But there are rumours that even modest inflation is causing problems.

Advertisers pay their agencies to ensure they come out of the annual negotiation season with watertight deals. Unfortunately, they tend to revolve around agreed levels of discount for money spent. When the price of airtime rises, that spend buys less in the way of impacts.

Some advertisers will not be achieving the campaign weightings laid down in their strategic plans. So they're now having to spend more money to reach those targets. Which means that airtime in general gets more expensive again.

It's a vicious or virtuous cycle, depending on your point of view. So, have we reached that point when revenue growth starts acquiring an unstoppable momentum? Is the era of cheap TV airtime really over? Gary Digby, the director of customer relations at ITV, says it depends on what is meant by cheap.

He adds: "The TV companies have been good at telling clients what great value TV has to offer. Perhaps they're starting to listen. Advertisers have been looking at TV and comparing it especially with press, which has been reducing pagination. For many advertisers, buying into a show reaching an audience of 12 or 13 million is going to be an attractive proposition."

Digby argues, though, that it's difficult to make forecasts about the second half of the year. Nick Manning, the chief operating officer of Ebiquity, agrees. "It's the most unpredictable market we've seen in years," he says, but adds that, from a historical perspective, TV will still be relatively cheap, even if there's sustained revenue growth. But that's of scant consolation to advertisers whose strategic plans are disrupted.

He explains: "Last year there were lots of very big media pitches - and some business was won on the basis of some spicy guarantees. No-one saw this market buoyancy coming, so campaigns are significantly underdelivering. There will be clients not achieving the levels of exposure they expected - and that might have a knock-on effect for the rest of the year. We're adjusting our forecasts but a lot now will depend on audience. Audiences were good last year, which helped to drive down prices."

However, Pedro Avery, the managing director of trading and engagement at Arena BLM, predicts that we'll see a contraction in the number of TV sales points. The net result will be an accelerated rise in the price of airtime.

He says: "There's also the notion that ITV might be flirting with going down the subscription TV route - and the effect will be again to reduce commercial impacts in linear TV, though I think we'll see cheaper online inventory. But the price of linear TV will go up. The good news, however, is that some agencies are starting to understand the effect of TV in the context of all advertising channels - better targeting will make it more efficient."

Mike Colling, the managing director of the direct response media agency MC&C, agrees. But he warns that the main commercial broadcasters will regret it if they take their eye off the ball where audiences are concerned. He concludes: "What worries us, if we start to see large amounts of inflation, is the prospect of media owners not being able to manage their inventory in the way we'd like. That becomes a problem for direct response advertisers because they make commitments in terms of call handling and stock management and they need TV stations to meet their commitments. If they don't, it will drive them to more reliable media. The supply of commercial impacts across the market has been good - we hope that continues."

MAYBE - Gary Digby, director of customer relations, ITV

"TV is fantastic value and that will continue. We've been seeing some inflation, driven by retail, food and a bit of financial coming back in - but we don't know if that will continue into the second half of the year."

NO - Nick Manning, chief operating officer, Ebiquity

"TV is more buoyant than it was, but it's still trading at a low level. We haven't seen prices as low as this since 1980 and though the market is recovering, in pricing terms we've barely reached 1986."

YES - Pedro Avery, MD, trading and engagement, Arena BLM

"We'll see a contraction in the number of broadcasters and sales points. That will change the market. TV will go through a period of transition. The price of linear as opposed to online TV will continue to go up."

NO - Mike Colling, MD, MC&C

"We're seeing a move away from distress pricing, but this is unlikely to be a problem as long as broadcasters continue to be able to meet their commitments. In other words, the supply of commercial impacts must continue to be good. We have no problems rewarding success."

- Got a view? E-mail us at campaign@haymarket.com

This article was first published on campaignlive.co.uk

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