Media: All about ... The TV ad market shake-up
By Alasdair Reid, campaignlive.co.uk, Friday, 16 April 2010 12:00AM
Has Ofcom's TV airtime market probe done any good?
Those hostile to Ofcom tend to portray the organisation as a classic quango, nothing more than a glorified job creation scheme for a bunch of cronies who've found themselves in just about the right place at the time.
Thus, these critics say, the tendency of Ofcom is to set itself problems that are impossible to solve and then to ensure that its inevitable failure is arrived at only after the most painstakingly thorough of investigations, involving whole floors of well-paid researchers grazing lugubriously at mammoth-sized hoppers full of submissions.
The process by which the publication of interim conclusions is followed by invitations for interested parties to submit responses, followed by the publication of more interim conclusions, followed by a call for supplementary evidence can become self-perpetuating.
One of Ofcom's masterstrokes (these same critics say) is to stretch an investigation to include matters over which it has absolutely no jurisdiction, such as issues regulated by the Competition Commission or organisations such as the BBC over which it has minimal powers.
And where over-reach is inappropriate, it can go the under-reach route, looking at only one half of a set of interconnected issues - meaning that any conclusions must, in their nature, be inconclusive.
Just look, some media agency observers say, at Ofcom's recent efforts to reform the television airtime market (and we're ignoring for the time being its inquiries into the pay-TV market). Its intertwined investigations and policy statements are beginning to add up to a classic of their kind - with the added piquancy that this might just prove to be Ofcom's last hurrah.
In July 2009, David Cameron promised that if the Conservatives win the next General Election, he'd drastically cut Ofcom's powers.
There would be upsides to this, of course. When all the Ofcom paperwork is shredded, it could (given the right bureaucratic clearance) become the bedding for a mind-boggling number of hamsters.
On the other hand, it is the fundamental instinct of all politicians, of whatever stripe, to create rather than to destroy quangos - so Ofcom may survive a little beyond the end of May, even if Cameron wins a thumping majority.
1. On 1 April, Ofcom published a submission it had made back last year to the CC, arguing that Contract Rights Renewal, the mechanism preventing ITV from abusing its dominance of the airtime market, be abolished. The CC decided that CRR should remain in place - and continues to hold that view. Earlier this year, ITV came up with plans to replace CRR with a more flexible system. The CC is set to publish its final findings on this later this month.
2. In January, Ofcom said it was to review whether public- service commercial broadcasters (ITV, Channel 4 and Five) should continue to be required by law to sell all of their advertising inventory. This review is to dovetail with a reconsideration of regulations covering break patterns and whether advertising minutage for public-service broadcasters and other channels should be harmonised. (The likes of ITV can run an average of seven minutes an hour currently; for satellite channels, the figure is nine minutes per hour.) Ofcom plans to publish a consultation document over "the next few months" with further proposals to be published in the autumn of 2010 ("in time for the annual negotiation season") and brought into effect from 1 January 2011.
3. At the end of March, Ofcom announced that it was also minded to investigate conditional selling in the airtime market. Its current rules, in theory, prevent broadcasters such as ITV and Channel 4 bundling in channels such as ITV2 or E4 with their main channels as part of an ad sell. But Ofcom's statement said: "Any anti-competitive effects from bundling, should they arise, would then be best dealt with on a case-by-case basis." It hopes to close the consultation process on this by 7 June.
4. Meanwhile, if a new wave of consolidation rips through the television business (as is widely predicted), all bets will be off. A consolidated market will, almost by definition, work to entirely new parameters, not least where conditional selling is concerned. A couple of weeks ago, Five's owner, RTL, made renewed overtures towards Channel 4 - and there is a growing consensus that neither broadcaster can go it alone over the short to medium term. Should a merger go ahead, the airtime sales market will conceivably boil down to three players: ITV, Channel 4/Five and Sky Media.
WHAT IT MEANS FOR ... broadcast sales points
- Ofcom's proposals on minutage (notably its review of the "must sell" principle) can be interpreted as an attempt to give some form of flexibility to ITV. Unfortunately, this proposal is a complete waste of everyone's time while Contract Rights Renewal remains in place.
In theory, ITV could hope to increase yield if it restricted supply. In practice, restricting supply of commercial impacts would lead to it being punished under the terms of CRR, which forces ITV to give up revenue if its share of impacts declines.
- As for conditional selling, no-one has ever previously come up with a workable definition - and it's a practice in which both buyers and sellers collude, so policing it is impossible.
- So broadcasters will continue to work towards consolidation and see what the Competition Commission makes of the outcome. Ofcom, they may well feel, has become an irrelevance. An incoming government may agree.
ADVERTISERS AND AGENCIES
- Similarly, buyers are not expecting radical changes to the ground rules in advance of the autumn negotiating season - and they'll quietly continue to resist radical change.
- Few, for instance, believe that an incoming Conservative administration would have the power or the inclination to remove CRR at a stroke.
- Jim Marshall, the client services director at Aegis Media, says: "Yes, you can argue that CRR is antiquated and I think many on the agency side can appreciate those arguments. But it's a bit like old age - it's not great but it's better than the alternative."
This article was first published on campaignlive.co.uk
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