MEDIA FORUM: Can ITV weather deflation and advertiser fatigue? - ITV's reward for addressing advertiser worries about audiences and programming has been a slump in revenue. Alasdair Reid investigates

Timing is clearly not one of ITV's strengths. If there were awards

for being at the wrong place at the wrong time, the network would sweep

the boards consistently. We're obviously not talking about questionable

programme scheduling here - now and then ITV's programming people can

still hit seams of red hot form. But some scheduling issues certainly

can be called as evidence - the News at Ten scheduling debacle, for

instance, is just one recent incident in an accident-prone history

that's the product of either rotten luck or bad judgment.



You need look no further than the recent boom times in the ad

market.



If you're going to have a poor run in terms of audience performance,

it's obviously best to have it when there's not so much inflationary

demand in the market.



But that's exactly what we saw. While the revenues rolled in, ITV's

viewing figures slipped and the network succeeded only in running up a

massive deficit in terms of goodwill. In particular, it managed to upset

some of its core long-term clients by paying extravagant court to

new-economy advertisers such as dotcoms and telecoms companies.



All of which makes the latest twist doubly ironic. ITV is in one of

those fine veins of programming form at exactly the wrong time - because

there's no revenue out there. ITV revenue for the first quarter of 2001

was down 7.7 per cent year on year; now it looks as if the second

quarter could be far worse, down by as much as 20 per cent year on year.

This at a time when share of commercial impacts (and of all viewing) is

very robust indeed.



And, having won recent concessions from the Independent Television

Commission, ITV not only has more airtime but better airtime too because

there are more centre breaks.



So there's tons more ITV inventory chasing dwindling revenues. It's

almost unbelievable, but there's massive deflation in the airtime market

these days. 'It's ironic isn't it?' Mick Perry, the vice-chairman of

Universal McCann, says. 'You want last year's revenues with this year's

audiences. We had horrific inflation last year, we've got deflation this

year. In an ideal world it would be more balanced.



But advertisers don't work on the basis that if there's good value

around they can just go out and take it. Their TV advertising takes

place in the context of their marketing plans and the economy as a

whole. They also tie up deals a long way in advance so negotiation for

2001 obviously took account of what had been happening during 2000.



So, yes, there is a time lag. But when people say 'wouldn't it be better

if advertisers could pile more money to take advantage of the situation

now', they tend to forget that, even now, despite significant deflation

on ITV, it's still by far the most expensive station.'



Mick Desmond, the chief executive of Granada Enterprises, says he hopes

the network will be given credit for addressing last year's advertiser

concerns. He states. 'We feel we have listened to our customers. We

admitted we had a problem with inflation and we put our money where our

mouth is by investing in the schedule and we overhauled it

completely.'



Desmond says he can't feel aggrieved about the fact that the market is

soft. However, he is concerned that the industry is using planning

systems that are entirely focused on precedent and year-on-year

performance comparisons.



It's not something confined to the advertising industry by any means and

it is found on the sales as well as the agency side. He says it's time

to remind people of the power and excitement of the TV medium. Perhaps

ITV as a whole will be tempted to rediscover evangelical

salesmanship.



He adds: 'The only thing we would have a right to be aggrieved about

would be if buyers are still motivated by a desire to come off ITV. We

have spent a lot of time and effort communicating the value of ITV and

we are now delivering. So I'd hope that, if money has been moved, it now

comes back and is taken off the stations that aren't performing. What we

would ask of clients is that if they are cutting budgets that they take

it from the periphery and keep their core investment - especially when

the core is delivering such fantastic value.'



Some observers believe that ITV tends to get sucked into a lose-lose

situation. It never gets the credit for good performance but is

absolutely savaged when inflation begins to kick in. They also imply

that buyers - and some advertisers - almost bear long-term grudges

against the network. On the other hand, the situation is nowhere near as

bad as some make out. Take all the lost dotcom business out of the

equation and the underlying revenue trend is more reassuring.



Paul Parashar, the broadcast director of New PHD, concedes that it

wouldn't do the network any harm if it managed to build up a greater

stock of goodwill.



But he agrees that the issue here is the TV market's trading mechanisms:

'The business is now so sophisticated that you have to trade at least

three months in advance. So perhaps the industry is not fleet of foot.

And television is tied in with so many other things like leaflet drops

of seasonal point of sale, the time of which is determined by TV lead

times. So it's difficult to change plans to take advantage of market

conditions. But the truth is that everybody is being hit. It might be

slightly worse for ITV - if FMCG is down, it has a disproportionate

effect because the absolute volumes of airtime involved are so huge. And

it certainly hasn't helped that the dotcom money has gone. There are two

or three factors coming together at the same time.'



During the big upfront trading season last autumn, for instance, there

were stories that planners and buyers were looking for any excuse to

pull money off the network this year. Is ITV actually being 'punished'

for aggravating so many advertisers last year?



Alan Doyle, the marketing communications manager at Volkswagen, doesn't

hold to that viewpoint. He says: 'As with all suppliers, the question is

about whether they deliver or not. Expenditure on television generally

follows audience delivery - as can be seen from the success of Sky and

Channel 5 in recent times. ITV audiences have fallen over the past few

years and prices have gone up. They've made a great start to 2001 but

because budget control is done on such a long-term basis, the task they

face will be a bit like turning a tanker around. However, if they

sustain recent successes, confidence will solidify and the coverage

building that the channel offers will become attractive to advertisers

again. But it still has to improve its programming in what is a very

competitive market.'



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