David Elstein, chief executive of Channel 5 and reputedly ’the
cleverest man in British broadcasting’, is always good value, especially
when he’s gazing into his crystal ball. Usually he’s having a go at the
BBC for its muddled strategic thinking and its anachronistic funding
arrangements. Last week, in a ’whither Channel 5’ document sponsored by
the Billett Consultancy, it was ITV’s turn.
Take ITV’s peaktime ratings share target of 40 per cent by 2000. Elstein
says it’s just not going to happen - mere ’rhetoric’. Or the
much-praised high-powered network management team led by Richard Eyre:
it’s just there as a short-term ruse to stop advertisers complaining.
And David Liddiment, scheduler in chief at ITV’s Network Centre, can
also come on down - Elstein reckons he deserves to face a firing squad
for slotting in Des O’Connor at 9pm on a Friday.
Much of this is delivered with robust good humour but Elstein is clearly
deadly serious about one issue - the trading system which, he argues,
fails to reward Channel 5 adequately for its audience performance. Or,
more accurately, doesn’t punish ITV for its shortcomings. He states:
’The gap between (ITV’s) share of net advertising revenue and share of
broadcast (ie: audience) has got wider every year ... As long as ITV
trades at Station Average Price, advertisers are all trapped. As long as
you buy into that method of trading, whatever they deliver is what you
get - good or bad.’
Elstein does forestall charges of naivety - he claims he doesn’t expect
Channel 5 airtime to command exactly the same price as airtime offering
extremely quick cover build or unique demographics. ’But we can ask that
the industry as a whole rewards growth more than it rewards decline.’ He
concludes: ’The major issue is to persuade buyers to break the habits of
Good sales pitch - but is he being naive after all? And is there a hint
of panic in this plea? There shouldn’t be. Channel 5 can expect a pretty
decent year in revenue terms. For a start, airtime demand is likely to
remain buoyant - with growth in the TV market as a whole forecast to be
around 5 per cent year on year.
And Channel 5 can expect revenue growth in excess of that. But it won’t
be down to changes in trading mentality - the fact of the matter is that
it sold itself short last year, setting prices based on very
conservative audience forecasts. The first priority this year is to set
Revenue for 1999 is expected to be around pounds 185 million, compared
with an estimated pounds 143 million last year - that’s an increase of
29 per cent.
Channel 5’s audiences will increase next year and revenue will shadow
that upward move. But can Channel 5 genuinely expect to close the
price-per-rating gap with ITV?
Not really, say some buyers. And the trend could go the other way, with
ITV able to command even more of a premium for its peaktime
David Cuff, the broadcast director of Initiative Media, believes that
Elstein underestimates the attractiveness of ITV’s airtime to some
advertisers. You can reach a very large number of people at least once
in a very short time using ITV. Channel 5 offers frequency, so a smaller
number of people see an ad many times.
Cuff states: ’You will never get a situation where, for the sake of
argument, Live TV is the same price as ITV. There will always be markets
within markets - within ITV for instance, you would not expect Scottish
to be the same price as London.
’What I’d say to David Elstein is that the differential is more
pronounced in the UK than some other countries. It’s one of the dynamics
of the market here. Airtime that delivers reach is scarce and it
commands a premium. The type of airtime that Channel 5 delivers just
isn’t scarce at all.’