MEDIA SPOTLIGHT ON: CHANNEL 5 - Channel 5 calls for reform of television ad trading system. Channel 5 asks ad buyers to change the habits of a lifetime. By Alasdair Reid

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.

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

a lifetime.’



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

that right.



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

audiences.



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.’



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