MEDIA SPOTLIGHT: Will multichannel's rise force TV trading to change?

The present trading system undervalues multichannel homes, Jeremy Lee reports.

The fundamental dynamics of TV trading have changed little over the past decade. Advertising revenue follows audiences, with those channels that are able to provide a large audience (and therefore the ability to build instant mass cover) able to charge a premium.

This has been good news for the terrestrial broadcasters, which have a larger reach and get larger rating programmes, and bad news for the multichannel players who, with a limited reach, can generally only supply ratings in single figures and below.

However, the confirmation last week from Ofcom that multichannel TV penetration has broken through the 50 per cent mark, giving viewers access to 380-plus digital channels on offer, shows that the continued fragmentation of audiences cannot be ignored.

Under the existing TV trading model, agencies adjust their plans according to their target audience. But the terrestrials are still able to command a premium for programmes such as Coronation Street that achieve a mass audience.

However, agencies are also increasingly being forced to use their discretion when planning campaigns. According to Mark Holden, the executive planning director at PHD, the growth in opportunities is forcing buyers to become more developed implementational planners. "In the past, TV has been seen as a blunt tool. With segmenting audiences, it has become much more targeted," he says.

The Flextech sales house ids, which represents the UKTV suite of channels, is trying to start a debate to move the planning and buying model on for the multichannel age.

According to Mark Howe, the ids managing director, the expansion of digital TV has increased the scope of communications and media choice and, at the same time, has provided a valuable means for marketers to reach increasingly segmented consumers. Furthermore, homes with multichannel TV are more valuable to advertisers because their inhabitants are generally younger and have a higher level of disposable income.

Howe argues that the established trading currencies and the industry measurement systems do not accurately serve the reality of contemporary media consumption. In short, the discretionary budgets that Holden describes that are allocated to multichannel stations are not representative of the value of its audience.

"While communication and creative strategies have changed, the same cannot be said of the practices employed by media agencies and the dynamics of placing TV media. ITV station price performance and the comparison of price within a channel still pre-occupies the minds of most, along with old-fashioned coverage and frequency measures, and the difference between a good or bad audit," he says.

Of course, it is not new for the smaller players to gripe about the way that TV airtime is traded - with a small share of audience and no mass-cover programmes, they are at a disadvantage against their terrestrials rivals.

However, it is interesting that Howe wants to change the fundamentals of the TV planning and buying process. "Consumers have changed, as have TV viewing patterns and brand consumption. In fact, everything's changed except TV trading practices," he says.

Few would disagree that the existing TV trading model isn't perfect.

But has he got a point that multichannel homes are, in fact, more valuable than their terrestrial counterparts?

Andy Zonfrillo, the broadcast director at MindShare, thinks that Howe is being a bit opportunistic. "Just because you're in a multichannel home, this doesn't mean you don't watch the terrestrials. And high-value consumers are available on all channels," he says.

There is also the argument that if multichannel penetration has reached more than half of UK households (and in the younger demographics it exceeds it), by definition they cannot all be high-value consumers.

Holden thinks Howe could be on to something with his complaints over some of the tools that planners have. Barb is a particular case in point.

Two years into the new Barb contract and panel, there is still concern that the panel sizes are too small to represent some of the digital channels.

"Sample sizes on multichannel are not robust enough and Barb needs to think about this," Holden says.

Another criticism is that the prevailing wisdom of the traditional four-week burst to achieve audience cover is contrived. Howe says in the contemporary TV environment there are more brands looking for more media opportunities with frequency as a constant presence. Therefore, agencies should scrap the idea of bursts of activity and instead run constant campaigns, but with a lower presence.

Generally, although depending on the communication objectives, high levels of frequency and low levels of cover are considered to have a negative effect on an advertising campaign.

A move toward greater frequency would change the way in which agencies strike TV deals. Howe says: "Along with share deals and price, allocating TV spend according to a hierarchy based on size of net advertising revenue remains the norm. Rather than adopt a 'bottom-up' approach and planning media around the targeting of high-value consumers, the 'top-down' approach of buying the biggest channels first continues to dictate the shape of clients' media schedules. Clearly, the latter approach aims, simply, to achieve a cheaper price for TV airtime in the market. The former, however, aims to sell product to most of the appropriate, potential customers."

But, based on last year's evidence, ITV was not the first station to be traded. Because of the implementation of the Contract Rights Renewal procedure, many media agencies traded the other channels before they signed up to ITV deals in January.

For some advertisers, the idea of a constant low-weight, high-frequency campaign may be suitable. However, most campaigns require bursts of activity with high cover and low frequency, so it seems unlikely that the TV trading model will change any time soon. This won't stop ids from trying, though.

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