Once a quarter, Martin Sorrell, the chief executive of WPP presents
the group’s interim financial results. And, regular as clockwork, he
uses the occasion to deliver his speech about the pernicious effects of
inflation and the alarming costs of TV airtime. It’s so expensive, in
fact, that advertisers are about to start leaving the medium in
By tradition, some analysts and many practitioners in the airtime market
are allowed a wry smile at this point. They know, of course, that
Sorrell’s comments are not directed entirely at the UK market. But they
do know that the UK market, like other markets, complies now and then
with the laws of supply and demand.
They know, in short, that the greatest cause of media inflation is
advertiser demand. Or they thought they knew. Now they are more
convinced than ever - and it is perhaps ironic that the latest evidence
comes from one of Sorrell’s companies, MindShare.
A MindShare report, entitled, Media Inflation (Campaign, 7 May), takes
on several myths about the media market. Perhaps the most important of
these is the belief that increasing commercial minutage (by introducing
advertising to the BBC or letting ITV have more airtime) would affect
prices in the long term.
Not so. The report states: ’Extra minutes would have a negligible impact
on inflation. Because demand for TV airtime is so high, advertisers
would be prepared to buy any new capacity at more or less existing
prices. The market would absorb any new supply within about 18 months
and with next to no impact on media costs.’
Are its conclusions true? And if so, what are the implications? Bob
Wootton, the director of media and advertising services at the
Incorporated Society of British Advertisers, has been at the forefront
of calls for more minutage.
He agrees with much in the report.
He states: ’Yes, initially there would be a reduction in the rate of
inflation. This is a sophisticated and dynamic market, but budgets are
not sufficiently fleet of foot to take advantage right away. But all the
models we have looked at suggest that, after the initial effect,
increased supply would be absorbed by increased demand.’
In other words, there is currently demand that is being frustrated.
’Yes,’ Wootton says. ’Big advertisers have a huge range of brands. And
while the big ones can and will always find a way to use TV, that’s not
always the case with tertiary brands. Similarly, there are many smaller
advertisers not on TV at all. That would change.’
The price pattern of the market would change too, Wootton believes.
Although average prices across the market would return to previous
levels, all of the subsequent increases would take place at the top end
of the market - pricing at the bottom end would not rise to levels where
the new TV advertisers would be bumped out of the market again. Wootton
adds: ’What this work does is make clear something we’ve always
understood to be the case - that money does flow between media.’
And, you could add, price is as important as strategic communications
planning issues. In the past, for instance, ITV has had mixed feelings
about the ability of the market to absorb more minutage. But if the
report is right in its conclusions, it might have even wider
implications. One of the big economic arguments against introducing
advertising on to the BBC is that it would throw the market into chaos
and deprive ITV of up to half of its revenue overnight - with obviously
ISBA isn’t calling for such a sudden shock to the system these days; but
it continues to call for the limited introduction of advertising on to
the BBC. Its critics say that this is just as alarming. ISBA, they say,
just wants to establish a bridgehead - it obviously envisages a gradual
ramping up of BBC minutage. But if the MindShare report is correct, we
now know that the market could cope.