Ad-funded TV has a future, PHD claims

Although advertising revenue is growing at half the rate of subscription, the short-term picture for ad-funded television broadcasters is secure, the Oxford Media Convention heard.

Research from PHD suggests the threat from personal video recorders and Video on Demand has been overstated. By 2010, even in the worst-case scenario of eight million homes having PVR or Video on Demand, there will be only an 8.7 per cent loss of impacts.

Tess Alps, the PHD chairman, said that although the decline would produce incremental inflation, advertisers would tolerate this because of the recent recession.

She also said TV advertising would not lose its effectiveness at the same rate, that sponsorship would become more valuable and that interactive advertising would grow more prevalent, producing new revenue.

In the longer term, however, the research showed that if the penetration of PVRs or Video on Demand reached all UK homes, there would be a 32 per cent loss of commercial impacts. Alps said the medium would have to find ways to adjust to this change.

Lisa Opie, Flextech TV's managing director, predicted commercial terrestrial broadcasters will struggle to attract mass audiences, so will grow more risk-averse. "The bigg-est growth in innovation will come from pay-TV," she said.

- Media Forum, p8.