Editorial: Advertiser exodus a real danger to broadcasters

National newspaper coverage of Unilever's £200 million airtime deal with ITV last week tended rather to miss the point: the figure represents close to a 40 per cent cut in budget on 2002, when the UK's biggest advertiser spent £320 million with the UK's largest commercial broadcaster.

Unilever's decision is part of a wider trend. TV's mainstay advertisers are turning away from declining terrestrial audiences in favour of (in Unilever's case) online, outdoor and what Alan Rutherford, Unilever's vice-president of global marketing, calls "relationship marketing". So far, ITV has managed to make up the shortfall by launching its own multichannel offering. However, at the rate money is moving out of terrestrial TV, it is unlikely to be able to maintain its revenues unless some swift changes take place.

ITV is not the only one suffering. TV revenues are forecast to fall 6.2 per cent period on period for the first quarter of 2006 and even if budgets are being held back for the World Cup, the long-term picture looks far from rosy. Neither is the trend confined to the UK: in the US, six of the top-ten advertisers cut their overall TV spend last year. And, in an environment of increasing pressure on clients' margins, the decision to drop expensive TV campaigns in favour of emerging (and cheaper) media is an easy one to make.

What is the solution for the broadcasters? Without money from advertisers, the funding model that allows them to commission high-budget drama looks under threat. One answer might be a two-tier system of programmes, with a subscriber charge for certain high-demand shows.

Subscription revenues will offer little consolation to advertisers looking to reach a TV audience, however, as "The future of media" (page 22) indicates. Product placement and branded content offer an alternative, but no-one really knows what the future holds for the advertiser-funded broadcast model.