…Yet that is how Britain’s £5bn-a-year TV ad market works, thanks to Contract Rights Renewal, the legislation that has protected advertisers since Carlton and Granada merged to become ITV 14 years ago. Reviewing CRR should be a priority for Dame Carolyn McCall, the incoming chief executive of ITV, and Alex Mahon, her new counterpart at Channel 4.
CRR works by giving advertisers the right to keep renewing their ad sales contracts with ITV on the basis of deals first agreed in 2003, so long as they spend the same share of their TV budget with ITV relative to other broadcasters. An advertiser can cut its volume of spend and get the same discount if it maintains its share. The prices might even be cheaper because of the deflationary effects of cutting spend and falling audiences.
However, rewarding an advertiser for share, rather than volume, is flawed because the broadcast market no longer operates in isolation. Most brands and agencies now regard TV as part of a bigger audio-visual budget that includes online platforms such as YouTube and Facebook. What’s more, the rise of online means advertisers are less dependent on broadcast TV to reach young audiences.
It was easy to overlook CRR’s flaws after Ofcom’s last review in 2011 because TV had a renaissance as brands rediscovered its effectiveness. But the downturn since the Brexit vote has exposed CRR’s contradictions. Longstanding advertisers have cut TV spend and moved video money into Google and Facebook but kept their discounts with ITV. At the same time, newer advertisers trade on volume and don’t get the same benefits.
There is further evidence that CRR is no longer fit for purpose. Addressable advertising, which lets brands target and personalise ads, promises to bring in more revenue. But if an addressable ad during a broadcast counts as part of a share deal under CRR, then that limits the upside. No wonder Sky, a pioneer with AdSmart, is exasperated.
Another red flag is agencies circumventing share deals in the so-called "grey market" through sponsorship, video-on-demand and advertiser-funded programmes, where an agency pays for a show and receives ad spots that it can sell at a profit. Lack of transparency has led to repeated clashes as broadcasters check if agencies have met their share deals.
Reviewing CRR requires the support of advertisers whose trade body, ISBA, has resisted so far, although it is listening. CRR was created to protect advertisers from ITV, which continues to air about 990 of the 1,000 most-watched shows on commercial TV annually, so a remedy may still be required.
However, ITV is less dominant in a world where Google makes three times as much in UK ad revenue, Facebook is set to overtake Channel 4 and Sky by ad sales, and viewers turn to Netflix without ads. Even within TV, the market is more balanced as the number of sales houses has shrunk to three, and ITV, Channel 4 and Sky each has roughly one third of commercial impacts or ad views.
As broadcast and online merge and the US tech goliaths tighten their grip on the global media industry, it is in the interests of advertisers to support a strong, British ad-funded TV industry that will invest in homegrown content. CRR should be consigned to the past.
Gideon Spanier is head of media at Campaign.