Media Forum: Will Ofcom rules change TV?

Does the relaxation of airtime sales rules go too far, Alasdair Reid asks.

Apparently, just about everyone consulted by Ofcom about its proposed partial relaxation of airtime sales rules told the regulator that it should think again. Many suggested its proposals were half-baked. Some even advanced the opinion that they were downright stupid.

Chris Locke, the trading director at Starcom, went as far as to suggest that "all the parties at Ofcom who passed this legislation should be given a job more appropriate to their skillset, which would involve wearing big red noses, size 28 shoes, while working in a big tent".

But these strong views came from those close to the regulatory coalface - in the wider market, the response was rather more muted.

Under the new Ofcom rules, applicable from 1 September, the three commercial public service channels (ITV, Channel 4 and Channel 5) will no longer be required to sell all their inventory; and they will be allowed, for the first time ever, to formalise the practice of conditional selling of digital channels such as ITV's 2,3,4 and Channel 4's Film4 to advertisers on the other channels.

The former will allow them to ditch undemanded spots and thus manipulate yield; the latter potentially adds to their negotiating leverage - though this new freedom does not apply to ITV1, which is still regulated by the Contract Rights Renewal regulations.

And there's the rub. Not for the first time, some observers say, Ofcom has bottled the opportunity to conduct a big-picture review of the airtime market, including the arguably bigger issues of CRR and other fundamental trading dynamics - including station average price benchmarking and agency deals negotiated against market share.

Ofcom is aware of potential criticism on this front. "A market study is a considerable endeavour with significant resource implications, and given the information currently available, Ofcom's view is that an own-initiative market study is not justified at this time. Ofcom will keep this decision under review by monitoring any stakeholder concerns and wider market developments," a disclaimer in the press release read.

Meanwhile, sales points, advertisers and their media agencies will just have to get on with it. But does anything really change? After all, CRR leaves ITV with little room to manoeuvre - and other commercial broadcasters tend to take their cue from the market leader.

But Andy Barnes, the sales director at Channel 4, says there could be concerns. "Even if Ofcom were to undertake a more thorough review of all aspects of the airtime trading market, I'm not sure what anybody thinks it would come up with," he says. "And it's interesting that when you talk to people in other media, they seem to be envious of the way in which TV is bought and sold. But some advertisers will view the prospect of ITV being officially able to conditionally sell with some trepidation - and that's not unreasonable."

However, Aegis Media's trading director, Steve Platt, confesses he's less concerned. He says: "Given that everyone sells conditionally anyway, even if they call it bundling, then I don't see what's new. You can't go to any of the TV sales points and tell them you just want to do a deal on one channel. As for minutage, ITV is going to continue to sell all its airtime. If it doesn't, it will have issues with its share of impacts and that has a knock-on effect as regards CRR. I can't see any broadcaster deciding it doesn't want to sell all its airtime either, particularly in the current market."

That's not exactly the way that Chris Hayward, the trading director at ZenithOptimedia, sees things. He predicts: "Broadcasters will almost certainly use this minutage flexibility to try to increase revenue by putting more inflation into the system. I think you'll find this especially in ITV regions and you might also find selective manipulation of heavily demanded event TV. If the opportunity is there, broadcasters will inevitably seek to take advantage - a point that's (tacitly) conceded in Ofcom's release."

Mark Jarvis, a founding partner at the7stars, wholeheartedly agrees. He concludes: "The rule governing TV minutage has been the one piece of legislation keeping the TV media owners on the straight and narrow. As the digital world becomes a reality in which TV programmes are accessed as much through the PC screen as the TV set, then price optimisation will become more important. You can't blame the TV stations for wanting this but the more cynical among us will feel threatened. Without the promise of a broader review of the TV market, Ofcom's rule change is tinkering around the edges."

MAYBE - Andy Barnes, sales director, Channel 4

"As far as these changes go, I'm not sure they will make a lot of difference in a CRR-driven world - but I can see why some people might be concerned. Advertisers can see a situation where their ability to negotiate is affected."

NO - Steve Platt, trading director Aegis Media

"Reducing minutage would push prices up but prices are high already and it's not necessarily going to pull more money into TV. Everyone should be trying to deliver deals and maximise revenues."

YES - Chris Hayward, trading director, ZenithOptimedia

"Where conditional selling is concerned, a lot has changed since the Ofcom review began in March. There are fewer sales points so the potential for it is greater. This has implications for buyers."

YES - Mark Jarvis, founding partner, the7stars

"By giving (sales points) the opportunity to control product supply, the genie has been let out of the bottle. How can TV sales people resist? This is what they have craved since the opportunity to advertise on TV was invented - and anybody who argues otherwise must be mad."

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