Media Perspective: Many broadcasters face being stuck in a downward spiral

"We're fucked." The summary chart of a TV broadcaster's board presentation on 2009, just before Christmas. A technical term, apparently.

TV is totally exposed. It cannot control or limit its decline. Its cost model - station average price - means less revenue equals cheaper costs. Bizarrely, more audience also means cheaper costs. Both true in probably every month of 2009. For consumers, TV has never been better, the very epicentre of people's lives. Still 25 hours, on average, of their waking time.

If you started again with a blank sheet of paper, broadcaster investment in programming and audience would have been rewarded by increased prices - something worth paying more for. Ironically, if CRR and one ITV didn't exist, the TV broadcasters would have removed revenue publication and looked to charging more for more, not less for more.

CRR is the shackle, but CRR is not why TV is where it is. It's because station average price still exists, and it keeps getting cheaper. Value is rewarded by share, not volume. Advertisers can spend less and get more, with no pre-requisite to maintain or increase spend. Digital TV penetration, viewing and naturally cheaper channels have ensured TV has maintained its death-grip on itself with a self-perpetuating downward cost spiral. Clients, procurement, auditors, us - none of us want to give up this trading method. Like smokers who light up after reading "... this will kill you" on the packet.

The end game of this head in the sand, or, as in my case, head not in the sand, will lead to mergers and dumbed-down content, as programme costs can no longer be funded out of ever-falling TV advertising revenue. A worse product. The BBC is immune. Sky is immune - the ultimate cockroaches in the depression fallout. Virgin is maybe immune. But ITV, Channel 4, Five, Viacom and IDS are not so.

Until CRR ceases to exist, which, because of ITV's overall family share, will receive no advertiser/agency support, we are in the model we are in. Advertisers having to cut spend, "retail" pricing a thing of the past, means paying more for TV is unlikely to be accepted. So we like the model. We know it might "kill us", but we'll light up so long as it costs less. All about the now, not the when.

Poorer content, fewer channels going forward, will ironically create inflation. That, and an ITV1 unrestricted by CRR, will allow ITV and other TV media owners to follow suit and seek to increase prices. I'd recommend advertisers spend as much as they can while TV is great and cheap. 2009 may be the last, and certainly best, opportunity for massive deflationary value. Otherwise, "we're fucked" could be the most profound chart you've ever seen.

Ian Darby is away.

- Chris Locke is the trading director of VivaKi Trading UK.