No-one's ever really very happy about the cost of television airtime. Someone somewhere will have a gripe, even in the current situation when prices are rising (which pleases the TV companies) but they're still, in historical terms, extremely low (which should please advertisers and their agencies).
Last week, Group M published a new set of UK media and marketing forecasts - and, true to form, reasons to be cheerful tend to be rather well hidden. More interesting, however, was its rather timely reminder of the contemporary volatility of media markets, not least in television. We have, after all, just witnessed the most violent TV revenue spike in recent memory, with May's figures up 27 per cent year on year.
No-one saw that coming - and accounting for the fact that they failed to account for that fact has become an obsession within some media agencies. And it's all down to the vagaries of one of the strangest trading systems ever devised.
The price of any commodity is governed by the immutable laws of supply and demand - and a commercial television impact is, whatever your friendly sales rep tries to tell you, beyond peradventure, indisputably, a commodity.
And yet it is traded in an absurdly complicated way. A complexity that the satirist Jonathan Swift, who once speculated on the nature of a machine for extracting sunbeams from cucumbers, would have found beyond the powers of his invention.
It has an in-built hedging structure in which the market is pegged to ITV's station average price and in which buyers don't specify how many commercial impacts they want - instead, they specify how much money they're going to spend.
Station average price is calculated on an historical basis - last month's SAP is arrived at by taking last month's revenue figure and dividing it by last month's total commercial impacts. So your true trading position only really emerges after the fact.
And, in one final twist, a commercial impact that might seem valuable to one advertiser (targeting, say, young men) will appear almost worthless to another (who's targeting, say, older women).
It is, in other words, a meta market - a market traded at (at least) one remove from reality. And, during transition phases, meta markets tend to experience exaggerated levels of volatility. We're in one such transition phase, the market having hit rock bottom last year.
During a recession, there's more supply because everyone stays at home in front of the box and commercial impacts soar. Meanwhile, advertisers cut budgets, so demand tails off and the market sags.
But that can change rapidly, as the May market proved. As demand picks up, advertisers no longer get the impacts they expected for their budget allocation. So they raise their budgets. Which further inflates the market. Soon we're in a vicious (or virtuous, depending on your point of view) cycle.
1. The Group M report predicts that, although this year's strong spring TV market will be maintained across the summer, not least thanks to the Fifa World Cup, the back half of the year will be weak. Still, it believes that revenue for 2010 as a whole is likely to be up by 12 per cent year on year. This sounds a lot but TV revenues in 2009 were at rock bottom, totalling a mere £3.5 billion. We won't see revenue break through the £4 billion barrier once more until 2011 (up 3 per cent on 2010, the report predicts).
2. Some buying points think that Group M's figures for 2010 are sound - but many believe they're on the high side, stating that 6.5 per cent growth would be nearer the mark.
3. But no-one disputes the analysis that TV's cost-per-thousand figure will remain at an historically low level for some time to come. The all-adult cost per thousand was £6 in 2005, falling to £5 in 2008 and £4.29 in 2009. Even on Group M's projected figures, this will have crept up to a mere £4.67 in 2011.
4. And the Group M report touches on an interesting new dynamic in the marketplace - TV advertisers, it suggests, will steer clear of a month if they perceive it to be expensive on a year-on-year basis, even if, in absolute terms, it is still a cheap month. In effect, they have become highly sensitive to short-term airtime price bubbles.
WHAT IT MEANS FOR ...
- Many advertisers were rather irked by the inability of their media agencies to predict the May price spike - or, indeed, to forecast the general TV market buoyancy of spring and early summer.
- The underlying message of this and other recent reports is, however, that they had better get used to restricted visibility.
- We're all in this together - and the Group M report points out that the outlook for the economy as a whole remains cloudy.
- Advertisers should be thankful that, should they enter a sustained growth phase and need a marketing medium to lead this, they can rely on TV being available, for the foreseeable future, at historically low prices.
- Broadcasters face all sorts of imponderables above and beyond their background worries about the state of the broader economy. There's the whole question of Contract Rights Renewal and its likely end date. And then there's the issue of consolidation - with just about everyone expecting the number of sales points to reduce over the coming months.
- Those factors will have a bearing on market dynamics and market shares. It's unlikely, however, that either factor impacts on revenue growth.
- The fact that TV is likely to remain a "cheap as chips" medium for many years to come, even if marketing budgets start to pump up, will actually undermine TV's ability to grow its revenues in absolute terms - because advertisers will continue to believe they should be able to get more impacts for more or less the same money.