Raymond Snoddy on media: Lack of flexibility will kill TV revenues

Often the most interesting thing about a political speech is what the politician planned to say but unaccountably didn't at the last minute.

A good example came from culture secretary Tessa Jowell at the Royal Television Society meeting in Cambridge at the weekend, where she rubber-stamped the 2012 analogue switch-off timetable.

The BBC licence fee will be the basic mechanism to pay for the change.

But in an early version of her speech the culture secretary apparently suggested that the licence fee might have to stretch a bit further, and could be used to help Channel 4 with some of the specific costs of transition.

Unfortunately for Channel 4, that bit disappeared. Were there worries that it was too specific and sounded a bit like a promise? Did BBC chairman Michael Grade find out what as going on and nobble Tessa? He was certainly effusive in his praise for the culture secretary for her performance, complete with its lack of any specific aid for Channel 4.

There has also been a dramatic shift in ITV's outlook on the channel.

It has dropped its support for the top-slicing of the BBC licence fee.

The penny has dropped that a strong BBC is the best way of keeping Channel 4 in check.

There was no good news at all for the channel at Cambridge - except that everything was fine. Channel 4, said Jowell, was doing fantastically well at the moment and, although all public-service broadcasters were facing challenges,'I do not believe that this warrants any direct intervention by government at this point in time. After all the Channel 4 schedule is in good shape.'

Options are open for the future, but it looks as if the channel will have to swing by its own tail for the time being.

Channel 4 chief executive Andy Duncan was even quite negative about product placement in programmes - one potential way of replacing advertising revenue lost in the fast-forward world of personal video recorders (PVRs).

Duncan was one of those who argued that, once embroiled in product placement, it was difficult to avoid the danger of undermining the quality and independence of editorial.

The threats to advertising revenue are real enough. Alan Rutherford, vice-president of global media for Unilever, warned that his company had cut its spending on television by 20% in the past three years. There was more unfortunate news from Janice Hughes of Spectrum Strategy. If PVRs reach 25% penetration by 2012, she said, more than £100m in television advertising would be under threat.

In the rather more likely event of PVRs reaching 70% penetration by 2012, there could be a 37% reduction in advertising impacts, with close to £300m in television advertising coming under threat.

There are lots of ways of meeting the PVR threat. You can have competitions with prizes for those who watch the ads and respond to the message, or more frequent, shorter ad breaks. You can split the screen and have an advertising presence in part of the programme and you can also have a more flexible approach to ad breaks.

On the evidence of Cambridge there seems to be little enthusiasm for blatant product placement on the US model, even though lots of it is already imported in American films and television.

As Tess Alps of PHD put it: 'No brand wants to be the one that ruins television.'

To the extent that there was consensus on the issue, it was best expressed by Charles Allen of ITV. In the face of such challenges, regulators will have to be more flexible on what they allow.

Programmes awash with ad breaks would serve no one's interests. But surely the rules that prevent programmes being interrupted any more often than every 20 minutes - 45 minutes for feature films - need to be revisited for the sake of the funding of Channel 4 and all other commercial broadcasters.


- The US product placement market was worth $3.46bn in 2004, according to media tracking agency PQ Media. TV accounted for $1.87bn (a year-on-year increase of 46.4%), due in part to the rise of reality shows.

- Product placement is most prevalent in TV and film, but it has now extended into other aspects of the US media, such as magazines, video games and even music.

- Earlier this year McDonald's planned to pay rappers to mention the Big Mac in songs. The burger chain intended to pay the artists $1-$5 each time the words 'Big Mac' were heard on the radio. Plans were scrapped when the story was leaked.

- It would not have been the first product placement in the hip-hop charts. Media agency Maven Strategies had previously managed to get Seagram's Gin mentioned in the lyrics of five rap releases.