The regulator, not advertisers, should start reform of TV trading
A view from Bob Wootton

The regulator, not advertisers, should start reform of TV trading

A former ISBA director of media responds to ITV and says the broadcaster itself should talk to the regulator.

Ben Allen’s interesting piece for Campaign earlier this month, arguing that advertisers should take the lead in modernising TV trading, merits qualification and comment.

Allen, ITV’s director of strategy and trading, is right that ITV continues to operate under a cap of price regulation that is no longer relevant nor fit for purpose.

The boring bit: the cap is called contract rights renewal (CRR) and was introduced when the UK’s then competition regulator, the Competition Commission (CC), investigated the merger of Carlton Communications plc and Granada TV plc in 2003 to create the ITV we now know.

At the time, TV was the big game in town and ITV was its biggest beast, controlling the sale of airtime in 997 of the top 1,000 TV programmes according to BARB.

Any consolidation in the sale of airtime that might lead to greater market power for the broadcasters and ITV in particular was a prevailing concern for the major advertisers of the day. Such was the legacy of decades of monopolistic sales behaviours.

As director of media at ISBA, I represented the interests and concerns of advertisers to the CC and the nascent Ofcom – successfully, as it turned out. 

Independent sources confirmed that CRR saved advertisers billions (yes) over time and it has been widely cited around the world as one of the most successful regulatory competition interventions. How I wish I’d been on points!

Now I’m one of the few remaining original architects/signatories of CRR still active in the sector.

I came to the view – which I expressed publicly some time before I moved on from ISBA in 2016 – that CRR should be reviewed and overturned. It was only intended to be in place for a few years.

Terrestrial spot broadcast advertising is but one of many channels between advertiser and viewer. It has been joined by sponsorship, product placement, connected TV, TV on demand, addressable and streamed services and more.

Nor (perhaps regrettably, but that’s another story) is TV’s market power still a concern.  

Today’s far bigger worry is the major tech players, which have carved out positions of much greater and global advertising market power and operate far less transparently.

The make-up of the advertiser base has changed too. The established players who were around when the imposition of CRR allowed the formation of ITV plc – mainly FMCGs, booze, toiletries, financial and motors – have been diluted by many newer-economy businesses whose norms and expectations of advertising pricing weren’t set in the 1950s, 1960s and 1970s.

No: if ITV plc were to be formed by merger today, advertisers would be unlikely to object to it, making it harder for regulators to justify any intervention.

I shared my views with ITV – at its invitation – several years ago and suggested the time was ripe for it to get advertisers on its side, and petition Ofcom and current competition regulator The Competition & Markets Authority to overturn CRR.

It was uncomfortable with this. I got the clear impression that it simply didn’t want to rock the boat with its regulator. (Like most regulated businesses, there were times when it probably wished the regulator didn't exist.)

Now if CRR was still doing its job in any way at all, it would be an extremely unwelcome cramp on ITV’s ability to trade at this very difficult time.

However, the narrative circulating among the tight-knit circle of TV traders is that ITV has found comfortable ways of living with CRR much of the time, while agencies have turned their focus single-mindedly to deliver their contracted and audit performance targets.

Yet in calling for advertisers “take a leap of faith and let go of the perceived protection of past trading metrics”, Allen both confirms that CRR is still working – albeit to some kind of mutual disadvantage – and implies that advertisers should lead a charge against it.

Which they won’t. It’s ITV’s business, not theirs – except by proxy. Advertisers may – and should – be open to persuasion, but they will not see it as their role.

Rather, I repeat my counsel that ITV should seek to persuade them and bring them onside so that they can approach the regulators together and complete the modernisation of the trade in TV advertising of whatever form.

Ofcom’s first helpful step could be to charge its long-standing independent adjudicator of CRR, Robert Ditcham, a highly capable and experienced senior agency player, who could bring significant value to the discussion, to engage.

Bob Wootton is principal at Deconstruction Consulting and was director of media at ISBA from 1996 to 2016