TV revenue ‘shifting away from ads’

TV revenue ‘shifting away from ads’

Tony Lithgow

Smith: pay-TV’s continuing growth will lead advertisers to look for alternatives

Pay-TV revenue in the UK and Western Europe is expected to overtake revenue from spotadvertising on the small screen starting in 2005, according to the UK’s second-largest media agency.

ZenithOptimedia says the shift will have far-reaching consequences for advertisers and television programmes as their own experts and computer projections show the gap between the two revenue sources widening during the next eight years – with cash from subscription TV remaining the greater revenue source.

The predictions are set out in a newly-published 180-page report from ZenithOptimedia, which was the number-two individual media agency last year, according to Nielsen Media Research.

The agency’s head of knowledge management, Adam Smith, said the continued growth of payTV would lead to advertisers searching increasingly for alternative forms of media to put their message across to the public.

This would eventually impact on television content, he said.

“I see the redirection of funds away from commissionprogramming into format – which leeches away the ability of free-to-air channels to mount very popular spectacular programming,” Smith explained.

He said this would mean fewer expensive quality dramas, such as Inspector Morse, and more I’m a Celebrity...-type programmes.

Smith went on: “In 10 years’ time, when PVRs are much more widespread, we’re going to have much more difficulty in drawing attention to spot advertising.”

ZenithOptimedia – clients of which include Allied Domecq, Quantas, Procter & Gamble, Nestlé, British Airways and Ralph Lauren – have forecast that, next year, TV adspend will be £12.6bn in western Europe. The UK figure is estimated at £2.6bn.

TV subscription revenue for 2005 is predicted by the agency to be £13.4bn for Europe and £3.3bn for the UK.

Mark Jarvis, head of media at Carat, the UK’s fourth-largest media agency, suggested that Smith’s prophecies for the future impact on terrestrial TV programming were a “bit doomsdayish”.

He argued that ITV1, for example, would know the only way it could survive in an increasingly competitive environment would be to invest in quality programming.

He did concede, however, that TV appears to be drifting toward subscription-based funding.

“I can quite see subscription revenues outpacing revenue from spot-advertising as a trend,” he said.

“I wouldn’t disagree with that.

Over what period, is a matter for debate. But, undoubtedly, subscription revenues will continue to grow at a faster rate than spotadvertising revenues, on the longer-term forecasts we’ve been looking at.

“The explosion in the number of TV channels does make the job of advertisers in delivering effective communication through the television more difficult.”

Jarvis added: “Historically, you had one channel, so you’d get 90% coverage in a week. These days, that’s not so easy. But I still think there’s a future for advertising on TV.”

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