Audiences – not impacts – are the true measure of itv’s value

I have this recurring dream about the television advertising world. It’s standing on a chair with a noose around its neck, an orange in its mouth and sporting women’s underwear. I wake as it steps off the chair.

In the rush to maximise their investment in ad budgets, clients and agencies should pay more attention to how the ‘Superman’ of commercial television is rated by its consumers, before redeploying their cash to cheaper channels, argues Chris Locke

I have this recurring dream about the television advertising world. It’s standing on a chair with a noose around its neck, an orange in its mouth and sporting women’s underwear. I wake as it steps off the chair.

The good news is: I can wake from my nightmare. I am not sure TV ever can. It is caught in the ever-spiralling contract rights renewal (CRR) world created by the formation of a single ITV.

On the face of it, it’s great news for advertisers. Take money away from ITV1, keep your deal, even though you’re investing less, and redeploy to cheaper channels. A great way to control a “bully”, one who would surely leverage any freedom beyond CRR if so allowed.

We at Starcom hold our hands up to such behaviour. In fact, we would like to think we’ve been at the leading edge of following audience migration away from ITV1, and having the flexibility to deliver individual strategies that keep our clients on this migratory curve. But are we in danger of destroying the very channel that makes TV great? Looking back at the past two years, pretty much every agency and advertiser that could do so has taken its full CRR/audience ratchet mechanism (ARM) percentage out of ITV1.

Vicious circle of losses

Sure, ITV has kept about 40%, pushing money to its digital channels. But it’s still a compound loss of about &£100m a year. You can already see – from the 2006 audience delivery to date – that ITV1 is in for another 4% loss of revenue, and another &£100m net loss in 2007.

And this is in a market where there are fewer advertising pounds. Why? Because TV is cheaper. Competitive channels chase audience so they can get their piece of CRR. Cheaper TV means less money required to deliver target weights, so less money pushed to TV, so TV gets even cheaper.

Back to my recurring vision. The point is ITV can only sustain these losses for a short period. The cost of the World Cup, drama, F1, films and digital channels is huge. It costs to deliver mass. ITV cannot monetise its other “spaces” fast enough. It is still spot-advertising reliant. In two, maybe three years, ITV1 will look like Five. No more mass. Thousands of spots on schedules. Tiny audiences per spot (we’re already on that path). Coverage targets only work if you can get the 1+ coverage high quickly. ITV1 does that. It always has. When the model is broken, what then? Will we weep? I think we will.

The BBC must be sitting looking at what is happening to the UK commercial market, and be grinning like a smug Cheshire cat. It knows that in the not too distant future, it will be the only home of all major free-to-air sport and major UK drama. After all, it only has &£4.5bn of your and my money to spend, on anything it fancies. Coupled to that, the BBC has recovered its “pixie dust” touch in this area.

That alone doesn’t bode well for ITV, but recent weeks have seen something of a return to form. The key factor in taking money out of ITV1 is based on commercial impact delivery. Rather like Barcelona vs Arsenal, 11 vs ten will win out. Having only seven-and-a-half minutes of ads an hour average on terrestrial channels will see commercial impact delivery accelerate away to multi-channel, with its 12 minutes an hour average. Compound this with new channel launches – particularly within the Freeview package, Film4 and Five’s two digital channels all coming soon – and ITV1 becomes ever more King Canute-like.

The irony is, in all other media it is the audience (not the commercial audience) that drives share and volume. In press it’s circulation (eyeballs), and in radio, listeners (ears). Not readers of ads, not listeners to ads, but readers and listeners to the title or station.

Strong viewer loyalty

If TV was planned by viewers rather than impacts, it would not necessarily be worth more, apart from the fact that ITV1 viewers are more programme-loyal, and watch longer than on rival channels. Apart from the fact ITV1 still delivers about 90% of the top 50 biggest-rated audience programmes in a year. Apart from the fact Coronation Street still hits 12.5 million adults in a single bound. And apart from the fact ITV1 had – in 2005 – 2,633 programmes delivering over 3 million viewers. Five had 53, Sky (and therefore satellite) had none. ITV still reached more individuals in a week as a single source than any other channel (78%).

It is still the Superman of commercial channels, just that it’s increasingly under attack and being weakened by the green kryptonite of digital.

So, just stop and consider this for a moment. Think of TV as eyeballs, and you rethink how you could (should) deploy your media pound. We live in a world dominated by auditors and procurement. Price is everything – including value.

Am I saying CRR should be discarded? Absolutely not. Advertisers should challenge their agency to self-regulate their overall approach and ensure it is right for the client. Yes, there are ever cheaper, smaller alternatives to ITV1. But we should look beyond price – to the value of mass, the value of talent, the value of fast coverage.

Because you’ll miss it when it’s gone. Take time to consider the price of value.

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