Despite pulling in 21 million soccer viewers, ITV’s ad revenue is tumbling, forcing it to review its income model. But C4 is bullish about the old ways
As World Cup audience figures pile up ever higher, television advertising revenue – particularly for ITV – plunges ever lower. With the England-Sweden match peaking at 21 million viewers – an 81% share of the commercial audience – ITV should have been laughing all the way to the bank. Here was proof that event television can still pull in the crowds and ITV can win audiences that other commercial channels can only dream of.
Instead, Charles Allen and his new top team spent two mornings last week trying to convince analysts and journalists not merely that ITV has a strategy to cope with the digital maelstrom, but that it has a future at all as an independent company. That’s not exactly how they put it – but with the Goldman Sachs bid fresh in the memory, you knew where they were coming from.
Dangerous procedures these presentations. The last time ITV did one, it assured analysts that the World Cup would stimulate an advertising recovery – which merely frightened advertisers into believing their costs would rise. Already jittery, they ran a mile, sowing the seeds of this month’s revenue fall.
Unlike the BBC and Channel 4, ITV has to please the City and its desire for short-term cash while sorting out its long-term business. Hence the announcement that it was returning &£200m to shareholders and cutting parts of its programme production – instead of investing more in new production, as some believe it ought.
ITV’s business is based on a financial model that is, at the very least, creaking and, at worst, in dire straits – and as Allen was addressing the analysts, he wasn’t helped by a provocatively-titled speech by one of advertising’s iconic figures at the Cannes festival.
Lord Saatchi – Maurice, as distinct from Charles – had distributed advance copies of his talk entitled The Strange Death of Modern Advertising. It caused great excitement in newsrooms because he seemed to be saying that advertising – and TV advertising in particular – was dead.
“The funeral rites have been observed. The gravediggers have done their work. The mourners are assembled. Most of them are embarrassed to say they ever knew the deceased. ‘Advertising?’ they say, ‘I’m not in that business.’…
“Advertising holding companies used to boast about their share of the ad market. Now they are proud of how much of their business is not in advertising.”
What Saatchi said is true, up to a point. Companies don’t want to be associated with the A-word at the moment – and ITV was indeed proudly saying how much of its business would soon come not from advertising. But of course he was teasing too – not to mention laying out a new business strategy for his (advertising) agency M&C Saatchi, namely that in this rapidly-changing, multi-media, low-attention-span world, businesses must ruthlessly pare down their brand strategy to a single word.
“Why?” he asked. “Because nowadays only brutally simple ideas get through. They travel lighter, they travel faster.
“What I am describing here is a new business model for marketing, appropriate to the digital age. In this model, companies compete for global ownership of one word in the public mind – to define the one characteristic they most want instantly associated with their brand, and then own it.
“It is the modern equivalent of the best location in the high street, except the location is in the mind. For example, the word ‘search’ is now owned by Google.”
But if TV advertising is on its last legs, why hasn’t anyone told Channel 4? It has just moved its digital channels E4, More4 and FilmFour onto Freeview, away from the subscription model and onto the TV advertising model.
While Channel 4 has positioned itself very effectively for the new era, this week becoming the first broadcaster to simulcast its channel on broadband, chief executive Andy Duncan believes broadcasting and advertising have a lot of life left in them. “PVRs – personal video recorders – were supposed to have destroyed broadcast television and the airtime sales business by now,” he said in a New Statesman Media Lecture last week. “They haven’t yet. Though it’s certainly true that the advertiser-funded model is under strain.
“Internet use is supposed to be galloping ahead of TV viewing. It isn’t. Except for a particular young demographic who were always light TV viewers anyway. There’s a lot of spin about. For all the hype about the latest broadband and mobile gadgetry, many of the fastest-selling consumer electronics devices are actually to do with traditional TV – Freeview boxes, and widescreen, LCD and HD sets.
“While sites such as MySpace have impressive hit rates, it’s worth remembering the continuing power of traditional TV to deliver big audiences. Eight million people tuned in for the opening night of the latest series of Big Brother, and nightly viewing regularly peaks at over 5 million.”
Which, as ITV would point out, is much lower than ITV1’s World Cup audiences in recent weeks.â¢