Phone-in scandal kills participation TV

It has been a disastrous year for participation television. Despite rising ad spend (contrary to early predictions), the industry has faced a broadside of criticism for abusing viewer trust in pursuit of revenues from lucrative TV quizzes.

The issue was last week thrust back into the spotlight after ITV executive chairman Michael Grade released the findings of an independent inquiry into its use of premium rate services (PRS). TV stars Ant and Dec were dragged into the controversy when two of their shows – Saturday Night Takeaway and Gameshow Marathon – were highlighted for below-par practices in the report.

The UK’s biggest commercial broadcaster admits the affair will cost it £18m. That includes the £2m cost of the Deloitte report, the £7.8m fund set up to repay viewers and the £8m ITV is expected to pay out for the (separate) GMTV scandal. But in reality the scandal will cost broadcasters millions more in lost income at a time when they are desperate to replace declining ad revenues.

ITV made £20m in profits on £54m revenue last year, while interactive revenue generated £47m. Channel 4 had earlier estimated such services would provide up to £9m in revenue and Five estimated revenue of £8m a year before activities were curtailed.

One City analyst says that broadcasters were starting to get into consumer businesses in a bid to diversify revenues. The analyst adds that they were beginning to act like Tesco or Amazon but had failed to put into practice structures to cope with the change.

Unfavourable prognosis
As a result, the sector’s outlook is bleak. Just 11 months ago, Channel 4 sold its Quizcall channel to iTouch, claiming that strong competition in the participation market meant that it was no longer easy to make profits.

At the start of the year there were 23 channels broadcasting premium-rate quiz shows including the highly publicised ITV Play (axed in March) in a market Ofcom said was growing 16% a year. Now there are just a handful.

Bob Willott, editor of Marketing Services Financial Intelligence, says broadcasters face a year or two of pain following the debacles: “But better that than relying on something that is almost a spurious, exploitative source of revenue.” 

Breakfast broadcaster GMTV, 75% owned by ITV, was fined a record £2m by Ofcom last month for misconduct in its phone-in competitions. Opera Telecom, which provided the service, was earlier fined £250,000 by premium rate watchdog Icstis.

It found that in almost four years at least 18 million callers had been charged for entering the GMTV competition but had no chance of winning. It estimates that the revenue generated by callers with no hope of winning was over £20m. Meanwhile, the Serious Fraud Office is “reviewing evidence” against GMTV with scope to broaden its remit.

And Ofcom is still investigating dozens of separate cases of alleged misconduct. Channel 4, the first to be exposed for fooling viewers with its You Say, We Pay quiz on Richard & Judy is likely to be fined, while BBC’s Children in Need may also be penalised.

Complaints deluge
An initial trickle of complaints and revelations in February soon turned into a flood with Icstis and Ofcom caught flatfooted.

Grade says the inquiry found “no corruption, no venality and no criminality”. But he faces pressure from all sides to do more.

Grade argues there was still a case for such voting services on TV because of “public demand”. Yet, as media commentator Professor Adrian Monck of City University, London, says/ “If participation is editorially important then why not make it revenue neutral?” He says “naked prompts” for a revenue generating scheme were akin to teleshopping.

“ITV now has to convince regulators not just that this was a command chain issue that can be brought in-house and controlled, but that this is a valid editorial enterprise,” he adds. “It doesn’t want to address that latter point, but it’s the elephant in the room.” 

It is an issue facing many broadcasters except, perhaps, BSkyB. Chief executive James Murdoch famously said such schemes felt “grubby”. But Monck notes: “When you have a subscription model, you can afford to be a little lofty about PRS.” 

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