Channel 4 admits TV ad market is in recession as big brands pull back

Broadcaster also admits that while it saw a lift in TV ad spend following the Google brand safety scandal, that increase was ‘short-lived’.

The advertisers who stopped backing Google following the YouTube brand safety scandal did shift more ad spend back into TV advertising, according to Channel 4. However, it concedes this only created a “short-term lift”.

Responding to a question from Marketing Week at its annual results briefing this morning (12 July), Channel 4’s sales director Jonathan Allan said: “We saw a bit of money move out of YouTube and into Channel 4 around April and May, but it was only a short-term lift and it unfortunately doesn’t look like a long-term shift.

“YouTube has made certain commitments on white listing and removing extremist content, and the majority of advertisers have now returned. TV advertising has a difficult period ahead as the reality is the exchange rate means the big TV advertisers like P&G, Unilever and the supermarkets have strained budgets right now and need to work harder to generate value.”

In 2016, Channel 4, a non-profit broadcaster that invests all of its profits back into its programming, saw revenues total £995m, up from £979m in 2015. Digital revenues made up 10% of this total, having risen 24% year on year to £102m.

Total advertising and sponsorship revenues, meanwhile, hit £938m, up from £925m in 2015.

TV ad industry ‘in a recession’

Despite its ad revenues inching up, Allan admitted TV ad revenues are currently in a “recession”. He pointed to the Channel 4 board’s decision last year to use £15m from the corporation’s content reserves to protect remit delivery as a “necessary step” to protect creative programming due to the advertising market going into decline following the EU referendum.

TV advertising has a difficult period ahead as the reality is the declining exchange rate means the big TV advertisers have strained budgets.

Jonathan Allan, Channel 4

He predicted Channel 4 would see a similar modest rise in digital ad revenues in 2017, and said it will do more to try to win ad spend over from digital rivals.

“We think TV advertising is as effective as it always has been,” Allan added, in response to the same Marketing Week question. “But we will invest a lot of money over the coming months in communicating the value of broadcast advertising effectiveness, in both video online, VoD and traditional TV, versus the less secure environment on YouTube and Facebook.”

Even though he conceded that any rise in TV ad revenues following the Google brand safety scandal was “short term,” Allan said Channel 4 should see longer term benefits because The Times investigation had shifted the behaviour of some marketers.

He explained: “It feels like the subsequent conversations around transparency and effectiveness online have shifted advertiser’s attitudes. There’s more questions being asked [of YouTube and Facebook] now, whereas five years ago they’d just spend 20% of their ad budget on those platforms without even asking a question.”

Allan also gave an update on Channel 4’s The Great British Bake Off property, which it bought from creator Love Productions following its controversial split with the BBC. He insisted the chemistry between the new presenting team was “incredible” and that it had a “huge” amount of interest from potential sponsors.