Advertising minutage & conditional selling – does anyone care?

In his latest column, Jim Marshall talks airtime sales rules; the realities of buying and selling; CRR; and Polish humour…

Ofcom’s ruling, announced last week, that it is to release ITV, Channel 4 and Five from their obligation to sell all their minutage has caused, if not total outrage, a fair degree of consternation and criticism from advertisers and agencies. As has their ruling that ‘conditional selling’ will also now be allowed.

So, what will it mean to the market? In my view – little or nothing, certainly in the short term!

In the case of advertising minutage, this ruling goes back to the 1980s, when ITV was the only game in town (it also sold Channel 4 airtime for the first 10 years or so of the new channel’s existence) and had a clear monopoly – albeit a regional monopoly in those days. In those times, closing down minutage artificially raised the price and advertisers had nowhere else to go.

Has it changed significantly since then? Well, yes and no; yes, in that the market is now considerably more competitive, and no in that ITV still has a dominant market position – most advertisers still need ITV in order to build an effective TV campaign.

However, the big change, and the reason why ITV is unlikely to withhold advertising minutage, is the continued application of CRR. In theory, ITV would increase its price by closing down some minutes, but this would be entirely counter productive because it would result in a reduction in its share of commercial impacts, which in turn would result in agencies and advertisers reducing their investment in ITV (while still retaining the same deal terms). ITV will not want this. So, why would ITV, or indeed any of the other terrestrial broadcasters, close down advertising minutes? Therefore, for the time being at least, no change!

Conditional selling is arguably a more contentious issue and, given that it has been outlawed from the time that TV sales started consolidating, it’s perhaps surprising that Ofcom has done a complete ‘u-turn’ and have now legalised it. I suspect they are just being realistic and pragmatic. The fact is that, irrespective of the rules, conditioning selling has been taking place for years and has always been impossible to police let alone enforce. And not least because, while conditional selling has not been allowed, conditional buying has. So a sales pitch can say:

“I can’t offer you a conditional deal across these channels, but you can ask me for a better deal by offering to buy across all of my channels…”

Actually no one bothers with this approach because, in spite of the rules, conditional selling is a fundamental and accepted approach of every TV sales operation, and rules are going to make no difference to this. Is this a problem? It undoubtedly would be if conditional selling could be applied to ITV1 but again, while CRR exists, agencies and advertisers are protected from the most punitive application of conditional selling.

So, the recent Ofcom rulings really should have no real impact on the market – but what about in the future?

This of course is why there is understandable discontent with these changes. If, for example CRR was dropped tomorrow – and let’s face it, that is what Ofcom suggested it wanted in its recommendations to the Competition Commission, and that’s what the current Conservative government has suggested it wants – these recent changes in sales regulations would have horrible implications for advertisers and agencies.

And what is also concerning is that Ofcom has stated that it does not intend to conduct a full market review, which would address the issues of minutage, conditional selling, CRR and a host of other sales/buying practises in the context of the overall market both for now and the future. So, not surprisingly, customers of the TV companies are feeling a bit vulnerable, particularly as we are witnessing consolidation in television airtime sales, with Sky taking over the sales for Viacom and Virgin and Channel 4 for UK TV.

It currently feels like Ofcom is trying to move TV sales towards a totally free and unregulated market, mindful of analogue switch off and the move to a multi channel/platform environment where the old rules will not only be irrelevant but also potentially restricting and commercially unrealistic for broadcasters. It’s difficult to argue with this view, but the problem (like so many things in life, and Polish humour) is timing.

Yes, we are heading for a world where television, and the advertising that helps fund it, will be accessible through so many distribution points that what sales policy ITV operates and the ad minutes it sells will be a relatively minor consideration. But we are not there yet, and it’s difficult to predict accurately when we will be.

In the meantime, ‘traditional’ commercial television continues to be essential and largely irreplaceable in reaching mass audiences, whether promoting a tin of branded baked beans (which it has been doing since 1955) or promoting an online comparison site (which it’s been doing for somewhat less years, but no less effectively).

In these circumstances, advertisers and agencies will inevitably wince when Ofcom relaxes the rules.

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