Feature: Cost Of ITV Increases As Audiences Fragment Across Digital Media

Last month WPP issued a warning to network television controllers about the cost of advertising, which, it said, is rising at an unprecedented rate. The global advertising group said that inflating prices on both sides of the Atlantic are causing clients to seek other media as the cost of advertising on network TV has risen by as much as 5-10% a year.

“As long as network price inflation continues, clients will increasingly experiment with alternative media and non-traditional alternatives will continue to grow faster,” said WPP’s chief executive Martin Sorrell.

Blaming the networks themselves for the increase, WPP cited the oligopoly of media owners and a decline in network audiences for the rise. Mediapolis joined the fray last week when it too declared its frustration with the increase in prices on the ITV network. Russell Boyman, managing partner at the group, said that since the start of this year prices had risen by up to 30% for certain spots.

When comparing revenue and costs per thousand to measure ITV’s relative price, the chart here shows that both have increased at steady rates since 1995. ITV’s average monthly revenue has grown from £131.5 million to £156 million between 1995 and 1999 – an increase of 19%. The average monthly cost per thousand has risen from 556p to 737p, an increase of 33% over the same period.

However, the ITV audience has been falling steadily during this period, so that reaching a thousand viewers is much more costly today than five years ago. Since 1995, the ITV network’s annual audience share has dropped from 37% to 31%. Viewers tune into the network for an average 80 minutes less each week than in 1995.

This year the situation has been exacerbated by an influx of dot.com adverts, which are increasing demand and pushing up prices further. Revenue for the ITV Network during January currently stands at £156 million according to agency estimates. This is an increase of almost 13% on last year’s figures, which itself is more than double the revenue growth between 1998 and 1999.

Channel 4 has also experienced a similar rate of growth to ITV, with the average CPT increasing by 28% since 1995 and average monthly revenue by 32%. It has, however, maintained its audience base; annual audience share for the channel has dropped by 0.6% points since 1995 – ITV’s fell 6.0% points during this time.

The challenge for the ITV Network will be in maintaining its position as a vehicle for delivering mass audiences to advertisers, in order to charge these advertisers for the service accordingly. However, the proliferation of multi-channel television and the convergence of TV with the internet are likely to fragment audiences more and more, and so erode the position from which ITV has traditionally sold itself to advertisers.