Ofcom Boss Warns Of New Media Dangers To Advertisers

Ofcom chief executive, Stephen Carter, has today warned delegates at the Incorporated Society of British Advertisers’ Annual Conference of the dangers presented by new technology, stating that peer-to-peer file sharing and DVR technology could undermine their efforts to convey brand messages.

Explaining at first that TV is currently in a state of rude health, Carter went on to explain that the advent of more advanced home technology could pose problems to traditional advertisers.

“In the short term things are pretty rosy,” he said. “TV is in a strong cyclical upswing, and although advertising was overtaken last year for the first time by subscription revenues, it’s not really a cause for concern because all that it demonstrates is that the consumer has an appetite to pay for media, communications and entertainment services that seems to know no bounds. TV revenues grew from £6.5 billion in 1998 to nearly £9.5 billion in 2003 and are estimated to have gone over £10 billion in 2004.”

Explaining the growing significance of new media advertising, Carter continued: “There is a bit of cannibalisation, but not much. It looks as though interactive and enhanced TV revenues are simply a net add to consumer spending on television, and this is good because they are growing exponentially. Online and interactive revenues in advertising are now worth over £575 million, and they’ll be worth £2 million by 2008.”

However, the regulator warned that new services such as digital TV, faster broadband and more advanced file sharing networks could impact on broadcasters. He said: “Digital, internet, broadband and new media mean that today, for the first time, advertising in the broadcast and newspaper media has dropped below 50% of total advertising. Not the end of the world, but a signal of where to put your advertising dollars in an ever expanding cake that rewards the intimacy of advertising rather than the impact.”

He added: “The shift from command and control, via the linear schedule, to on demand is a much more serious concern. The PVR is today a relatively minority pastime, with just over half a million PVRs in the market, but all who have it say that it completely revolutionises their viewing habits. Several respectable estimates put PVR penetration at about 15% by the end of the decade. Personally I think that wildly underestimates PVR take-up, because, apart from anything else, it never assumes that PVR capacity will go free in the market in much the same way as mobile handsets and set-top boxes went free in their respective markets.”

Carter was most vocal about the growing trend in internet video piracy, stating: “We have now pretty much got used to always on, convenient data and radio downloads, and it has been a phenomenal success story,” he continued. “Two years ago peer-to-peer file traffic in video was not much more than a cloud. Today hundreds of thousands of users are pirating American shows like Friends, Desperate Housewives and 24. Sad, but it’s true, and an increasing reality for the copyright owners in the video industry. If they can, they will, and there are a number of Napster equivalents in the video world that have the effect of robbing the owners of those rights from the ability to market those rights in the way that they have traditionally done.”

Carter warned, however, that the problem is too large to be tackled by Ofcom alone, suggesting that advertisers concentrate more on alternative revenue streams, such as advertiser funded programmes and sponsorship in order to deliver their message in a changing TV environment.

Promising that Ofcom would reassess UK regulations on the governance of advertiser funding and sponsorship, Carter said: “We don’t have the capacity or frankly the capability to deal with any or all of those questions, but today I want to give you a sense of direction.

“We believe that advertiser funding is not just an economic good, but a social good, and it is making quality content universally available. We will work with the advertising industry to allow advertiser funded content to evolve to meet viewers need in the years ahead. In terms of sponsorship we recognise that UK rules have been more restrictive than European rules, so we have consulted on liberalisation, allowing channels or stations to be sponsored, relaxing the restrictions on the content and length of sponsor credits and widening the range of programmes that may be sponsored by betting and gaming companies, using interactive revenue streams to fund mainstream broadcasting.”

Recent research by internet monitoring company, Envisional, reported that the UK’s internet users are the largest downloaders of pirate TV programmes, with the hit American series 24 being the most popular show. The company found that increased bandwidth, technological advances and a growing demand for early access to popular American TV shows are some of the key contributors to the current world-wide explosion in online TV piracy, of which around 18% is believed to be occurring in Britain (see UK Largest Pirate Online TV Downloader).

ISBA: 020 7499 7502 www.isba.org.uk Ofcom: 020 7981 3040 www.ofcom.org.uk

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