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TV advertisers tighten their belts again

Fears over autumn figures despite the return of The X Factor and Big Brother

The return of ITV1′s ratings juggernaut The X Factor and Channel 5′s relaunch of Celebrity Big Brother herald the start of the crucial autumn TV season, during which advertisers traditionally spend big to win the hearts and wallets of consumers in the run up to Christmas.

However, the bad news for commercial broadcasters is that after a slow summer for TV advertising, there are signs of further belt-tightening by advertisers against a backdrop of turmoil in financial markets, faltering economic recovery in Europe and the US, and even the negative sentiment resulting from the recent riots across England.

“I think people are worried after what has happened in the market,” said Sir Martin Sorrell, chief executive of WPP and the owner of media buying agency networks including MediaCom and Mindshare, last week. “Are consumers going to buy a holiday or a car, is an employer going to make that hire, maybe not. It is a cautious atmosphere out there.”

As the mood darkened during the summer months, media buying agencies have started to pencil in downgrades to previously relatively rosy forecasts of TV ad spend in the fourth quarter.

Predictions of a roughly flat year-on-year level of ad spend – which would have been a very positive result given the barnstorming TV market in 2010 – are giving way to new forecasts of “at least” a 5% fall across the final quarter of 2011, if not significantly more. Some doomsayers are even fearful that December could see a double digit decline.

“It is going to be a bit of a rough ride to the end of the year, to a man [marketers] are now all coming under pressure from finance directors to start finding savings,” says one senior TV industry executive. “There is belt-tightening across all clients and forecasts are dropping. Pressure is definitely mounting.”

Early indications are that, despite the loss of Simon Cowell and Cheryl Cole, the new look X Factor is on track to pull in the usual strong ratings that ITV requires of its biggest hit franchise, which last year raked in more than £100m in TV advertising.

Nevertheless, ad space during The X Factor is selling for at least 5% less than last year – at about £150,000 for a 30-second spot – which could cost the show as much as £12m in ad spend.

Last weekend’s launch show was 15 minutes shorter than last year – meaning it ran with one less ad break of 3.5 minutes – which cost ITV at least an additional £500,000 in ad spend.

“They made a decision to shorten the programme, I heard it was to keep the show fresh and punchy,” says one media industry source. “The reports that Gary [Barlow] and the rest are the cause of the price drop is plain wrong. It is purely the market, last year was just so strong. In fact the rethink could be just what the franchise needs, Cheryl fluttering her eyelashes and Cowell being a twat was becoming tired and predictable.”

A bet by Richard Desmond to revive Big Brother seems to be paying off, with the celebrity version averaging a 2 million-plus audience so far, and the reality show’s return could have a significant knock-on effect for other commercial broadcasters, particularly Channel 4.

“They are definitely pleased with the audience levels but the real story here is that the more successful it is, the worse the impact on Channel 4 heading into the tail end of the year and the TV advertising trading season for 2012,” said a senior executive at a media buying agency.

Channel 4′s digital channel portfolio, including E4, continues to perform well but the flagship network has never recovered from the loss of the Big Brother franchise. Despite the format becoming something of an embarrassment to the broadcaster in its later years on Channel 4, it nevertheless still pulled in viewers and advertising pounds.

An analysis of Channel 4′s viewing figures to 14 August – before Big Brother and The X Factor returned – shows the predicament the broadcaster faces heading into the final quarter of 2011.

Channel 4′s audience is down 6% year on year in total and its much-vaunted youth demographic of 16- to 34–year-olds is down 14%. Another key demographic for advertisers, housewives and children, is down 15%. “It’s a shocker,” says a senior TV industry executive. “Channel 4 is really going to struggle for viewers during this period, we are talking about key audiences for FMCGs and a tough-looking market.”

However, Sorrell, who last week said that WPP was sticking to its bullish target of about 6% revenue growth this year despite the softening market, is not convinced that the fourth quarter is set for a hammering.

“It is too early, we will have to wait until after the August holidays [to see what marketers decide],” he said. “I doubt there will be much impact in the fourth quarter. I don’t think people plan that quickly.”

Sorrell argued that the real test of the market will come in 2013, when there are no “quadrennial” events to skew the advertising market. “2012 is a bit confusing with the US presidential elections, the London Olympics and Euro 2012 which will all help not hinder the market,” he said. “I maintain it will be 2013 that is the acid test.” Commercial broadcasters can at least look forward to better times in 2012. But before that they must navigate a potentially choppy passage to the end of this year. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds