Pay-TV provider Sky could lose up to £150million a year in TV advertising revenue over proposals to allow the UK’s biggest free-to-air broadcasters to make more money and better compete with services streaming.
Broadcasting regulator Ofcom is revising historic rules that prevent UK public service broadcasters (PSBs) – ITV, Channel 4 and Channel 5 – from running as many minutes of advertising on their main channels as rivals such than Sky are allowed.
Under the rules, which were introduced in 1991 to help then fledgling pay-TV and cable companies such as Sky grow their business in the UK, non-PSB channels are allowed to carry many more minutes of adverts throughout the day, and in the all-important peak period each evening, as well as unlimited commercial breaks.
Ofcom is looking at options including whether the main PSB channels – ITV1, Channel 4 and Channel 5 – should be allowed to increase the number of adverts between 6pm and 11pm from 40 minutes to 60 minutes, and the total for any the day. from 168 minutes to 216 minutes, as well as the removal of a restriction limiting individual ad breaks to a maximum length of 3 minutes 50 seconds. This would standardize the rules for all broadcasters.
The Incorporated Society of British Advertisers (ISBA), which represents the vast majority of the UK’s biggest spender brands, estimates that if this were to happen, Sky could see up to £150m worth of advertising spend each year to ITV given the size of its existing market. to share.
“We anticipate that the proposed changes will simply shift ad spending away from smaller broadcasters to larger commercial public service broadcasters,” said Paramount, the US television giant that owns companies including Channel 5, MTV and Comedy Central. in a submission to Ofcom.
Channel 5 is against any changes to the regulations, but ITV and Channel 4 say that with steep inflation in the cost of TV ads – up to 30% in the last year alone according to some research – the rise in offering hundreds of hours a year will make commercial airtime cheaper to buy and better value for shifting budgets to online media companies.
“This should help reduce inflationary pressures and thus make the commercial TV advertising market more competitive than Google, Amazon and Facebook,” ITV said.
And with more than 480 non-PSB channels thriving in the UK, the mechanism that was designed to support newcomers’ early survival is no longer needed, Channel 4 said.
The regulator, which reviewed the rules in 2011 and 2015 but each time decided against making changes, said it was taking into account this time “the support of our traditional broadcasters, which includes helping them to compete American streaming platforms”.
Coba, the association of commercial broadcasters and on-demand services whose members include Sky, Discovery and Walt Disney, says the injection of around 850 hours of new advertising space per year will not only be bad for viewers, but will slash advert prices so much that the UK TV market could ultimately lose up to £300m in revenue.
ITV disagrees, with a spokesperson saying: ‘Audiences are unlikely to be negatively affected by a slight increase in peak-time advertising on the PSB channels. The broader commercial market is unlikely to be significantly affected, and commercial TV as a whole could benefit by becoming more competitive with global streamers.
Ofcom is expected to publish its decision on potential changes to advertising rules early next year.
ITV’s ad sales operation brings in around £2bn a year, while Channel 4, which also sells adverts on third-party channels including BT Sport and Dave for Gold owner UKTV, brings in around £1 £.2 billion.
In addition to Sky’s multibillion-pound pay-TV, broadband and mobile phone businesses, the company’s advertising sales business, which also has contracts to sell UK advertising inventory on owned channels to companies such as Disney, Discovery and Paramount, generates around £1.4 billion in revenue a year. .