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Pay-TV provider Sky could lose as much as £150m a year in TV advertising revenue from proposals aimed at enabling the UK’s biggest free-to-air broadcasters to make more money and better compete with streaming services.
The broadcasting regulator, Ofcom, is reviewing historic rules that bar the UK’s public service broadcasters (PSBs) – ITV, Channel 4 and Channel 5 – from running as many minutes of adverts on their main channels as rivals such as Sky are allowed.
Under rules introduced in 1991 to support fledgling pay-TV and cable companies such as Sky to build their businesses in the UK, non-PSB channels are allowed to broadcast significantly more minutes of advertising throughout the day, and the all-important peak period each evening. Also there is no limit on the length of ad breaks.
Ofcom is considering options including whether the PSBs’ main channels – ITV1, Channel 4 and Channel 5 – should be allowed to increase the amount of advertising between 6pm and 11pm from the cost of 40 minutes to 60 minutes, and from a total of 168 minutes for the whole day. to 216 minutes, as well as removing the restriction limiting individual ad breaks to a maximum of 3 minutes 50 seconds. This will level the rules across all broadcasters.
The Incorporated Society of British Advertisers (ISBA), which represents most of the UK’s biggest spending brands, believes Sky could shift up to £150m a year of advertising to ITV, given the scale of its current market. share
US TV company Paramount, which owns businesses including Channel 5, MTV and Comedy Central, said, “We anticipate that the proposed changes will shift ad-spending from smaller broadcasters to the largest commercial public service broadcasters.” Ofcom.
Channel 5 is against any regulation changes, but ITV and Channel 4 argue that with sharp inflation in TV advertising costs – up by 30% in the last year alone according to some research – increasing supply by hundreds of hours a year of commercial airtime compared to shifting the budgets of online media companies. Will make it cheaper and better value to buy.
“This should help reduce inflationary pressures and therefore make the commercial TV ad market more competitive with the likes of Google, Amazon and Facebook,” ITV said.
And with more than 480 non-PSB channels thriving in the UK, the mechanism designed to support the early survival of new arrivals is no longer needed, Channel 4 said.
The regulator, which looked at the rules in 2011 and 2015 but decided against making changes each time, said this time it was considering “sustaining our traditional broadcasters including helping them compete with American streaming platforms.” “.
Coba, the association for commercial broadcasters and on-demand services whose members include Sky, Discovery and Walt Disney, argues that injecting about 850 hours of new ad space a year would not only be bad for viewers but would lower advertising costs. That the UK TV market could ultimately lose as much as £300m in revenue.
ITV disagrees, with a spokesman saying: “A small increase in peak-time advertising on PSB channels is unlikely to have a negative impact on audiences. The broader commercial market is unlikely to be significantly affected, and commercial television as a whole could benefit by becoming more competitive against global streamers.
Ofcom is expected to announce its decision on potential advertising rule changes early next year.
ITV’s advertising sales operation makes around £2bn a year while Channel 4, which also sells adverts on third-party channels including BT Sport and Dave, earns around £1.2bn for Gold owner UKTV.
On top of Sky’s multibillion pound pay-TV, broadband and mobile businesses, the company’s ad sales business, which also has contracts to sell UK ad inventory to channels owned by companies including Disney, Discovery and Paramount, generates around £1.4bn a year. .
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