How to evolve TV beyond CRR
Commercial TV's Contract Rights Renewal is outmoded and must change, writes Bob Wootton. Here's what needs to happen
With audiences having boomed recently and talk of its impact and effect rightly resurgent, the focus is at last turning back where it belongs - TV
There is also conversation around ITV’s forthcoming update to investors later this month that we should pay attention to.
A ‘strategy refresh’ is expected from newish CEO Dame Carolyn McCall and some believe ITV will finally seek to overturn the competition remedy which governs what it can charge advertisers - Contract Rights Renewal (CRR).
Leading economic and media consultancy Enders Analysis seems to think so. It’s been working on a paper for some time and chose to publish it a few days ago.
Thorough if rather equivocal, Enders concludes CRR is obsolete and should now be formally reviewed.
As one of its original architects and signatories, I’ve been saying this publicly for several years and have a very keen interest in how the market evolves beyond it.
Installed in 2003, it is one of the most effective “competition interventions” of all time.
We only had a few months to implement it, so it could yet be annulled in September for 2019 trading.
But I’m putting the cart before the horse. Why should it be reviewed and how best to go about it?
Enders’ lead author Andrew McIntosh sets out the reasons why in some detail:
- It tends to ossify trading at a time when the broadcast environment for which it generates revenue is changing with exponentially-increasing speed, as Nick Manning recently and cogently argues.
Although CRR does not require deals to be based on volume or share of expenditure, share in particular seems to inform judgment of whether ITV’s offer is ‘fair and reasonable’.
Advertisers can reduce their budgets yet maintain pricing provided they maintain share of spend with the broadcasters.
Perverse, especially in the face of the money that continues to pour into online despite all the pitfalls and recent proclamations of leading CMOs.
- It rightly recognises that advertisers still need reassurance, if not protection. The key exhibit here is ITV’s share of the top rating programmes, which speaks into the resurgent narrative around reach, impact and effectiveness.
Large audiences fuel high reach and its rapid build and, by implication, fame. As I write, we’re seeing some of the largest TV viewing audiences ever.
These are still the almost exclusive territory of BBC1 and ITV. When ITV plc was formed, it enjoyed 997 of the 1000 programmes with the highest commercial audiences.
Enders tells us the figure today is 970 - still an almost complete monopoly of these engines of massive and rapid reach and fame that gives ITV a trading advantage. Although the TV market has settled into near-perfect triopoly by audience, ITV pulls almost half the revenue. Hats off to Kelly, Dags and co.
- to which list I would add that CRR still offers some advertisers protections but many newer ones (and to TV’s credit there are many) don’t or can’t use or benefit from it.
So how to evolve beyond CRR?
My sense is that ITV has wanted rid of it for some time but has not pressed its case for fear of a wider-ranging, disruptive, resource-draining and, on past form, unpredictable regulatory market review.
There’s no shortage of regulators. The Competition and Markets Authority (CMA, the mash-up of the Office of Fair Trading, OFT and the Competition Commission, CC) is the overarching competition regulator and Ofcom oversees media and telecoms.
Both are rigorous and dispassionate but even with Independent CRR Adjudicator Robert Ditcham onside, Ofcom is arguably not close enough to the subtleties and nuances of trading.
(CRR originated from within ITV and was validated and endorsed by ISBA. Ofcom flighted an alternative intervention which was roundly considered unworldly. The expert panel headed by Deputy CC Chairman Professor Paul Geroski, RIP, saw this clearly and he was rewarded with the CC’s Chair the following year).
This fear of a market review and of unintended consequences seems to have faded.
ITV could simply make a formal appeal to Ofcom and the mechanisms would swing into place. But it would be much better making a case which it had already agreed with the advertisers, ISBA, which is where it gets interesting.
Some advertisers benefit from CRR, some don’t. Those that do will understandably cling to it absent of viable alternatives.
If these focus on airtime price, we might as well stick with what we’ve got despite its flaws. No, any credible proposal should reflect how the market has evolved and embrace linear, catch-up, online, sponsorship, product placement, promotion et al.
And, just like CRR, be optional for advertisers.
ITV’s in a good place to propose such a thing. Could advertisers unravel and react to it? If they can’t they’ll probably stick, so best keep it simple.
Meanwhile, threats to advertising freedoms, notably for HFSS food and drinks, continue to escalate.
The industry now delegates this battle to the Advertising Association, which does a sterling job reminding Government that we already have the strictest rules in the world. Yet levels of obesity still rise.
My own long-held view is that advertising may sometimes be powerful but unless parents, educators and role models apply themselves, further ad bans won’t help. They will, however, greatly impoverish our world-class commercial media, diminishing quality and diversity.
Whether or not it actually believes that ad bans will have any effect in the face of evidence that they don’t, the medical establishment is a formidable lobby, so every part of the industry that’s affected will have to engage.
ITV is understood to be entertaining approaches from pretty serious marketing management consultants to help in the space. Good idea to have such firepower onside.
However, there are some murmurs that ITV might be seeking to leverage its continued support for deflection of threats to advertising freedoms against advertiser co-operation with overturning CRR.
This would be misguided:
- ITV is as great a recipient of such ad revenues as any, so it can hardly parlay or ration its participation lest it loses.
- Advertiser opinion on both issues will be divided.
There is strong argument that further restrictions on HFSS advertisers will deflect some from TV, reducing the price for others.
Many newer, perhaps more performance-based TV advertisers won’t miss CRR because they’ve never used it.
In both cases, it’s unlikely that those unaffected will put any effort or resource in.
Most media agencies aren’t likely to be any more help than in 2003 unless they can see a new way of making money from it. They are after all a primary party in the market’s obsession with share, which Enders observes does not foster market growth.
Broadcasters also have diverse perspectives. Enders argues that share trading hampers Sky from developing AdSmart, as every time an advertiser wants to run an addressable campaign with Sky, it also faces the nonsense of having to run similar or larger campaigns with the other broadcast sales houses to maintain share balance!
It isn’t going to be easy which is why it will be so very interesting to see if ITV finally goes for it on July 25, and how it goes about it.
Bob Wootton is principal of Deconstruction