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How will agency and media owner relationships change in the near future?

Recent updates from both Channel 4 Sales and Sky suggest significant changes to TV trading are on the near horizon in the UK.

Both broadcasters are dialling up their propaganda around ‘selling audiences however and wherever they choose to watch.’ What do they mean by that?

For Sky in particular, from 2021, they have outlined a future where advertisers may be forced to buy campaigns including traditional spot, AdSmart and broadcast video on demand (BVOD) elements. In effect a blended approach to reaching a specific audience target. In addition, broadcasters are increasingly pushing other non-spot elements such as sponsorship.

What’s the driver behind this? Should advertisers for whom standard spot is key start panicking? Should they be abandoning TV, running faster to the likes of Facebook, Instagram and YouTube instead?

No need to panic! There are plenty of those lovely old school TV spots and impacts to be had for the foreseeable future. And despite Sky’s fanfare, we fully expect the move to multi-element campaign buys to be gradual, rather than forced.

However, the increasing noise from both major broadcasters, along with ITV also, does indicate changes to trading models are inevitable… eventually.

Three graphs illustrate the commercial dynamic forcing the issue for standard linear viewing.

‘All adult’ commercial impacts are only down 8% over four years. Declining yes, but certainly not cataclysmic.

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Impacts for adults aged 35+ are also only marginally down by an average of 2% over the same four-year period.

But here’s the reason for the broadcasters’ shifting messages… Unsurprisingly, young adults are watching far less linear TV than they used to. Total impacts over four years are down on average a significant 36%.

While that is a big fall, it’s important to point out there are still over 107 billion 16-34 impacts annually in-market! Yes, young adults are watching less linear TV. Yes, they are watching on other devices and via other platforms. But they are still watching a shed-load of the old stuff too.

Where this significant change relates to C4 and Sky’s proposed developments is because the high-value revenue of those lost young adult impacts cannot be offset by the more stable older demographic impacts in linear TV. The revenue gap will be closed due to the likely price inflation for all linear activity in the coming years. Broad, niche, day time and peak campaigns, for both young and older audiences, will see price hikes. Also, increased selling of non-spot formats, many of which are traded at a significant premium to linear due to current demand and supply conditions, will be an important component.

As an example, unconfirmed latest sources put AdSmart revenues at anywhere up to £100m per year for Sky. Given they are monetising previously mostly worthless tradable spots, as I talked about in another recent ARM Weekly article, that’s a significant boost to balancing the books.

How, then, can advertisers continue to maximise the effectiveness of their audio/visual (AV) related areas of the advertising mix for the foreseeable future at least?

  1. Continue exploiting the obvious and measurable benefits of the linear spot since it delivers on both cost-effective acquisition and reach and frequency metrics given the abundance of supply and still relatively low media prices as a result – cost per thousand (CPTs).
  2. Gradually consider how sponsorship, BVOD, or even lower-end CPT AdSmart routes can start to form part of the AV media mix, especially at higher average budget levels where there may be incremental reach and frequency advantages.
  3. For BVOD and AdSmart in particular, that means understanding contribution and performance. Effectively evaluating them at planning stage and testing in isolation to understand their incremental effects, be it brand or acquisition objectives – is vital.

Pushing broadcasters for data sharing and measurement innovation will also be essential to build advertiser confidence in these newer channels, beyond being a ‘nice-to-have’ on plans.

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