For many brand owners, the intricacies and currencies of the UK’s media trading system remain a mysterious subject, best left to “specialists”. Media specialists are tasked with buying the most appropriate media as competitively as possible; their performance is in turn externally assessed by another group of specialists, which may or may not trigger various types of payments-by-results schemes. A logical and well-established process, which keeps the market efficient….or does it?

Our analysis of 2009 TV ad revenues – the year of the worst recession in history – shows that the most cost-effective channels actually lost market share, while the most expensive broadcasters gained. This is counter-intuitive, given the extreme cost pressures on many businesses and the increased prevalence of procurement-driven media pitching. Bizarrely, we are witnessing a flight from value!

Perhaps this suggests that something is wrong with the functioning of the TV market and/or the way in which buying performance is assessed and rewarded. Many sellers have pointed out that CRR has turned impact volumes into the criteria for success, and has stifled broadcaster innovation and commercial creativity. Many buyers have pointed out that the pervasiveness of media auditing rewards delivery against hygiene factors, while penalising differentiation and risk-taking.

While there is clearly some truth in these opinions, is there really any appetite for changing the status quo?

Well, Channel Five are trying to steer buyers back to a more value-driven approach, and they are building a very strong case.

Five is after all the UK’s fifth most-watched channel, enjoys over 50% weekly reach, regularly outperforms Channel 4 in peak-time and attracts 20 million more viewers per week than Sky One. Despite this, in April 2010, 100 16-34 adult ratings on Five will cost a third of the price of the same on ITV. Yes, a third! Just as surprising, 100 ABC1 Adult ratings on Five will be just half the price of the same on Channel 4.

“That’s not fair!” I hear cry the folks at Grays Inn Road. “Our ratings are more valuable!” On a reach basis, yes – but not a lot more. On a cost-per-reach basis, no.

“It’s all about engagement!” I hear cry the folks at Horseferry Road. “Our viewers are more loyal”. And maybe they are, but there has been very little robust data on viewer engagement, until now….

There is a new kid in town, called IAG. Owned by the research giant, Nielsen, IAG is a big business in the States and has set up in the UK. IAG measures viewer attentiveness to programmes and tracks advertising recall within programmes. Their data promises to shed new light on channel loyalty, and to identify the most effective programme genres and advertising environments for brand owners. A glimpse at the first cut of data indicates that Channel Five is faring very well in terms of viewer engagement and ad recall.

If successful, IAG could change the way we value TV airtime because it offers the prospect of linking quality metrics to consumer outcomes, rather than inputs. (And waiting around the corner are IPTV and return-path ad serving on Sky, which will take the TV value debate to yet another level).

So 2010 appears to be the year for re-appraisal. To progress, the TV industry must move from a mindset of cost-reduction to a mindset of value creation, where negotiations will increasingly become results-based rather than share-based, and where measurement will increasingly focus on outcomes rather than proxies.

In this environment, Five can thrive.

Andy Pearch, 25/3/10

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Posted Monday 12th April 2010