For Broadcast July 08, 2010

Will consolidation help to steer advertisers away from other media?

Going, going, gone!

UKTV’s advertising contract with Virgin Media’s sales house IDS has been terminated, banging the final nail in the coffin of a business that today counts 112 staff and began more than 20 years ago, in the days when Virgin Media Television was still Flextech and launching The Children’s Channel looked like a novel (and a good) idea.

Of course, once VMTV was sold to Sky, the writing was on the wall for IDS: Sky has its own sales house for all its channels, as well as others.

Ironically, it is Five chief executive Dawn Airey who has been banging the drum about ad sales house consolidation. In the days when Five was talking about being part of a consolidation play in the UK TV business, as opposed to simply hanging a ‘for sale’ sign around its neck, having ad sales expertise in-house might have been considered an asset. Now that UKTV will take its business to C4 in January, and VMTV airtime will be sold by Sky, Five is looking marginalised.

UKTV says it had to move its ad contract because even with VMTV, IDS was already the smallest sales house. IDS pioneered award-winning brand sponsorships between the likes of Old Speckled Hen and UKTV’s Dave but, going forward, putting UKTV channels with C4’s will allow a “broader canvas” of channels and inventory to offer to advertisers, says UKTV. It also likes the fact that C4 is leading VoD advertising in the UK, as this is an area where UKTV has aspirations to do more.

The fact that C4’s top man, David Abraham, is UKTV’s old boss is not unimportant either. The former ad man is keen to innovate how C4 audiences are “traded and packaged” for advertisers. At C4’s annual report presentation, he said he was developing a business plan that will require both “editorial and product innovation” at C4, with a view to take advantage of how TV audiences are accessing content and where advertisers want their messages to show up.

So what is the next UK TV consolidation step? RTL chief and Five owner Gerhard Zeiler is hoping to hear the gavel fall on the sale of the beleaguered broadcaster sitting on his balance sheet.

At least some voices say that removing Five from the equation altogether would be a better outcome for the industry. They argue that without Five, the number of available commercial impacts would fall, hopefully leading to an increase in prices. One market estimate is that nearly £200m of ad money could be freed up.

But where would that freed-up money go? The hopeful say it would go to the remaining strong TV brands. Maybe, but it could go elsewhere - dare I say the internet or even billboards?

That is exactly why Abraham is preaching innovation and why IDS was pioneering brand sponsorship packages that were about more than spot ad sales.

The pressure is on the TV ad market and on Five’s price-tag. The broadcaster has called on Ofcom to conduct a full market review of TV advertising, but given the political situation (Ofcom is unlikely to go near anything that smacks of policy-making) and the time it would take, it may not come soon enough for Five.