Kate Bulkley, Media Analyst.

Two ways to crack advertising

By Kate Bulkley

Broadcast News

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For Broadcast May 23, 2013

Will ITV and C4’s different approaches both pay off asks Kate Bulkley.

Both Channel 4 and ITV are (painfully) aware of the fickle nature of TV advertising, but they have a different take on the best way forward. For ITV, it’s about growing the production business to be truly global and highly profitable in its own right, while for C4, the priority is using data to target its audience more lucratively.

Armed with £200m in net cash and no debt, ITV has been racking up indie deals, purchasing six producers in the past 12 months and with no end in sight.

Its latest target is Rev producer Big Talk, and given its balance sheet, it could also look at bigger targets such as All3Media and even Endemol, or the channels business of Liberty Global, Chellomedia, which Virgin Media’s new owner put on the market this week.

Last year, ITV Studios delivered a £100m increase in revenues to £712m, pushing non-advertising revenue to just over £1bn. But a good proportion of this ‘increase’ was from selling shows to ITV channels, meaning the new revenue was really a case of taking money out of one pocket and putting it into another. Hence the buying spree, as ITV tries to shorten the odds of finding a global hit – or preferably half a dozen – that it owns and can exploit.

It seems willing to pay prices that some think are over the odds, but buying an indie like The Audience (pictured) producer The Garden, with which it already had a close relationship, is also a good way to add new cashflow to its own bottom line.

ITV also needs more so-called ‘bankers’ – shows that are returnable and have many episodes. Hence it is looking to the US, where the cable networks are hungry for multiple-episode programmes. ITV has bought two US producers in the past 12 months, including the $25.6m (£17.5m) purchase earlier this month of High Noon Entertainment, the US reality and entertainment production company behind Cake Boss.

With limits on its remit, this is not a strategy C4 can follow, and its emphasis has instead been on data collection and exploitation, which fits well with the younger demographic mix of its audience.

Having amassed a 7.5 million email database, C4 is pioneering advertising models with major partners such as Microsoft, McDonald’s and Bulmers. The idea is that those companies will be able to target the same audiences on 4oD that they buy on TV (and potentially even more precisely). Chief executive David Abraham admits these are a “long-term play”.

He says advertisers have been “craving” this kind of ad model but, so far at least, the big ad money hasn’t followed. That needs to change for the strategy to pay off, and C4 has commissioned a research project to investigate the effectiveness of VoD advertising.

It will be hoping that will help convince brands they are on the right path, and will take heart from the likes of Nokia, O2, Unilever and B&Q also joining the first wave of its data initiative.

So while ITV is placing bets that its newly acquired producers can deliver hits, C4 is gambling on winning over brands to a new model of advertising. Let’s hope they both have it right and can secure a safer and more predictable financial future.

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