Feature
Spanish TV’s perfect storm
15 April 2010
Spain has been engulfed in economic crisis for over a year. Now the country’s television market has been blown off-course by what looks like ‘the perfect storm’. The problem began with a new law that totally eliminates advertising on the publicly-owned (and dominant) national television networks TVE1 and TVE2, which came into force in January. The law is smashing through the market like a tidal wave.
TVE’s last ad was transmitted on New Year’s Eve. Consequently, a quarter of the gross commercial audiences available to TV-hungry brands has disappeared overnight, turning supply-and-demand conventions on their heads.
TVE’s profit-challenged rivals, the private TV networks Antena 3 (A3) and Telecinco (T5), have reacted with advertising price hikes of 15-20%. Horrified by the loss of advertising slots, and furious over price increases, clients are now facing another unwelcome problem: falling audience share on those TV channels that can still carry advertising.
No-one really saw this coming. As soon as the ads disappeared from TVE screens, the two state channels’ audience share rose in one month from 21% to 23% (adults 16+). A3 and T5 together lost 1.3%. In effect viewers have spontaneously voted for a TV service which is not cluttered with advertising.
The shift is evidence of Spanish viewers’ deep dissatisfaction with commercial clutter, which endlessly interrupts their viewing. Remove the advertising, and audiences go up. Simple.
Shocked by their audience losses, the two main independent channels have swallowed up smaller private TV rivals. Late last year A3 announced that it was merging with Channel 6 (La Sexta). Then in December T5, owned by Silvio Berlusconi’s Mediaset Corporation, snapped up national Channel 4 (Cuatro) on a handshake. Between them, T5 Group and the new A3 empire will control two-thirds or more of Spain’s TV advertising business. For their part, advertisers are aghast at the emergence of a commercial TV market with only two significant sales points.
Spanish advertisers commit TV ad budgets short-term, month-by-month. They are used to calling the shots, since prices actually fell by 20% last year. Now, with TVE going ad-free overnight, tariffs are rising again by at least 16-20% year-on-year. It may get worse. Media buying agencies have projected “Armageddon scenarios” of further 25% increases in the second half of 2010.
Advertisers are rolling out their big guns against these “unprecedented and indefensible” price-hikes. Their admiral is Bernard Meunier, Nestlé Iberia’s Belgian-born regional manager. Meunier has already given warning to the big private networks that “we will move the money budgeted for TVE to digital media and other TV channels”. The advertisers’ message: “No surrender”.
Some agencies suggest befriending one or other of the two main TV groups, rather than trying to cover both, and buying more spots to ensure adequate levels of coverage. This can only exacerbate the clutter nightmare; wiser voices have been advising clients to diversify into more communication channels, like online and the new digital services (which would require tools to measure ROI trade-offs).
Television advertisers’ two biggest complaints are price inflation and ad saturation, combining to undermine the effectiveness of campaigns. The irony is that their two complaints actually contradict each other. If ad prices were lower, the clutter would get even worse.
Authoritative studies show the loss of communication power, and therefore investment value, that ad saturation involves. Putting your commercial in the middle of a long ad break can reduce real communication effectiveness by more than half. Value may disappear almost completely, since audiences are either out of the room, or paying no attention. Time to hit the re-set button perhaps?
As an industry we should not believe in cheap advertising. We should believe in advertising that delivers good value. Billetts thinks now is the moment to be listening to viewers, who are saying plainly that they are sick and tired of excessively long ad breaks on TV.
Advertisers’ message to private TV might offer a cautious receptivity to higher prices, but on two conditions: first that programming should be improved and better-targeted to important audience sub-groups, and second that TV clutter should be controlled, perhaps via shorter premium-priced ‘super-breaks’ in the most heavily-demanded programmes. Softening attitudes toward so-called ‘product placement’ could help to co-fund high-quality shows.
Advertisers’ ultimate bargaining chip would be moving money away from over-saturated broadcast TV channels to other media.
Spanish advertisers have a choice: face down the new TV oligopolies with constructive, reasoned arguments; or spend months in angry denunciations.
A longer version of this article appears in Response, the first issue of Billetts’ online newsletter which provides independent insight into the bigger issues in the media market place. Go to billetts.com/response to read more.
Mauricio Barangé, managing director of MediaVALUE Billetts