Does the Channel 5 ad blackout suggest media agencies have too much power?: Omnicom's pullout prompts questions about C5's future: TV ad market share
(Guardian (UK) Via Acquire Media NewsEdge) Broadcasters: ITV pounds 1,852m (48% of market) Channel 4 Sales pounds 934m (24.1%) Sky Media pounds 724m (18.65%) Channel 5 Sales pounds 336m (8.65%)
Media agency groups: WPP's GroupM 35% Omnicom's Opera 14% Publicis Groupe's Vivaki 14%
A bitter dispute that has seen pounds 30m of TV advertising stripped from Channel 5 raises questions about the rising power of media agencies - and whether in a multimedia world brands still need to buy into a schedule once celebratedly described as "films, football and fucking".
The blackout has just begun and means that as many as 90 advertisers - including some of the biggest spenders in the UK such as McDonald's, Vodafone and Apple - will not appear in any Channel 5 programming until 2015.
Given that none of the clients have voiced any concern about missing Channel 5, or looked to break ranks - all are abiding by the decision taken by Opera, the group buying arm of marketing giant Omnicom that represents them - is the free-to-air minnow no longer a "must buy"?
One marketing director of a top 20 UK advertiser believes that with such intense competition for eyeballs, and attention, from everything from Netflix and YouTube to games consoles and apps, the pre-eminence of TV advertising is no longer a given. "We are going through a period of digital acceleration and advertisers are looking for better engagement with consumers," he says. "If you aren't distinctive and compelling then there won't be a space in a diversified world. Are you going to miss Channel 5 in this climate? Can you run a campaign without it? Yes, absolutely."
And Channel 5's schedule is under strain. The broadcaster is becoming increasingly addicted to huge doses of Big Brother (as did previous franchise owner Channel 4), and the show's contract is up for renewal this year. The once-mighty CSI franchise is winding down, football has gone to ITV (although cricket highlights remain), and Neighbours will need to be renewed by 2017.
Nevertheless, financial miracles have taken place during Richard Desmond's cut-throat four-year ownership, from inheriting a pounds 48m loss to a projected pounds 70m profit as he hands the reins to new owner Viacom. Channel 5's TV ad sales have rocketed to more than pounds 330m, and some believe such a performance means it is disingenuous to attribute the ad blackout to client dissatisfaction or weak programming.
"Channel 5 is valuable - it takes a 10%-plus share of all TV viewing. Saying you won't run there is like saying no to Sky or ITV's digital channels - you could, but why would you?" says another executive at a major advertiser. "Channel 5 is not substitutable long term."
Broadcasters have fairly regular run-ins with media agencies, which try strongarm tactics to get better TV ad deals for their advertiser clients, but in this case there was no negotiating. It is understood that Opera, which controls about 14% of the pounds 3.85bn UK TV ad market, simply informed Channel 5 of the spending freeze and moved all of the budget to ITV.
"There has been no progressive falling-out in this case," says one senior media agency executive. "It seems to me the problem is not at Channel 5, it is at Omnicom. Are clients saying they don't want to spend money, or is it the agency whose interest is being served?" A spokeswoman for Omnicom Media Group failed to return a request for comment. Channel 5 said that the blackout is a "private matter".
Media agency power is becoming increasingly concentrated - if Omnicom's $35bn mega-merger with Publicis Groupe had not come unstuck, the enlarged group would have controlled almost 30% of UK TV ad spend. Sir Martin Sorrell's Group M, which last year pulled its TV ad spend from Channel 4 in what became a very public spat, controls 35% of the TV market.
"The big media groups are immensely powerful and it is not healthy," says another media agency executive. "As the smallest of the TV sales houses Channel 5 more frequently comes under pressure." Despite Channel 5's startling sales revival life is far from easy. It has had perhaps just two profitable years since launching in 1997, proof of just how difficult a task Viacom faces in driving the growth of the smallest commercial player.
If there is one silver lining to the advertising blackout it might be that Channel 5 will be something of an advertising bargain for the rest of the year. Its success saw its advertising rates rise - at one point a commercial on the main channel cost as much as on ITV - but the loss of pounds 30m of bookings means costs have dropped.
And for ITV, which received a share price boost from the news of an ad injection, prices will actually rise for advertisers as more money chases relatively fewer viewers. In some demographics, such as housewives or 16- to 34-year-olds, Channel 5 is as much as 50% cheaper than ITV.
Overall, Channel 5's rates are expected to be about 15% cheaper in the second half of this year compared with 2013, but will that be enough to lure clients back? Maybe.
"When Channel 5 is at its best you know exactly why it is on your schedule," says the top 20 brand marketing director. "Popular culture and insight into real life, cheaply. Now maybe I can get the cheap bit back again."
Dead weight? . . . Channel 5 is becoming as addicted to Big Brother as Channel 4
(c) 2014 Guardian Newspapers Limited.
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