Television Advertising: Communications Committee Report

Lord Razzall Excerpts

Thursday 3rd November 2011 Lords Chamber

[Lord Razzall]

My Lords, following the remarks of the noble Lord, Lord Lipsey, I ought to report that, as a member of the committee, his noble friend Lord Bragg showed remarkable restraint in not making the point that the noble Lord, Lord Lipsey, has just made.

I think I speak for every member of the committee who had not previously been involved in the television industry when I say that when we started on this inquiry we were to some extent extremely surprised and in some cases shocked to discover the way in which TV advertising was sold. That very much coloured our deliberations. As a relatively sophisticated business person, I would have assumed, until I got to the first meeting of the committee, that advertisers were by and large able to choose which programmes they would like their products to be advertised around. I was somewhat surprised to discover that that applies only to about 20 per cent of advertising, during big events such as a cup final or “The X Factor”. I do not know whether that yet applies to the next episode of “Downton Abbey”, but no doubt the noble Lord, Lord Fellowes, who is not speaking in the debate, will tell us afterwards. That represents only 20 per cent of the way in which advertising is sold.

For the benefit of the people who read Hansard, it is worth expanding a little on my discovery of the way in which advertising is sold. People who do not appreciate the way in which it is sold might be interested to know about that. Each year there is an annual deal round, usually in the autumn, when media agencies negotiate an “umbrella deal” which will form the basis for booking specific advertising campaigns for the year ahead. That surprised me. It was even more of a surprise to learn that those negotiations do not start with a blank sheet of paper each year. The starting point each year is likely to be what was agreed in the previous year, which means that there is likely to be considerable consistency over time in the deals which are made.

In broad terms, media agencies agree to commit a proportion of their television advertising spend to a particular broadcaster. In return the broadcast sales house gives them a discount off the station average price. This is the price which the broadcaster charges for a particular target audience or demographic group; for example, men aged 16 to 34. During the course of the year, within the terms of the annual contracts which have been negotiated, advertisers then negotiate terms to reach certain target audiences for particular advertising campaigns. The standard station average price is calculated after the advertisements have been aired and varies month by month depending on the viewing ratings delivered by a broadcaster for a particular demographic group. The audience viewing figures for each advertisement are measured using an independent industry metric and the overall revenues which it has received.

What I have just said eminently proves what my noble friends Lord Clement-Jones and Lord Patten have indicated—that this is a completely non-transparent, peculiar system. The most fundamental element of our report was that it should be reviewed. All members of the committee were absolutely unanimous on that. We were also unanimous that the CRR undertakings should be removed. They were implemented in 2003 and the broadcasting world has fundamentally changed since then. I was not in my place when the noble Lord, Lord Grade of Yarmouth, spoke in the previous debate but I understand that he expressed the view that I have put rather more strongly than I have just done.

Picking up a point that has been made, if these concessions are going to be made to ITV, it is important that binding undertakings are obtained from it on its commitment to invest in further quality UK original content and training. Although ITV might not like to be quoted on the exact detail, the representations that the committee received from representatives of ITV showed that it was very open to do this. Obviously, there will be a question of definition and what is meant by improved programming; it cannot just be ITV making programmes that it would have made anyway. However, it is perfectly possible to measure that. Those undertakings are very important.

[Lord Patten]

Would my noble friend also add to his list of desiderata in the matter of undertakings which ITV says it is glad to give that a certain amount of resources should be devoted to more and better training for more up and coming young broadcasters and producers?

[Lord Razzall]

The committee made that point. I am not sure that in its representations to us ITV talked about training but it certainly indicated its receptiveness to giving undertakings on UK programming. I entirely agree that that is a very important point.

As regards the remarks made by the noble Lord, Lord Lipsey, I do not think that the committee ever contemplated removing all the restrictions on advertising minutage. The debate, which was lengthy—we had representations from a number of different channels on this—concerned whether we should bring in line the minutage that ITV, Channel 5 and Channel 4 were allowed to have with that which the other commercial channels were allowed to have. There was a long debate about whether everyone should go up to nine minutes or the nine-minute people should come down to seven, but we never discussed whether the COSTA rules should be abolished entirely. Even the noble Lord, Lord Lipsey, indicated that there was a general feeling that the public really would not want to have more advertisements. We had no detailed evidence to that effect; there was a general assumption that that was the public’s view. Therefore, we felt that everyone should be brought in line and come down to seven minutes. I will be interested in the response that the noble Baroness, Lady Rawlings, makes to this but no doubt there will be a recommendation by Ofcom in due course as to which of the two it should be. I will be very surprised if the noble Lord, Lord Lipsey, carries the day on a complete abolition of the COSTA rules. To go back to my first point, it is fundamental that we have a comprehensive review as to the way television advertising is sold.