Ad revenue slump set to force TV industry rethink

Facing declining television advertising revenues and the prospect of a protracted global economic recession, the international broadcast industry is bracing for a difficult year ahead in 2009.

A recent report by respected London-based market analyst Screen Digest predicted tough times ahead for European broadcasters, with declining audience share and revenues impacting the ambitions of many, including the UK's ITV and France's TF1.

Both broadcasters have struggled to adapt to shifting consumer tastes and the challenge presented by the proliferation of new content delivery platforms, which have driven competition for advertising dollars and forced rates across the board downwards.

In a statement supporting its research, the firm declared that "the full impact of the recession" was already being felt in the UK advertising market, with "financial and telecoms clients cutting budgets first".

As disquieting as this admission is, it says plenty of the severity the downturn is having on the UK economy as a whole. It also paints a fairly bleak picture for the long-term future of the UK television broadcast sector and one which portends at painful structural changes ahead for the key players if their survival is to be guaranteed.

Ironically, the ubiquitous nature of the internet and its burgeoning reputation as a cost-effective media - and marketing - content delivery platform, means it actually stands to gain from the current economic situation, particularly given the cost-ratio of online advertising rates compared to traditional media platforms.

For example, while ITV and TF1 expect full-year advertising revenue shortfalls of up to four percent respectively in 2008 compared to 2007, industry analyst eMarketer estimated the global online advertising market grew by at least 23% during the same period, generating more than US$25 billion in revenues.

While the evolutionary nature of the internet means this impressive growth figure is derived from a smaller base compared to the global television advertising sector, the industry's upward swing during a recessionary period should send alarm bells ringing for a broadcast industry in an unprecedented state of decline.

The affects of the global slowdown in television advertising spend will inevitably touch these shores, which should encourage long-overdue and much-needed consolidation in the free-to-air television sector and a further shift towards rival content delivery platforms as major media operators bid to provide a point-of-difference from their competitors.

This consolidation will no doubt be welcomed by the region's pan-Arab FTA broadcasters, who have become increasingly concerned by what they perceive as the parasitic threat posed by small country-based television broadcasters on regional advertising spend.

Aaron Greenwood is the senior group editor of ITP Publishing Group's IT, broadcast & communications magazines.

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