Advertising Minutage – it's about quantity not quality

The Chief Executive of Ofcom, Ed Richards described TV as "the cockroach of the internet revolution" at the recent Oxford Media Convention.  Where the internet and its ever broadening tentacles have not succeeded to date, Ofcom itself could go some way to hurting UK commercial television, if it acts precipitously on the issue of advertising minutage. 

In policy terms, we do not deny that the amount of television advertising is at best a sleeper and at worst, a non-event for both the chattering media classes and the public at large.  The media's current pre-occupation is focussed on News Corporation's bid for BSkyB and its potential impact on the provision of news in the UK or whether the Secretary of State for Media, Culture and Sport, Jeremy Hunt's passion for local TV is a panacea or just plain loco.  No less august a body than the House of Lords is due to report shortly on the issue of advertising.  However, we suspect that most of the report will be given over to an otherwise obscure piece of regulation entitled, the Contract Rights Renewal Remedy which ITV willingly wrapped itself in when Carlton and Granada agreed to merge in 2002 and which since then has been assiduously used by the advertisers to torture ITV.  Although CRR was a conundrum of its own making, ITV has valiantly but largely unsuccessfully struggled to rid itself of these chains.  Whilst the politicians appear sympathetic, the regulators remain steadfast that an undertaking, once given, should not be lightly removed.  Rather than worrying about the regulators or seeking help from Westminster, perhaps ITV should throw itself on the mercy of the court and invoke the European Convention on Human Rights – CRR is truly a cruel and unusual punishment even if self-inflicted and corporates have human rights too, you know. 

Then with all this going on, what is the fuss about the amount of advertising on TV?  Well here it gets complicated.  Currently, the amount of minutes which broadcasters are allowed to use for advertising is not uniform – the rules distinguish between the commercial public service broadcasters (ITV, Channel 4 and Channel 5) and the rest of the commercial broadcasting industry (Discovery, Sky, National Geographic, etc.).  The commercial public service broadcasters get less advertising time (currently around 7 minutes per hour across each broadcast day) whilst the rest of the industry gets on average 9 minutes every hour.  There is an absolute maximum of 12 minutes of advertising in any one hour. 

The reasons for the disparity go back through the mists of time but are rooted firmly in the greater reach and hence commercial advantage that ITV and the others enjoyed as commercial free to air terrestrial analogue broadcasters over their satellite and cable rivals. 

Ofcom believes the time is right to look at this issue afresh, given the changes in the industry such as digitisation but as change will inevitably have winners and losers, there is much at stake.

To add to the confusion, the maximum amount of advertising time is not determined in London but in Brussels.  Previously it was set out in a European legislative instrument called the Television Without Frontiers Directive which was overhauled in 2007 and rebadged under the less transparent title of the Audiovisual Media Services Directive.  On the issue of advertising minutage, this Directive says there can be no more than 12 minutes of advertising in any one hour but removed the daily average that currently still exists in the UK.  Even more confusing for the average viewer, this Directive allows broadcasters to be licensed in one European country but broadcast legitimately into another country.  Several major broadcast groups have taken advantage of this rule and the UK is home to many of them.  To their good fortune, the new broadcasting minister, Ed Vaizey likes having them in the UK and what is more, would like more of them.  What is not to like? – these broadcasters employ people, pay taxes, buy programming and generally behave themselves.  Any grumbles about what is on or the lack of variety on TV happen in a living room far, far, away. Well, we know you are wondering now what does any of this have to do with the amount of advertising that is broadcast on UK television.  Here is the rub – everything! 

Since the Audiovisual Media Services Directive was brought into effect, Ofcom has been looking at the issue of advertising minutage in the UK and whether to harmonise the amount of minutes allowed to the public service broadcasters and the rest of the industry.  Because of the way the Directive operates, the international channels also have to follow the UK domestic rules and so are bound by any determination on the amount of advertising they can broadcast. 

In carrying out any review, Ofcom appears to have five choices, which are: 

• harmonise the amount of advertising so that all broadcasters enjoy the amount currently allowed to the satellite and cable sector;
• harmonise all broadcasters down to the amount which the commercial public service broadcasters enjoy;
• do nothing and keep the status quo;
• increase the amount of advertising to the 12 minutes allowed under the AVMS Directive and remove any daily average; or
• chose a variant in between.

We can almost hear the shout from every viewer that down has got to be better.  The common perception is that there is already too much advertising on TV and therefore less must be best.  Allied to this is Ofcom's economic analysis which seems to show that levelling down may be the best (or perhaps more accurately the least worst) outcome for all domestic satellite and cable broadcasters if you chose anything other than the existing status quo.  The argument goes if you reduce the amount of advertising minutage, the price paid for that minutage by the advertisers should increase – simple supply and demand analysis. Of course, Ofcom's economic analysis is not without its critics, and its fitness for purpose has already been questioned by other economic experts.

Well then what's the problem with any of that we can hear you ask? It's those pesky Europeans again.  Most other EU countries have increased the amount of advertising to the 12 minutes an hour limit allowed under the Directive.  More importantly, the leading Queen's Counsel in this area, Lord David Pannick has said not only that Ofcom can lawfully distinguish between domestic and international broadcasters under the Directive for the purposes of determining the amount of advertising which can be broadcast but also that European law may require them to do so – and in this area – Europe rules OK!

As we have mentioned earlier, Ed Vaizey likes foreigners or at least, foreign UK-based broadcasters and we believe he would prefer that Ofcom did nothing to drive them away. To this current government, someone's job is much more important than how much advertising any viewer may have to watch (or perhaps fast forward through).  In days gone by, this does not always have appeared to have been the order of priority of the previous government or its media regulator.

Here is the final thought: as Jeremy Hunt ponders what to do about the Sky/News tie up, he and his fellow ministers may also care to think about what could happen if Ed Richards changes the amount of advertising minutage in a way that advantages ITV and the other commercial public service broadcasters but disadvantages the satellite and cable broadcasters.  If News Corp gets rebuffed on its bid for Sky and Ofcom reduces the amount of advertising in the UK market, what is stopping Sky moving to Ireland?  It is legal under the European rules and would allow Sky to take advantage of the lower tax rates and more advertising minutage and would turn a major UK based broadcaster into a major Irish based broadcaster.  It may be that it is a case of last one out, please turn off the TV.  However, unlike the bankers who bully the government with such threats, the channels will still be on our screens, it is just the people who work on them that may go. 

Lawyers Tony Ghee