Researchers say no to four commercial TV channels
A
fourth commercial free-to-air television network would deliver little or no
benefit for Australian viewers and erode TV’s greatest strength for
advertisers, its ability to reach large audiences cost effectively and quickly, a newly released report from the University of South Australia
shows.
Calls by some advocates in the marketing community for a fourth commercial free-to-air (FTA) TV network for Australia have been poorly advised, according to Dr Byron Sharp, Professor of Marketing Science at UniSA’s Marketing Science Centre.
“A fourth TV network will fragment TV audiences further, making it more difficult for advertisers to reach their full target market without high frequency, which wastes money and annoys viewers, leading to increased ad avoidance,” Dr Byron Sharp said.
“We estimate that a new TV channel will draw its audiences in roughly equal proportions from each existing channel. Because the non commercial channels ABC (zero advertising) and SBS (limited advertising) will also lose share, there will be a slight gain in advertising opportunities, though arguably a cultural loss for Australia due to lower viewing of ABC and SBS programs.
“With more advertising space to sell, it will be of lower quality in that each spot will reach fewer viewers. While advertising prices for the average spot should fall, the price to reach an audience could rise, particularly when targeting light TV viewers,” Dr Sharp said.
The hope that a fourth TV network will increase price competition among stations is naïve, according to Dr Sharp.
“If increased numbers of channels decreased the cost of advertising, then TV advertising prices should be at an all time low given the recent number of global channel introductions. But we’re finding the opposite is true. Around the world marketers are complaining about rising prices of TV advertising.
“With a fourth TV network, the top rating programs and major free-to-air
networks will be able to command an even greater premium than they do today.
“The overall cost of using TV advertising will increase, adversely affecting not just commercial advertisers but also public service advertisers, particularly the government, which often needs to reach as broad an audience as possible,” Dr Sharp said.
“Not surprisingly, like audiences overseas, an extra commercial TV network will not increase TV viewing. The amount of TV viewed in developed nations has stayed astonishingly stable over the past few decades in spite of the arrival of pay TV. In countries like the UK that have increased the number of FTA channels, there has been no increase in TV viewing and in the average time spent viewing.
“Some advocates of a fourth TV network have stated that Foxtel subscribers watch more TV, implying that additional FTA channels will cause an increase in TV viewing, but the underpinning of their argument is factually wrong. They confuse a selection effort with a causal effect. These households watched more TV before they subscribed to Foxtel, (which is what encouraged them to take out a Foxtel subscription) and they have not changed. This pattern has been observed around the world,” Dr Sharp said.
Dr Sharp believes that four TV channels will not deliver much extra choice for Australian TV viewers. They will largely get to see more of the same content, but spread over more stations.
“Having an extra Australian network bidding for programs will be good news for the large US suppliers. It will raise demand by up to one-third with no increase in supply. These US companies are probably the main group to gain substantially from an additional network. Higher costs of programming will be passed on, or if the market will not bear the costs, viewers will be subjected to cheaper alternatives, such as repeats.
“A fourth commercial TV network will also provide more incentive for viewers to surf channels during ad breaks. Without perfect coordination of ad breaks across the networks, this will reduce the size of the audience for advertising. But as TV advertising time is sold on program ratings, not advertising block ratings, prices will not reflect this loss of audience. Marketers will be paying the same for a bit less,” Dr Sharp said.
“High rating programs reach the very occasional TV viewers, a particularly attractive audience, often because they are out working and spending. Advertisements during these programs will cost an even greater premium to capture light TV viewers.
“While some people have been convinced that an additional commercial television network will be good for the economy, in reality there is unlikely to be any gain for the marketing community. Just like Humpty Dumpty, increased TV audience fragmentation will be impossible to put back together and a unique resource for marketers will be damaged.”
Media contact: Geraldine Hinter (08) 8302 0963 or 0417 861832