Big TV ad rate increases tipped

Source: Lara Sinclair, The Australian   

MEDIA buyers and the pay-television industry have attacked the $2.8 million metropolitan TV sector over a bullish beginning to the annual advertising rate negotiations, claiming the cost of free-to-air TV advertising will rise by an average of 10 per cent next year.

The increase relates to the average cost of reaching 1000 viewers in the five capital cities in prime time, according to Anthony Fitzgerald, chief executive of pay-TV sales company MCN.

It is pegged on the Seven Network's opening gambit to increase its rates for the key buying groups by 9 per cent to 11 per cent, but takes into account a low expected claim of 3 per cent to 4 per cent from the Nine Network. Ten is expected to slot in between the two.

Also included in the calculation, Mr Fitzgerald said, was a 5per cent decline in the number of people watching prime-time free-to-air TV on the three commercial networks during the present ratings year.

"In my view, advertisers should be outraged by this level of increase in a marketplace where free-to-air audiences again in 2008 will decline," Mr Fitzgerald said. "The picture is significantly worse in the Sydney market, where audience declines are even greater."

The claims come as a large media buying agency, which asked not to be named, released calculations to Media showing advertisers are paying 63 per cent more today to reach 1000 viewers - the standard TV buying unit - across all demographics than they were in 2000.

The calculation is based on the weighted cost of reaching 1000 viewers (CPM) in the five capital cities using casual rate cards, and involves an equal amount of money spent on Seven, Nine andTen.

Figures obtained from the Australian Bureau of Statistics show the consumer price index increased by 26.9 per cent during the same period.

"You're looking at something of the order of about 9 per cent in real increases for advertisers each year," the agency's research director said.

Media analyst Steve Allen, from Fusion Strategy, backed the claims. He said the big buying groups, which will conclude annual rate talks for 2008 in the next three months, stood to pay 9.7 per cent more on a weighted CPM basis next year if Seven achieved a 9 per cent rate increase and Ten increased its prices by 4 per cent but Nine remained flat.

That figure would drop to 5per cent or 6 per cent once negotiations reached the client level, he predicted.

Advertisers are also looking down the barrel of a high-demand TV market next year, with most forecasts to date predicting total free-to-air revenues will grow by about 7 per cent.

Figures from the Commercial Economic Advisory Service of Australia for the six months to June this year showed total free-to-air TV revenues, including SBS, increased 7.1 per cent to $1.229billion.

The Australian Association of National Advertisers has condemned TV rate increases in the past and raised the prospect of advertisers turning to media such as the internet if TV became too expensive. Executive director Collin Segelov could not be reached for comment this week.

However, Toyota's general manager of marketing, Peter Webster - who manages an annual main media budget estimated at more than $65 million - said large advertisers would not bear the brunt of the increases. "The free-to-airs overall have had a good year, but we'd need to get some accurate data about audience erosion this year and in 2008," Mr Webster said.

"Let them talk about increases now all they want. We'll talk to them closer to the end of the year. There's no question the internet's playing a bigger role," he added. "(In the automotive category) it's an unbelievable information source."