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Would Higher Ad Loads Backfire for UK Broadcasters?

Tim Cross 04 July, 2022 

Ofcom, the UK’s media and communications regulator, last week said it will consider relaxing rules which limit the length and number of ad breaks on UK TV channels.

Ofcom says such a move would be designed to help broadcasters, and public service broadcasters in particular, to stay financially solid amid increased competition from international streaming services. But the idea of bringing more ads into TV seems to stand in contrast to the current conversation around reducing ad loads in TV, particularly as broadcasters and newer players rethink the traditional TV ad experience for their streaming products.

And, somewhat predictably, a lot of public comments about the news on social media have been negative, bemoaning the prospect of more TV ads.

So would a change of rules simply dangle a Faustian bargain in front of broadcasters – offering them a chance of more ad revenues at the risk of them losing audiences?

A long way from America

It’s true that there’s a lot more talk of reducing TV ad loads than there is about increasing them. But it’s important to note a few things.

A lot of this conversation is driven by the US market, where ad loads on traditional TV often reach 16 minutes per hour. But the current UK rules place a much tighter limit. Public broadcasters’ primary channels are currently limited to seven minutes of ads per hour of TV, while private channels and PSBs’ other channels may show up to nine minutes of ads. Ad breaks can’t be longer than three minutes and fifty seconds, and in shows between 21 and 44 minutes long, there can only be one ad break in the middle.

So loosening the rules wouldn’t necessarily lead to US-style ad loads, as some commentators have suggested. There’s nothing to suggest that Ofcom is planning to scrap these limits entirely. One solution could simply be to relax the rules for PSBs, and bring them in line with private channels – meaning a cap of nine minutes of ads per hour. UK audiences already accept this ad load on private channels, so presumably could tolerate it on PSB channels too.

Even if there was a significant loosening of the rules, it would be in broadcasters’ best interests to ensure they don’t push away audiences by running too many ads. Indeed, broadcasters are already able to run higher ad loads on the on-demand portions of their streaming services, so are already accustomed to optimising the quantity and length of ad breaks against the impact on audience size.

And while a lot of focus has been given to the prospect of longer ad breaks, rules might instead focus on giving broadcasters more flexibility – e.g to run more, shorter ad breaks, or to run more ads at times of high demand, so long as average ad load remains low.

Ofcom has hinted at this possibility, saying that it “recognises that the rules could impose some costs on commercial PSB broadcasters via reduced flexibility when scheduling adverts and responding to changes in demand”.

Research from egta, a European trade body for TV advertising, has found that AVOD services (which have more flexibility) tend towards more ad breaks per hour than linear TV. But they also run less minutes of ads per hour than linear TV, perhaps partially as a result of this flexibility.

“Providing more flexibility to public broadcasters will allow them to innovate, which ultimately serves the public,” said Michael Nevins, CMO of Equativ. “But they’ll need to be careful as, wrongly executed, they could easily push audiences into the hands of the growing online and connected TV space.”

Reducing TV adflation

If increased ad loads don’t cause audiences to switch off, there are still question marks around whether more ads would make much of a difference financially.

More ads obviously gives broadcasters more inventory to sell. But by increasing the overall supply of TV advertising, the average price would be expected to drop – potentially so much so that the costs outweigh the benefits.

Ofcom acknowledged this, saying in its report that “there is much uncertainty about how the price per impact would be affected if the number of commercial impacts increased”. If the price per commercial impact was reduced by a more than proportional amount, then overall ad revenues would actually decrease.

However Ofcom also cited research from Channel 5 which judged that ad revenues would increase if it wasn’t subject to minutage restrictions,, as well as a report from Mediatique which came to the same conclusion.

The fact that TV ad prices are currently high could be an important factor. These high prices may be currently pricing some advertisers out of the market, forcing them to look at other channels. If prices dropped as a result of higher ad loads, more advertisers might be able to invest in TV, bumping up demand and stopping prices from falling further.

And again, broadcasters wouldn’t necessarily be looking to profit solely from running more ads. If they had more flexibility overall, they may be able to optimise their ad breaks in a way which increases revenues while keeping overall ad loads down.

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2022-07-04T13:25:03+01:00

About the Author:

Tim Cross is Assistant Editor at VideoWeek.
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