UK Ad Market in Throes of 'Structural Shift', Claims PwC

20 December 2006

LONDON: A new report from PricewaterhouseCoopers estimates that up to 30% of ad expenditure diverted from British commercial TV is attributable to "fundamental, irrevocable structural changes in the media", rather than cyclical factors.

This, says PwC partner David Lancefield, is due to the growth of digital media and "represents a structural shift in the TV advertising market".

According to Lancefield: "Some 70% of the recent downturn in the UK TV advertising market can be explained by audience shares and economic conditions, relative to a historic average."

However: "We believe the remainder represents a structural shift in the TV advertising market. The concepts of 'TV' and 'advertising' need reinterpreting in the new era of converged media - both are much broader concepts than ever before."

The report uses as it base point the relative historic average growth in the TV ad market - assessed at approximately 4% annually.

Lancefield identifies, and rates, five factors as possible sources of a structural change in the UK TV ad market. In order of significance they are . . .

  1. The soaring growth of new media advertising is rated the most significant factor in the structural change.

  2. Contract rights renewal (the mechanism that reduces ad rates on ITV flagship channel ITV1 in line with a fall in ratings, whilst maintaining advertisers' volume discounts). This is rated of "medium" significance.

  3. Another medium rated factor is the increasing competition between traditional broadcasters' premium-priced ad rates and cheaper multichannel alternatives.

  4. The impact of personal video recorders, although this deemed of relatively "low" significance.

  5. Concerns among advertisers as to the effectiveness of TV ad measurement compared with the that of digital platforms. Also rated of "low" significance.
Predictably, however, not all media gurus share Lancefield's assessment. "To date the money coming out of TV is not the same money as that going into online," believes Mediatique joint managing director Mathew Horsman.

"This may be the case in the future, but for now other effects, equally structural, account for why we are having such a poor time in the UK ad industry."

That view is reiterated by Wayne Arnold of digital agency Profero: "Some budgets have switched straight online but that hasn't been a key driver to date. However, going forward, we will start to see major TV budgets go online in the next twelve months."

A major international client of PwC is the Internet Advertising Bureau.

Data sourced from; additional content by WARC staff