VOD services a factor in declining TV adspend

13 January 2010

LONDON: UK commercial broadcasters such as ITV and Channel 4 are facing a decline in ad revenues due to the growth of video-on-demand (VOD) services.

PricewaterhouseCoopers (PwC), a professional services provider, suggested that annual advertising revenues among the nation's broadcasters could decline by £280m as a direct result of consumers watching shows online via "catch-up" services, rather than live on TV.

The proportion of advertising mixed in with commercial TV content broadcast via VOD tends to be lower than the traditional 10 minutes per hour offered by linear channels, due to the "instant-access" nature of the online medium.

iPlayer, the commercial-free online VOD service from the state-backed BBC, has proved successful in the UK since its launch in December 2007, resulting in similar services being released on the websites of rival broadcasters.

Channel 4 also struck a deal to show some of its content on YouTube, a free-to-use video website, last year.

Meanwhile, the BBC and commercial broadcasters are also to collaborate in Project Canvas, which could allow viewers wider access to VOD services via their set-top boxes in future.

Possible ways of increasing VOD adspend without sacrificing viewership were highlighted by a recent Nielsen survey, which showed that 39% of European viewers are willing to watch ads via the services if it meant they did not have to pay for the content.

The PwC report stated: "There is a risk that revenues could fall before they rise, as companies experiment with new models before getting it right.

"In this scenario, selling VOD advertising without a premium of around three times that of [standard TV] advertising could result in a loss of about £280m, equivalent to a 10% fall in total TV advertising, which is close to the forecast impact of the recession in TV advertising in 2009."

PwC also said the video on demand market will grow to reach 15% of total UK viewing by 2014, although David Lancefield, a partner at the firm, added that TV as a broadcasting medium is likely to remain popular over the years to come.

Data sourced from the Times; additional content by Warc staff