AN INSIDER’S VIEW: WHERE WILL THE PRICE OF TV ADVERTISING END?

30. 8. 2022
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Martin Nováček from media agency OMD Czech reflects on what parameters currently influence the price of TV advertising and asks where it can go.

Price, the magic formula around which everything revolves and is decided. We have become accustomed to evaluating the success or failure of an advertising campaign through it, as if nothing else existed. We are all wrapped up in our fears, clients, agencies, media owners and, last but not least, auditors. Am I buying too dear, am I selling too cheap, am I buying through the right body at a really good price? If I say the price is right, will I ever get any more business?

In addition, all the media are currently covering the current inflation, its trend and its effect on consumers. Let's take a look at how TV advertising, which is one of the highest cost items for many clients, is doing in this regard.

For this reflection, it is worth remembering that advertising broadcasting has its own legal limits (in this text, I am focusing exclusively on advertising on commercial TV stations, as Czech Television's advertising space is much more drastically limited by law: it can only broadcast about 7 minutes of advertising per day on two channels, while each commercial station can broadcast 12 minutes of advertising every hour). No television station can afford to exceed these limits, as it risks fines from the Radio and Television Broadcasting Council (RRTV) and, in the extreme case, revocation of its licence.

Another equally important factor influencing the capacity of advertising broadcasting in the current sales methods is viewership in the form of ratings (% of viewership in the relevant target group - GRP). It should be stressed here that the fact that a programme, TV station or TV group has achieved success in terms of audience share does not mean that it has more GRPs in absolute terms, since if overall TV audience share is declining (which has been the case in recent months), a higher share can only mean that the entity in question is one-eyed among the blind.

The decline in viewership was to be expected after the release of covid measures, it has been continuously dragged down by streaming services and in the case of the last few months the exceptionally good weather has accentuated the decline. The programming departments of TV stations will be looking to arrest this trend in the autumn. From a commercial point of view, we can only wish that Czech Television had not been too successful, because due to the above mentioned limits we are not able to reach the Czech Television audience effectively with a classic commercial message (advertising spot), and on the contrary, in this situation the GRPs of commercial stations are decreasing.

Now that we have outlined the limits of commercial broadcasting, we can move on to the business itself. Let's start with demand. For the first six months of this year, it didn't look like a recession was hitting the Czech Republic. Although the number of GRPs broadcast did not grow year-on-year (they are still higher than in 2018 and 2019, when only a few experts knew the term covid), Media Club stations were sold out to the maximum and Nova Group stations were at their highest sell-out limits in years. If we include total demand, i.e. including GRPs that were in demand but not aired, the year-on-year evolution of the TV market would be in positive numbers. The outlook for the autumn does not sound pessimistic either. Households (not all of them, of course) have saved from the days of covid; few investments can beat inflation, let alone savings. Spending money thus often seems to make more sense than letting inflation eat it up. The full impact of higher prices, especially for utilities, will most likely not be felt until the turn of the year, so why not enjoy it while the money itself is disappearing before our eyes.

This situation is particularly beneficial for supermarket chains (not coincidentally, they are one of the biggest advertisers on TV), holiday and consumer goods retailers. If any part of the market is declining, it is rather the smaller clients, while the larger ones want to increase or at least maintain their share of voice. Television is still a key medium for most of them, which few marketing directors dare to skip. A possible cooling of the market is therefore not expected until next year.

However, media owners create their content more than six months in advance, so they are already forced to absorb the increased costs of producing news or audience favourites. The commercial departments of all broadcasters start work on the new commercial policy for the coming year during August and the actual presentation of the new commercial policy takes place in the second half of October, at the peak of demand for television space. When TVs came up with a planned price increase of over ten percent in the autumn of 2021, everyone shook their heads. In light of today's numbers, ten percent inflation seems like an underestimate, especially when demand exceeds supply month after month.

So let's summarise: we won't change the advertising limits, viewing figures may rise, but they certainly won't reach covid levels, the cost of producing shows is skyrocketing and demand is highly unlikely to fall.  With the media massage about current inflation and the fact that many TV advertisers themselves have already increased their prices for goods or services, we cannot expect TV advertising prices to remain unchanged. The only question remaining is: By how much percent will it be?

The pressure from clients for low prices is understandable, but in the end everyone loses - clients whose campaigns do not meet the required parameters, media agencies that cannot plan campaigns according to client plans and, of course, TV stations that lose revenue. So it is possible that we are in for a period of optimisation and efficient use of TV space, and as a result some clients may be left behind by their unwillingness to pay extra.



Martin Nováček, electronic media development, OMD Czech



Source: mediaguru.cz

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