Center for Media Research - Daily Brief: "A new report by Ofcom and compiled by PricewaterhouseCoopers to define the TV advertising market in the UK, says that TV advertising revenues are set to achieve significant real growth over the next decade, but little, if any, of this growth will come from the traditional commercial channels. The report concludes that new, multi-channel services will drive growth, as they increase their share of viewing. Key findings from the report include:
- Multi-channel advertising is increasingly a competitive constraint on, and substitute for, traditional advertising.
- Audience fragmentation does not have a significant impact on total TV advertising revenues, but revenues are set to shift from the traditional commercial channels to the new multi-channel services as multi-channel increases its share of viewing.
- Loss of audience to the BBC will have an impact on TV advertising revenues for both traditional and multi-channel services. However, it will have a relatively greater impact on the revenues of multi-channel operators, due to the higher estimated price elasticity of demand for multi-channel as compared with traditional channel advertising.
- The report provides two scenarios for advertising revenue growth to 2014, (the launch of new BBC channels, or through the BBC acting more commercially) demonstrating that future growth in TV advertising revenues is likely to be derived entirely from multi-channel services, with traditional channel revenues remaining broadly flat in real terms.
The report combines the latest quantitative economic modeling techniques with industry thinking and expertise to define the TV advertising market in the UK. Given the fundamental changes to the TV advertising market since Hendry's work (on TV advertisint elasticities), this updated model will be of critical importance to future analysis of the TV advertising market.