Enders Analysis, the leading research company, did not seek to sugar-coat its outlook for UK television advertising when it kicked off ‘The Future of TV Advertising UK’ online conference last week. “The economic impact will be very severe. This will be the biggest TV advertising downturn ever, and there is little chance of a swift rebound,” said Gill Hind, COO at the company.
“The sheer collapse in advertising demand is unprecedented, with campaigns deferred, cancelled or not booked in the first place. In the previous economic recessions during the past 35 years, plus the Dotcom bust of 2000-01, the negative impact [on TV advertising] was relatively short and the market bounced back soon afterwards.
“The year-on-year decline for the worst quarters has never been more than 20%, but we are in exceptional times and in Q2 this year the market will be down significantly more than that. Given that health experts cannot predict how long the UK will remain locked down, we cannot say when it might bounce back, and how quickly. However, the market could be down between 30-50% this year if things don’t improve.”
Analysing the market since 1986, Enders noted that the previous worst drops were approaching 20% during both the global financial crisis (2009) and UK recession of 1992, while the Dotcom bubble burst was nearer to 15%, and what is known as Black Friday (a stock market crash) in 1987-88 did not reach minus 10%. These are real-terms figures showing year-on-year changes to Total TV advertising quarterly revenues.
Enders Analysis has identified Channel 4 as the UK broadcaster that is most exposed by the crisis, as 81% of its revenue comes from advertising (compared to 53% at ITV, 7% at Sky and 2% for the BBC, with figures sourced by Enders Analysis). Channel 4 also has to reinvest all profit back into the business as part of its regulatory remit. “This means the company has very little headroom in any prolonged advertising downturn,” Hind warned.
Hind also worries about the knock-on effects of weakened public service broadcasters for independent production companies. “PSBs are the bedrock of the UK’s vibrant creative sector. Independent producers, under the terms of trade, can profit from the exploitation of IP for shows commissioned by the PSBs, which is one of the main reasons for the UK’s international success. In stark contrast, Netflix retains all the future production rights on shows it commissions and it can easily walk away from UK production.”
The impact of coronavirus consumed the first quarter of The Future of TV Advertising UK thought-leadership event, which was streamed last week. One important theme that emerged was how flexible television has proven itself in this crisis – with media owners, agencies and brands helping each other to collapse the timeframes needed to rethink messaging, change creative and get ads back in front of consumers.
Commercial flexibility (including around pricing and penalties) has been a key attribute – and many on the buy-side are hoping that television can keep at least some of its new-found agility when we slowly return to normal.
Another theme that stood out was ‘trust’ – trust in television as a source of news and information at a time of hugely disruptive change, uncertainty and danger. The contrast with fake news on social media was highlighted.
There was a consensus that television has moved even closer to the heart of our lives. Thinkbox, which champions TV as an advertising medium in the UK, is conducting a consumer study that has already shown how, for people that live alone, TV is giving structure to their day during the lockdown.
There were strong arguments that brands need to keep advertising if they can. ‘If they can’ has several caveats: brands need goods to sell and people to answer the switchboards to make it worth investing, but they also need to be relevant to the current circumstances – and a brand could actually damage itself by advertising the wrong things or taking the wrong tone today. And they need the budget, of course.
It was also clear that many speakers carry the hope that this unprecedented crisis will change viewing habits on a more permanent basis – whether by introducing youngsters to the intoxication of large, shared news and entertainment experiences where they feel part of something bigger than themselves, or simply by educating people to the depth of a broadcaster VOD catalogue and the box-sets within it.
Daniel Bischoff, CMOO at RTL AdConnect, the sales house that helps buyers reach European television viewers in around a dozen countries through a single buy, via RTL Group properties and partner broadcasters, said: “The world after the coronavirus crisis will be a different one, but right now we are engaging with a new and broader target audience, especially with more youngsters. That will help us in the long-run to connect with those consumers and help brands to connect with them.”
One immediate impact, “has been to demonstrate the enduring strength of TV to inform, educate and entertain, with increased engagement across the board,” according to Hind at Enders Analysis. She picked out the BBC for special praise, saying it “arguably has a central role in unpicking the events for the population with a front-footed approach that is necessary and admirable.”
“The need for news is greater than ever before – it’s importance has sky-rocketed since the crisis began, up 124% in the first three weeks of lockdown,” she said, quoting BARB figures.
Nicole Greenfield-Smith, Head of Research at Thinkbox, told the audience that for many, the government briefings have become appointment-to-view events. Thinkbox is conducting a three month qualitative study of twelve households to understand their relationship with TV at this time, which is the basis for this and other observations she made.
“Most of us have a long history of watching TV news. It is seen as a credible and trusted source and people [on the study] talked about that at length,” she revealed. “Many are mistrustful of news on social platforms, a mistrust that has been heightened by fake news around Covid-19. TV news is considered the pinnacle of journalism for many people.”
Thinkbox believes the value people place on television is providing a halo effect for advertisers who are still in-market. Greenfield-Smith reiterated that TV is not just a valued source of content, but is viewed as a trusted and truthful medium – one that is crucial to viewers at the moment. “This is a good opportunity to start building a brand relationship with consumers and extending brand relationships.”
She referred to BARB figures showing that UK television viewing is up 24% since the lockdown began, and gave details of the early data from Thinkbox’s consumer tracking study. The homes involved represent people who previously commuted before the lockdown, and those who have school-aged children, and people who cannot work because of the Covid-19 crisis.
“The first, really positive finding, is that TV is uniting households and families,” said Greenfield-Smith. “TV has always played a crucial part in binding households together, but that role has been amplified since lockdown began. More than ever, it provides a shared experience.” The BARB figures back up this finding, with shared television viewing up 37% in the period.
Thinkbox found that for some families in the study, the lockdown is a rare period when they have the chance to spend downtime together – and with few alternatives, television is where they spend it. “Lots of our households previously led quite separate lives, with partners working different shift patterns and the children often out. TV is bringing them together around a shared routine. We have a couple who had their first movie night together, ever.”
Television is providing much-needed talking points. “Our lives have shrunk and most of us do not have as much to talk about anymore, and [study] respondents say they need to find a connection and points of conversation and commonality with people beyond their homes,” continues Greenfield-Smith. “TV is brilliant at finding those common points of reference in spades [in large quantities].”
Turning attention to consumers and brands, Bischoff (at RTL AdConnect) referred to a large-scale study by Kantar in late March asking what consumers expect of brands during this crisis. Happily, for all media, the last thing on the list (in terms of popular answers) was the expectation that brands should stop advertising.
“This is quite logical – we are used to having a lot of brands around us and seeing our favourite brands on TV and other media, and they give us a sense of normality; they reassure us,” he said.
While it understandable when advertisers pull their budget to focus on short-term liquidity, RTL AdConnect is advising that this should only be a temporary measure. “Under-investment now does not ensure ‘mental availability’ and endangers future profits,” Bischoff declared.
He also referred to a study by the Italian broadcaster RAI about what consumers want from brand communications during this period. Across all age groups, the answer from Italians was that they want to know what the brand is doing for consumers, and what their purpose is, during the crisis.
In addition to this common answer, older consumers want to know the purpose of brands at a national level – so what they are doing for Italy and the Italian people, plus pragmatic advice on using their products. Younger consumers want to know how brands can help them make the best of their time at home, and they also want to know how brands can entertain them.
Bischoff noted that it is very important that brands strike the right tone during this crisis. Drawing upon the findings in the Kantar study and advice that RTL AdConnect is giving to the market, he noted the need to: have a strong product focus and relevant attributes; convey reassuring normality; show emotional support; make sure consumers know where they can find your products; accept the new reality; and show that you are thinking about consumers and you are there ‘with them’.
Natalie Marshall Foxwell, Managing Partner at PHD Manchester, the media agency, said a surprise outcome from the crisis is how the country [the UK] has warmed to the idea that brands have a requirement to do good – to the point where they actively expect it. “There has been huge cynicism around brands in the past [regarding brand purpose] but right now, if you are meeting a genuine need and have the right tone of voice and you are not just jumping on a bandwagon, then the tracking we have is that audiences are really receptive. They expect it.”
Bischoff pointed to ITV [the broadcaster] advice to advertisers right now: show a clear and appropriate consumer benefit; show your role in the world; be honest and transparent; strike the right tone of voice.
He also provided a list of what brands must not do, namely: do not contradict government guidance; do not appear to profit from this crisis; do not come across as short-termist or opportunistic.
RTL AdConnect laid out the arguments for why advertisers need to keep up their brand spend during the present economic deep-freeze. The company has gathered together a series of seminal effectiveness studies that demonstrate what happens to profit and sales if a brand pulls its advertising, drawing upon work from Thinkbox in the UK, Boston Consulting Group in Germany and Peter Field, among others.
“The impact is that if you pull advertising for a full year, it will take five years to recover your sales volume,” stated Bischoff. “If you cut your advertising in half, it takes three years to recover the pre-cut sales levels. And if the gap between share of voice and share of market is more than 10% [the former being the lower], you lose 1% market share year-on-year.”
He pointed out that right now, media efficiency is high due to the bigger audiences and lower demand for advertising [bringing with it lower ad rates] but the post-Covid economic recovery will reverse both trends (demand will rise, audiences will fall). “Competition will be more intense. Competitors will be pushing into the media space again, meaning that share of voice will be harder to obtain, and prices will definitely go up,” he commented.
Natalie Marshall Foxwell picked up on the lower cost of TV, pointing out that advertisers are getting far more reach for their money right now. “You have to ensure the right message at the right time, though, and not just take airtime for the sake of it.”
PHD is also witnessing smaller brands using TV who, before the cost deflation, found this channel cost-prohibitive.
Sam Taylor, Head of Group Commercial/Performance Marketing, Direct Line (the group that contains a number of insurance brands, plus roadside vehicle rescue and legal services) represented brands during this discussion. For many years, his company bucked the trend towards focusing on activation at the expense of brand building, and he characterises himself as aligned with Binet & Field on the subject of brand/activation balance. But before getting into whether CMOs should maintain branding budgets, he gave some insights into why some brands have paused spending, even if it is short-term – and they can be very practical reasons.
“We must ensure we manage our marketing spend with our capacity on the frontline [literally call centre staff with phones]. There is no point increasing sales volume if nobody is answering the phone, and in the first few weeks we had a massive drop in [call taking] capacity.”
Even moving ahead (and Taylor says his team is “now injecting energy into what happens in the rest of Q2 and H2”) Direct Line has to spend more on ‘below the line’ marketing directly to customers, a task that is competing with media for budget.
Taylor said his approach to a recession would be to maintain brand spend but reduce activation budget if less consumers are converting in the market. Noting the focus on effectiveness at Direct Line, with the aim of growing the business and margins long-term, he said: “Turning stuff [advertising] off won’t help us on the other side [of the crisis]. We want to come out of this as a strong brand so that we can dial-up our activation spend afterwards.”
Brand-building is not going to be the right answer for everyone, however. Advertisers must adapt their brand strategy to be relevant, before advertising. “If you can’t do that, get off TV because it won’t do you any favours or drive your brand metrics up,” Taylor advised. He also acknowledged that there are small companies with limited cash flow who just cannot afford advertising and who, if they do not stop spending on it, will literally go bust.
So, what about going to the CFO to argue against advertising budget cuts if there is a recession – is that a fool’s errand? The question referred to marketers in general. “It is, if it is the first time you have walked into their office,” said Taylor. “Marketers need to build a relationship with the CFO and demonstrate consistently the effectiveness and ROI of advertising, and build the trust that allows you to then go and ask to maintain spend.
“We have invested time in educating our teams internally and we have not needed a conversation about budgets yet.”
At Direct Line, the finance department asks marketing for their projection of what would happen after the crisis if any budget – and it is performance budget that is higher on the agenda – was cut. In other words, they defer to the marketing experts. “That would not have happened if we had not invested 4-5 years in demonstrating our credibility,” Taylor declares.
“At some companies, marketing departments are still known internally as the ‘colouring-in’ department and those teams have no chance – their money will be switched off. It all comes down to the credibility your marketing department has.”
If brands do want to change their media strategy, the next question is how far this is even possible, according to Taylor, referring to whether you have the flexibility to defer campaigns or adjust budget, or move money, change creative or produce new creative at minimal cost, and what penalties there are for changes. “This is part of the ongoing conversation. What all this has taught us, as an industry, is the need for increased flexibility on TV.”
Broadcasters have previously spoken about their flexible thinking and working in the current crisis (see story here) and Christian Kurz, SVP Global Consumer Insights at ViacomCBS noted during ‘The Future of TV Advertising UK’ that the entire industry (buy-side and sell-side) has pulled out all the stops to help marketers stay in-market or get back into the market quickly – demonstrating how flexible television can be.
“TV is not known as the fastest and most responsive media when it comes to changing creative, but we have seen some really good creative projects, with everything being edited remotely. There are new workflows to facilitate fast-changing messages – partly because people don’t want to advertise something they do not have anymore – and then get ads on-air quickly.”
Marshall Foxwell (at PHD Manchester) is also enthused by the response to this crisis. She pointed to the way that talent have been filming voice-overs or even shoots in their own homes, rather than in studios.
“Credit where it is due – the TV industry had to transform itself pretty much overnight, and not just TV but everyone associated with getting media live. That includes the speed with which agencies can turn things around and how quickly brands can make decisions. I hope all this sticks [after the crisis].”
The Future of TV Advertising UK also revealed some of the viewing trends during the lockdown. One of these, highlighted in the Thinkbox consumer study, is that people are now starting to confine their news consumption to windows – especially early morning and evening – in order to reduce anxiety, including for children. The government’s daily briefings are avidly watched.
Thinkbox pointed to massive audience increases for light entertainment, like ITV’s In for a Penny (up 47%) and Channel 4’s Gogglebox (up 41%). Their study reveals that families are looking for content that promotes a sense of togetherness, with universal appeal. People are catching up on dramas that were missed when first aired.
Jonathan Lewis, Head of Digital & Partnership Innovation at Channel 4, reported record-breaking audiences across the network and huge figures for Friday night viewing, in particular. “Young audiences are coming back in large numbers, and engaging with the All 4 platform more than they have ever done,” he added.
Comedy is big, and viewers have found their way deeper into the 15,000 hour All 4 VOD archive, enjoying old shows like The Inbetweeners and Father Ted. Lewis reported that there has been a notable spike in VOD viewing on the television set at Channel 4 (with the balance shifting from mobile devices).
Separately, Enders Analysis provided figures (source: Enders Analysis, BARB/AdvantEdge) showing that TV set viewing generally (not just VOD, and not including multiscreen) is up at least 20% in all age groups except the over-65s, where it has risen 17% during the lockdown. For ages 4-15, TV set viewing is up 24%, and 16-24s television set viewing is up 23%. TV set viewing is up 20% for the 25-34 and 35-44 age bands, and by 25% among 45-54s, and by 27% for 55-64s.These figures cover weeks 12-15 of 2020.
Hind believes commercial broadcasters will enjoy more of the benefits of the audience uplift over time. Enders Analysis figures show that until now it is the BBC that has gained most, with huge uplifts especially in the dayparts where it has news and news related shows. “As people settle into their new routines and viewing turns away from the news and other Covid-19 related programming, we would expect commercial viewing to pick up quite considerably.” Commercial viewing is up 15%, so far, she pointed out.
Unmatched TV set usage, which could be SVOD, YouTube or gaming (among other things) is up 30 minutes per person per day in the past few weeks, Enders Analysis noted. Game console usage accounts for a quarter of the increase in unmatched usage, with some of this explained by a desire to socialise at a safe distance.
Audiences for sports channels (Enders Analysis and BARB/AdvantEdge figures, year-on-year, showing pre- versus post-lockdown) are down 77% – perhaps remarkable for how small the drop is when there is zero live action!
Meanwhile, the Thinkbox consumer study also highlights a desire for nostalgia. According to Greenfield-Smith, “Respondents talk at length about the need to escape from reality and the need to use programming to transport them back to happier times in their life.”
Shared viewing is also inspiring shared activities – around cooking, craft and exercise, for example. This is considered an opportunity for advertisers. “There are genres of content that brands may not have considered before, but if they fit into these categories, this is a chance to create contextual awareness,” said Greenfield-Smith.
One potential threat to TV audiences, even in a lockdown, is a lack of new programming, itself caused by the lockdown. Hind predicted that within a few weeks, TV schedules will be almost unrecognisable and expressed her concern for the independent production sector and its staff, including freelancers. Broadcasters have been very supportive,” she added.
Kurz used production as another example of how the television industry has proved its agility, with programmes being made from staff homes, including news. But he also acknowledged the diminishing content pipeline across the industry.
“We are seeing a significant uptake in TV and video consumption overall, but on the other hand scripted productions have shut down and we are only just seeing the first ones returning to work, but in a different way. Eventually some platforms are going to run out of content.” He predicts that entire television seasons will be pushed back in the same way as movie releases. “I would not be surprised if the fall season comes in January ,” he said.
The anecdotal evidence, the views of speakers at The Future of TV Advertising UK, and results from consumer studies suggest that right now, television has returned to the very centre of national life. The Covid-19 crisis has also reminded us why we need regulated media – people could literally die from misinformation. Television has received a brand boost all of its own, and broadcasters are hoping that brands will want to exploit its halo effect.
“TV and BVOD is one of the most trusted [media] platforms and we hope we can build on the momentum when we come out of the crisis,” Jonathan Lewis at Channel 4 said. Noting the particular value of the big screen to advertisers, he highlighted brand safety, viewability, completion rates, co-viewing (with advertisers only charged for a single impression), and the ability to target against demo or customer interests as some of the reasons advertisers should spend on TV.
Hind predicted that two post-Covid outcomes would be more VOD viewing and an accelerated transition to programmatic advertising, which makes for happier listening at Channel 4 than her earlier remarks, given the broadcaster’s strong focus on both. And she does not expect Pay TV to gain subscribers, as in previous downturns, now there is so much streaming competition.
“In the last recession Pay TV benefited with new subscriptions, with the Premier League and movies viewed as a relatively cheap form of family entertainment, but it no longer has that [value for money] advantage,” she suggested. She also referred to the latest Netflix results, with total global subscriptions up 16 million, “and that only reflects the start of the Covid experience.”
Marshall Foxwell acknowledged that advertising money has left the market, but much of it has been deferred rather than cancelled. She hopes that the market will return to “some semblance of normality” within a few months. Right now, most people would probably accept that as a good outcome.