Sky could lose £150m a year from plan to relax ad limits on UK’s free-to-air TV

Ofcom reviews longstanding rules that allow pay-TV companies more ad minutes than public service rivals

The pay-TV provider Sky could lose as much as £150m a year in TV advertising revenue from proposals aimed at enabling the UK’s biggest free-to-air broadcasters to make more money and better compete with streaming services.

The broadcasting regulator, Ofcom, is reviewing historical rules that restrict the UK’s public service broadcasters (PSBs) – ITV, Channel 4 and Channel 5 – from running as many minutes of advertising on their main channels as rivals such as Sky are allowed.

Under the rules, which were introduced in 1991 to support then fledgling pay-TV and cable companies such as Sky to build their businesses in the UK, non-PSB channels are allowed to air significantly more minutes of ads across the day, and in the all-important peak period each evening, as well as having no limit on the length of ad breaks.

Ofcom is looking at options including whether the PSBs’ main channels – ITV1, Channel 4 and Channel 5 – should be allowed to increase the amount of ads between 6pm and 11pm from 40 minutes’ worth to 60 minutes, and the total for the whole day from 168 minutes to 216 minutes, as well as removing a restriction limiting individual ad breaks to a maximum length of 3 minutes 50 seconds. This would level the rules across all broadcasters.

The Incorporated Society of British Advertisers (ISBA), which represents the vast majority of the UK’s biggest spending brands, believes that if this were to happen then Sky could see up to £150m of advertising annually shift to ITV given the scale of its existing market share.

“We would anticipate that the proposed changes will simply move ad-spend away from smaller broadcasters towards the largest commercial public service broadcasters,” said Paramount, the US TV giant that owns businesses including Channel 5, MTV and Comedy Central, in a submission to Ofcom.

Channel 5 is against any regulation changes, but ITV and Channel 4 argue that with steep inflation in the cost of TV ads – up by as much as 30% in the last year alone according to some research – increasing the supply by hundreds of hours annually will make commercial airtime cheaper to buy and better value compared with shifting budgets to online media companies.

“This should help reduce the inflationary pressures and so make the commercial TV ad market overall more competitive with the likes of Google, Amazon and Facebook,” ITV said.

ITV’s A Spy Among Friends. The broadcaster said audiences are unlikely to be negatively affected by a small increase in peak-time advertising. Photograph: Sam Taylor/Sony Pictures Television/Spectrum Originals/ITV

And with more than 480 non-PSB channels flourishing in the UK the mechanism that was designed to support the early survival of the new arrivals is no longer needed, Channel 4 said.

The regulator, which has looked at the rules in 2011 and 2015 but each time decided against making changes, said that this time it is taking into account “sustaining our traditional broadcasters which includes helping them compete with American streaming platforms”.

Coba, the association for commercial broadcasters and on-demand services whose members include Sky, Discovery and Walt Disney, argues that injecting about 850 hours of new advertising space a year will not just be bad for viewers but will reduce ad prices so much that the UK TV market could ultimately lose as much as £300m in revenues.

ITV disagrees, with a spokesperson saying: “Audiences are unlikely to be negatively impacted by a small increase in peak-time advertising on PSB channels. The wider commercial market is unlikely to be significantly affected, and commercial television as a whole may benefit by becoming more competitive versus the global streamers.”

Ofcom is expected to publish its decision on the potential ad rule changes early next year.

ITV’s advertising sales operation makes about £2bn annually while Channel 4, which also sells ads on third-party channels including BT Sport and Dave for the Gold owner UKTV, makes about £1.2bn.

On top of Sky’s multibillion pound pay-TV, broadband and mobile business the company’s ad sales business, which also has contracts to sell the UK ad inventory on channels owned by companies including Disney, Discovery and Paramount, makes about £1.4bn in revenues annually.


Mark Sweney

The GuardianTramp

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