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TV's advertising breaks will have no one watching

DPA, HAMBURG
Sunday, May 11, 2003, Page 12

Television commercials will soon be a thing of the past, according to a new study in Germany which warns TV networks to begin planning now for the "post-commercial age" of broadcasting.

The alarming study -- alarming to commercial network executives, that is -- asserts that flagging commercial revenues in Europe can only partially be blamed on the continent's sluggish economy.

The commercial advertisers are not to blame, it's the commercials themselves which are going the way of the dinosaurs, says the study.

What is happening, according to the study by Mercer Management Consulting Agency, amounts to a "creeping revolution" which eventually will sweep commercial breaks off the TV screen for good.

In their place will be commercial-free premium subscription channels, pay-per-view events, tele-shopping and interactive services.

Networks which depend solely on commercial advertising for their revenues "will find themselves sooner or later out on a very precarious limb", say the analysts.

"Simply waiting for the current economic slump to end will not help networks which depend solely on commercial revenues," the study says. "By 2006 commercial revenues will likely be back up to levels last seen in 2001," it adds, "But by that time advertising dollars will be shifting away from the traditional TV commercial spot."

Networks whose programming consists primarily of canned presentations, such as movies and series, will be hit hardest as advertisers turn away from spending money on commercials.

Networks with more innovative "viewer-interactive" programming, along the lines of "Fame Academy," will be better placed for the short term -- but only for the short term.

"And the prospects get even worse," says the study -- meaning, of course, "even worse" for commercial networks and "even better" for the millions of viewers who hate commercials.

The digital revolution will pave the way for whole new generations of home equipment which will enable viewers to avoid ever having to see another commercial again. Networks which persist in airing commercials will be airing them to nobody -- a fact which will cause advertisers to turn to other media.

The study's findings are pertinent in Germany, where a veritable broadcast explosion has taken place. Two decades ago, the average German household received just three channels -- all three of them fee-supported public broadcasters. The public channels were restricted to 20 minutes of pre-primetime commercial advertising on weekdays. No advertising was permitted on Sundays or holidays.

And that was in West Germany. East Germany had two state-operated TV channels and no commercials.

But now, in the wake of a media revolution unimaginable as recently as 20 years ago, the average German household has access to scores of channels, most of them commercial networks free to air advertising 24 hours a day, seven days a week.

No other country in Europe has as many broadcasters -- more than 20 national commercial networks alone at last count -- available via rooftop antenna, cable and satellite dish throughout the land.

The vast number of "free TV" channels has made it difficult for the country's one and only Pay-TV channel, Premiere, to attract subscribers. Established over a decade ago, Premiere has yet to reach the break-even point.

And among the commercial networks themselves, competition is fierce for every advertising dollar.

German national TV advertising revenues peaked in 2001 at US$18 billion, and have been edging downward every year since then, down US$3 billion so far. In a country where the TV advertising market is so fragmented, that means a number of smaller niche-market networks are struggling to make ends meet and even the larger ones are having to cut back.

To the extent that there is any conventional wisdom in a country where commercial TV has existed only since 1984, the conventional wisdom has always been that German TV viewers will only ever watch "free TV" and that they will tolerate commercials in order to avoid having to pay extra.

The conventional wisdom has also always been that the current advertising slump would eventually end.

But the new study suggests that a great sea change is taking place and that conventional wisdom is wrong.

The analysts say that, of the US$3 billion that have vanished from the TV advertising market in the past three years, two-thirds of that sum found its way into other advertising avenues. Only a billion was actually due to the economic downturn.

"Germans still like to watch TV, but they are increasingly weary of having to watch commercials," warns the study, which notes that a whopping 82 percent of viewers look forward to the day when they can own a DVD recorder which will allow them to "skip over" commercial breaks at the press of a button.

And 57 percent would even be willing to subscribe to a service which would enable them to black out or skip over commercial blocks.

"Viewers want comfort, control and individualized programming," says the study which warns, "and commercial networks will either meet those wishes or else they will go under."
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