Advertisers worry that CRTC drama incentives will result in ad clutter

The Association of Canadian Advertisers (ACA) is pressing for safeguards to ensure that a CRTC proposal to boost a broadcaster’s commercial minutes in exchange for airing original Canadian drama doesn’t result in too much advertising on the TV airwaves. "One of the largest concerns of our members - the advertisers - with the television medium these days is the detrimental levels of advertising clutter," Rob Reaume, the association’s VP of policy and research tells Canadian Communications Reports. "In English-speaking Canada that is largely due to an American problem, and that is to say that Americans have no limit on advertising." Canadian broadcasters fill the difference in their currently regulated 12 minutes of advertising per minute and that found in the U.S. programming with such things as promos for Canadian shows, news updates and public service announcements. But Reaume says that the amount of commercial interruptions in Canadian-produced programs has increased over the past several years due to ten separate regulatory exemptions to the 12-minute advertising regulation. "Advertisers are concerned about clutter because it diminishes the effectiveness of our efforts. As commercial clutter or pods become longer we are training viewers to realize that they have extended periods of time to practise commercial avoidance," writes Reaume in the association’s June 21 submission to the CRTC. "…Increasing clutter levels on television can only lead to further commercial avoidance, which will most certainly lead to reduced investments in the medium by advertisers. What is to be gained in the end if the increased incentive revenue is offset or even decreased by a reduction in overall television advertising revenue?" The ACA supports the increased advertising incentives that the commission is proposing as a means of enticing broadcasters to produce and air more Canadian drama (CCR, May 6/04), but it wants some qualifications. The ACA is calling on the CRTC to cap the number of advertising minutes per hour at 14. The association wants a per hour maximum of 12 minutes of regular advertising and two minutes of reward garnered through the broadcast of Canadian TV dramas. "This will ensure that the most highly rated U.S. simulcast shows will not ever be run chock-a-block with untenable clutter levels," the ACA notes in its submission to the CRTC. Reaume notes, "Imagine taking an extremely popular U.S. show for which they can charge the largest amounts and stretching that half hour program into an hour with the extra commercials." Second, he tells CCR that the earned advertising rewards should only be allowed to run during foreign programming, not in Canadian shows. "If the minutes are taken in Canadian programming over which Canadians have production control, they would be cutting back content to insert more than 12 minutes of commercials. That we see as detrimental to Canadian content," he notes. Third, Reaume is asking that the CRTC remove regulation that permits broadcasters to average the maximum 12 minutes per clock hour over two or more consecutive hours because it too often "results in unacceptable concentrations of commercial clutter." Currently broadcasters may start a program at five minutes to the hour, and will then air a substantial portion of the mandated 12-minutes per hour in advertising near the end of that hour. The 12-minutes of advertising for the next clock air is aired at the beginning, allowing the broadcasters to air more than 12 minutes of advertising within the 8 p.m. to 9 p.m. time slot, for example. Fourth, the association wants the minimum length of interstitials and special incentives for branded entertainment to be set at 90 seconds. "This new type of program content holds great promise, we think. Encouraging this type of sponsor short-version programming could very well lead to successful Canadian content programming," reads the ACA brief. "For instance, the highly successful show The Simpsons started out as a short five-minute segment on the Tracy Ullman Show. More of this short-version programming could help redress the clutter issue with the viewer balancing against the many shorter interruptions." CHUM Ltd., Alliance Atlantis Communications Inc., VisionTV, Corus Entertainment Inc., Rogers Broadcasting Inc. and Astral Media Inc. oppose the CRTC proposal on the grounds that the advertising incentives will benefit primarily the largest broadcasters, Global Television Network and CTV Inc. They contend that there is a finite amount of money that will be spent on TV advertising, and that the CRTC policy will result in ad dollars moving away from them to extra minutes on the two largest networks. "If more of this money is spent on the largest conventional networks who would now be able to offer more inventory in their most popular programs, advertising expenditures would shift not only from specialty services, but also from smaller conventional broadcasters, including ethnic, third-language television stations, to conventional broadcasters," reads a joint submission filed by Alliance Atlantis, Astral, Corus, CHUM, and Rogers. VisionTV states in its June 21 submission that it is concerned that "the proposed incentives skew too heavily towards the largest conventional broadcasters without encouraging other niche services to participate in creating more drama programs." Vision TV general counsel and director of government and regulatory affairs Brant Kostandoff notes that while the largest conventional broadcasters are in the best position to make a significant impact in developing shows that will attract large audiences, the role of specialty services and smaller channels shouldn’t be ignored. "The proposed incentives will not provide an impetus to smaller broadcasters to invest more money in production or to broadcast additional hours of original drama," states VisionTV’s submission. "Even if they are able to meet the threshold requirements to take advantage of the proposed incentives, on most specialty channels per minute advertising rates are too low to generate sufficient revenue out of the incentive time to pay the costs of even low-budget drama production." Therefore, VisionTV recommends that the CRTC implement credits against expenditure and exhibition requirements instead of, or at least in addition to, the two-and-a-half additional minutes of advertising incentive. In its submission, Alliance Atlantis states that it is not opposed to granting additional advertising minutes as an incentive for creating original Canadian TV drama. However, it asks the commission to consider specific issues. First, it wants the CRTC to ensure the proposed incentives apply to incremental drama hours. Second, that it take into consideration that conventional broadcasters stand to gain the most from the proposed policy at the cost of specialty services. Third, that there is the potential for disruption from adding a large amount of advertising inventory into the market. CHUM also tells the CRTC in its submission that because the amount of ad dollars is finite, "rather than new funding entering the system, this will result in a redistribution of wealth and a commensurate negative effect on many participants in the system." Reaume says CHUM’s argument "holds water" but notes that it could amortize advertising over its stations which cover about 80% of the country, if it gets regulatory approval to acquire Craig Media’s TV stations. In its submission, CHUM crunches numbers based on a hypothetical 22-episode series and estimates that with the incentives CTV or Global would earn additional ad sales of $4.4 million, while CHUM would gain only an additional $1.38 million (see chart). CHUM notes that a national analog specialty channel would garner only a small fraction of the CHUM group estimate. AssumptionsCTV/GlobalCHUMLicence fee per EPS$240,000$240,000"Normal" CanCon ad return (two runs)$75,000$65,000Profit (loss) per episode($165,000)($175,000)"Incentive" ad rate (per minute)$80,000$25,000"Additional minutes" earned2.52.5Total additional ad sales$200,000$62,500Net profit (loss) per episode$35,000($112,000)Number of episodes2222Series profit (loss)$770,000($2,476,000)Extra "ad take" from series$4,400,000$1,375,000 The joint submission also calls on the CRTC to stipulate that the advertising bonuses apply only to incremental Canadian TV programming, not to the current level. The brief notes that large conventional broadcasters could earn $31.3 million in additional advertising revenues if they do nothing more than what they are doing at the present in the area of Canadian TV drama. "In terms of the mechanics of setting a benchmark for current performance as the starting point in order to ensure any incentives only reward incremental hours of drama, we feel that this could easily be achieved through the application process contemplated by the draft policy," reads the joint submission. About $2.6 billion is invested annually in Canadian TV advertising, according to the ACA.

Advertisers worry that CRTC drama incentives will result in ad clutter

News | 07/05/2004 4:00 am EDT

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