Foxtel and Austar are considering controversial moves to reduce their advertising volumes as part of plans to differentiate pay TV from free-to-air multichannels and reignite subscriber take-up.
Austar chief executive John Porter blamed free-to-air TV networks for “abusing” content and that one way pay TV could stand apart from free TV was to reduce the level of advertising interference on pay channels with “low or ad-free channels”.
“This is a controversial issue,” Porter told the annual ASTRA conference yesterday. “It is an important one. It is a huge strategic opportunity for us. We need to strike a balance between revenue generation to offset subscriber fees but also create an environment that is worth paying for. All these things can create a substantial point of difference to free-to-air TV. What doesn’t create a substantial difference is when we mimic free-to-air TV.”
Foxtel’s executive director of sales and product development, Patrick Delany, backed Porter’s views. “The point John raised is one Foxtel is very aware of and we’ve got to be very careful about ads,” he said.
“I don’t think it’s too late. In acquiring channels now we try to acquire them without ads and in viewing channels we’re trying to limit ads and we’re starting to introduce new models. On W, for example, there are completely ad-free blocks.”Advertising was a “very important part of our revenue” but was not an overwhelming part “and never will be”, Delany said.
“We have to be absolutely true to what we are doing and of course it’s a Catch-22,” he said. “If you are chasing the ratings you are doing it either for vanity or for your ad revenue and those two things aren’t necessarily in concert with growing the subscription base.”
There was some cautious rumblings, however, among pay channels not wholly owned by Foxtel or Austar, which rely more heavily on ad revenues than the likes of Fox 8, W, The Comedy Channel and Bio, which are controlled by the Foxtel group.
Foxtel’s direct revenues from advertising on its wholly owned pay channels is estimated at around $100 million while the total pay TV sector will approach $400 million this year. Foxtel and Austar’s ad sales unit, MCN, played down the impact on the ad industry of the changes outlined by Porter and Delany yesterday.
“We already run significantly less content than FTA is running,” MCN chief executive Anthony Fitzgerald told AdNews. “We’re at about 5-6 minutes an hour across the whole platform and our proposition, which we have sold aggressively on for some years, is that significantly less [advertising] content is good for the advertiser. A low clutter environment delivers greater cut through.”
He acknowledged that on general entertainment channels, the ad content could be as high as nine minutes per hour before channel and program promotions. Fitzgerald said there were “clever and innovative” advertising proposals which would be put to the market in coming months to enhance viewers’ experience on Pay TV but that the strategy was not just about cutting advertising volumes.
“We need to differentiate between ad free and uninterrupted,” he said. “The viewer does not distinguish between a paid ad and a program or channel promotion. These guys [Porter and Delany] are talking about fewer interruptions in the program. You will start to see more clever advertising initiatives. We want to do more solace breaks and more restructured ad breaks that deliver the advertising more cut through and engagement while delivering on the goal of the providing a better subscriber experience. It will start to look and feel a bit different but there is still a lot of [ad revenue] growth there for us.”
Fitzgerald said the viewer experience on the FTA multichannels was already troubled because they were running a higher ratio of ads than the FTA primary channels.
And the 13 minutes that the FTA networks are allowed to run each hour is “cleverly manipulated” to extend to up to 18 minutes on their primary and digital channels. By running programs in prime time starting at 8.30pm or 9.30pm, for example, allowed the FTA networks to get around regulations which monitor ads on the “clock hour”.
“They are able to get 16 or 17 minutes and sometimes 18 minutes in a program hour while the clock hour is 13 minutes,” he said.
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