UK broadcasters: ad nauseam

The lockdown is proving to be both the best and worst of times for UK television channels. Shows such as Channel 4’s Gogglebox, in which ordinary families joke and bicker over their viewing, have record audiences. Yet advertising revenues are taking a painful hit.

To cope, the second-tier UK broadcaster last week said it would slash spending on content by £150m, about 20 per cent. Cuts by traditional national broadcasters could help streaming platforms such as Netflix to win over more viewers.

Marketing products when consumers are in lockdown and economic growth is down seems pointless. Falls in advertising spend tend to be two or three times worse than drops in gross domestic product. Economists at Bank of America predict a 7 per cent contraction in the UK economy this year. 

C4 fears ad revenue may fall at least 50 per cent in April and May. During the financial crisis, the worst months saw drops of no more than 30 per cent. The broadcaster relies on adverts for 81 per cent of revenues. That compares to 53 per cent at ITV and just 7 per cent at Sky, according to Enders Analysis. As a commercially run, publicly owned entity, C4 is also less profitable than rival channels. 

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Cutting back on content will lower future viewing figures. Streaming platforms, reliant on less cyclical subscriptions, could come out of the crisis stronger — so long as their slated programmes last. 

Public broadcasters are trusted sources of information and entertainment. C4 may need help to survive. The government could increase spending on public information advertising, perhaps, or temporarily loosening the remit of the broadcaster. A virus-induced revenue collapse may trigger renewed calls for the privatisation of C4.

Broadcasters in individual European countries are chasing cross-border mergers to cut the costs of competing with streaming. The pandemic could push such ideas closer to reality. Silvio Berlusconi’s Mediaset has mooted plans for a pan-European broadcaster. Relaxing curbs on media ownership to permit consolidation to find a cross-border champion has merit. Although for the sake of quality it will almost certainly not be a group led by Mediaset.

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