Raymond Snoddy on media: Lack of flexibility will kill TV revenues

The BBC licence fee will be the basic mechanism to pay for the

change.

But in an early version of her speech the culture secretary apparently
suggested that the licence fee might have to stretch a bit further, and
could be used to help Channel 4 with some of the specific costs of
transition.

Unfortunately for Channel 4, that bit disappeared. Were there worries
that it was too specific and sounded a bit like a promise? Did BBC
chairman Michael Grade find out what as going on and nobble Tessa? He
was certainly effusive in his praise for the culture secretary for her
performance, complete with its lack of any specific aid for Channel
4.

There has also been a dramatic shift in ITV's outlook on the
channel.

It has dropped its support for the top-slicing of the BBC licence
fee.

The penny has dropped that a strong BBC is the best way of keeping
Channel 4 in check.

There was no good news at all for the channel at Cambridge - except that
everything was fine. Channel 4, said Jowell, was doing fantastically
well at the moment and, although all public-service broadcasters were
facing challenges,'I do not believe that this warrants any direct
intervention by government at this point in time. After all the Channel
4 schedule is in good shape.'

Options are open for the future, but it looks as if the channel will
have to swing by its own tail for the time being.

Channel 4 chief executive Andy Duncan was even quite negative about
product placement in programmes - one potential way of replacing
advertising revenue lost in the fast-forward world of personal video
recorders (PVRs).

Duncan was one of those who argued that, once embroiled in product
placement, it was difficult to avoid the danger of undermining the
quality and independence of editorial.

The threats to advertising revenue are real enough. Alan Rutherford,
vice-president of global media for Unilever, warned that his company had
cut its spending on television by 20% in the past three years. There was
more unfortunate news from Janice Hughes of Spectrum Strategy. If PVRs
reach 25% penetration by 2012, she said, more than £100m in
television advertising would be under threat.

In the rather more likely event of PVRs reaching 70% penetration by
2012, there could be a 37% reduction in advertising impacts, with close
to £300m in television advertising coming under threat.

There are lots of ways of meeting the PVR threat. You can have
competitions with prizes for those who watch the ads and respond to the
message, or more frequent, shorter ad breaks. You can split the screen
and have an advertising presence in part of the programme and you can
also have a more flexible approach to ad breaks.

On the evidence of Cambridge there seems to be little enthusiasm for
blatant product placement on the US model, even though lots of it is
already imported in American films and television.

As Tess Alps of PHD put it: 'No brand wants to be the one that ruins
television.'

To the extent that there was consensus on the issue, it was best
expressed by Charles Allen of ITV. In the face of such challenges,
regulators will have to be more flexible on what they allow.

Programmes awash with ad breaks would serve no one's interests. But
surely the rules that prevent programmes being interrupted any more
often than every 20 minutes - 45 minutes for feature films - need to be
revisited for the sake of the funding of Channel 4 and all other
commercial broadcasters.

30 SECONDS ON ... PRODUCT PLACEMENT IN THE US

- The US product placement market was worth $3.46bn in 2004,
according to media tracking agency PQ Media. TV accounted for $1.87bn (a year-on-year increase of 46.4%), due in part to the rise of
reality shows.

- Product placement is most prevalent in TV and film, but it has now
extended into other aspects of the US media, such as magazines, video
games and even music.

- Earlier this year McDonald's planned to pay rappers to mention the Big
Mac in songs. The burger chain intended to pay the artists
$1-$5 each time the words 'Big Mac' were heard on the
radio. Plans were scrapped when the story was leaked.

- It would not have been the first product placement in the hip-hop
charts. Media agency Maven Strategies had previously managed to get
Seagram's Gin mentioned in the lyrics of five rap releases.