Kids - Ad ban rings alarm bells for industry

month, when Ofcom announced stronger restrictions than had been
anticipated, with a mooted ban on all junk-food ads that are likely to
be watched by large audiences of under-16s.

The industry might be tempted to breathe a sigh of relief that Ofcom
rejected an option that would have shaved up to £73m from TV ad
revenues, not to mention a pre-9pm ban, favoured by the health lobby,
that would have cost £211m. But those who had been hoping at least
for some certainty from Ofcom's announcement find themselves engaged in
a further round of consultation, with the regulator now looking at two
packages that could cost between £17m and £39m, possibly
more (see box, page 16), and not promising any final decisions until
late January.

For the industry, the proposed extension of the ban to under-16s came as
the biggest shock. Throughout the consultation process, discussion of
restrictions had centred on primary school children - an audience that
is much easier to define and separate than the 10-16 market, who favour
many of the same programmes watched by adults.

"We are extremely disappointed they have moved the goalposts so late in
the day," says Suzanne Edmond, of the Advertising Association's Food
Advertising Unit. "This sudden change of focus to older children has
drawn astonishment. It's moving away from the evidence base towards
pampering the opinion of the consumer groups."

The extension to 16 also puts several broadcasters into the firing line
who had thought themselves safe from regulation. Channel 4, Sky and MTV
barely put out children's programming, but some of their programmes have
robust teen audiences that may bring them under the scope of Ofcom.
Under the regulator's calculations, some music channels that had
previously been excluded from the debates stand to lose up to 8.8% of
their revenues.

Michiel Bakker, managing director at MTV in the UK, whose sales house
VBS also looks after kids' channel Nickelodeon, is frustrated by the
lack of consultation in extending the ban.

"It opens up a whole new debate because, in our view, 10 to 15-year-olds
are completely different from under-nines," he says.

To some extent, the more draconian options being mooted may be red
herrings. In the first stage of its consultation, Ofcom played its
favoured Option 1 against two Aunt Sally policy packages that have now
been dropped. Now Option 1, which only restricts advertising to children
younger than 10, is again being proposed against an option that raises
the bar to 16 years (see box, page 16). So restricting ads to all
pre-16s is not yet a done deal.

For the ad industry, Option 1 is bad enough. The children's channels
will fare worst whatever policy is decided on, and at least one faces
losing up to 15.3% of revenue under Ofcom's estimates. "For some of the
media owners, advertising to children is pretty key as a revenue
stream," says MindShare's investment director Andy Zonfrillo. "If you
were a dedicated kids' channel now, you would be looking at what these
rules mean for the business going forward, looking at how your business
runs and the profitability of that business."

The unspoken possibility is that some channels could either give up
broadcasting or slash their programming budgets drastically. Dee Forbes,
senior vice-president at Turner's Cartoon Network, says that some impact
is inevitable.

"The new restrictions and resulting loss of revenue will undermine the
breadth of investment in quality original UK animation and kids'
programming," she warns.

GMTV says the new restrictions would mean the end of all food
advertising in its children's schedule, while Mark White, Five's
executive director of sales, warns that the channel's commissioning of
indigenous UK productions - currently the highest in commercial UK
television after ITV - could be hit hard by revenue losses he values at
around £2m.

"We do significantly more hours than our public sector requirements,
doing a lot of commissioning. Programmes like that are not cheap and
they are going to have to be looked at much harder now. We are still a
business fully funded by advertising and if it's making a loss, then we
have to look at other options," he says.

Nickelodeon's managing director David Lynn has similar concerns about
the impact on original programming, but also sees the decision as
disappointing for another reason.

"We see this as a missed opportunity to do more to harness the ability
of channels like Nickelodeon to use their popularity to positively
influence and educate children," he says.

Although some form of regulation is now certain, many in the industry
question whether there is any need for it. Nielsen figures show a 32%
reduction in food, drink and chain restaurant impacts on children aged
four to nine between 2001 and 2005, and Chris Williams, broadcast
director at Starcom, says more recent industry estimates show a 40%
reduction since 2003 - close to the 50% demanded by the Government's
policy objectives.

He fears the planned restrictions could deal a serious blow, not just to
individual channels but to the industry as a whole. "We're talking about
the category that's first or second in terms of expenditure on TV, worth
£650m, and 90% of that is HFSS food," he says.

"There's going to be tremendous implications for the whole of TV
advertising, which has got some structural issues that it's trying to
deal with anyway and has strict competition from digital media."

Ofcom's regulations have the force of law, and the only avenue of
redress - a judicial review of the Food Standard Agency's division of
foods into HFSS and non-HFSS categories - would be expensive, possibly
futile and dependent on leadership and investment from food
manufacturers who are already quitting the battlefield.

The Advertising Standards Authority has announced it will revise the
Committee of Advertising Practice codes in line with Ofcom's decision,
and the regulator says that radio will follow suit. With the revised CAP
codes, any hopes that TV advertising will be replaced by text messaging,
direct mailings, or targeted outdoor spots are likely to prove
illusory.

Indeed, the biggest beneficiary is likely to be the platform that is
already eating up television's advertising share: online.

Online blurs national boundaries, and thus regulatory regimes, in a way
that no other platforms can manage. It also allows manufacturers to do
something they cannot do anywhere else: drive their audience to their
own sites at the click of a button.

So by over-regulating TV advertising, Ofcom could find itself forced
into doing the last thing the Government originally wanted: pushing the
nexus between British kids and food companies into online, the most
lightly regulated space there is

THE ARGUMENT ABOUT KIDS

For the industry, the most alarming prospect about the proposed new food
rules is the question of where it will end. Youth marketing is a major
industry and if the Government decides to stop junk-food ads, what is
preventing it from banning other product spots?

A letter written to The Daily Telegraph in September by a group of 110
self-appointed child experts brought attention to something that has
been sitting at the back of the current debate: the fact that a lot of
people would like to stop children being exposed to advertising at
all.

Jeff Taylor, managing partner of BLM azure, a kids' specialist agency
whose clients are mostly toy manufacturers, says the non-food industry
has been keeping a close eye on what happens with Ofcom.

"They're taking note of the way the food industry has responded by
promoting healthy eating, but they're certainly watching with interest
and looking over their shoulders in case something happens," he
says.

At the same time, there are unique aspects of the current debate that
suggest it will not extend far. Child obesity is a major public health
problem and the scientific consensus is that advertising does play a
part, if only a modest one.

Sonia Livingstone, the London School of Economics professor who wrote
Ofcom's 2004 study of the impact of food on children's diet, says the
proportion of children who can be considered as "tipped into the obese
category" because of advertising is 2-5%.

"It would fly in the face of a lot of evidence to say there is no link,"
she says. At the same time, she says the loss of playing fields, bad
school meals, parents with no time to cook and social class all appear
to play a bigger role.

Apart from the sheer impossibility of shielding children from all
advertising messages, many also make a case for the positive benefit
children can get from well-targeted advertising. Alan Scurfield, of
outdoor agency Ten Nine, which puts six-sheets in schools, says that not
only can it prepare them to understand and evaluate the messages they
receive from ads, but it can also help give them messages about life in
general.

"The kids are going out into a commercial world and not everything that
is for sale is bad for you or evil. It makes perfect sense to talk to
young people as the next generation of adults," he says.

"If the word we're hearing from kids is that they want respect, I
suspect they don't want to be treated as characters in an Enid Blyton
book."

OFCOM'S OPTIONS

HOW WOULD IT WORK?

OPTION 1

Ads for HFSS products* would be banned from programmes aimed at children
and those in whose audience children under 10 are more than 20%
over-represented.** HFSS manufacturers would be banned from sponsoring
these programmes. The restrictions would be introduced over three years
and the BCAP rules** would be applied.

MODIFIED

OPTION 1

Identical to Option 1, with the restrictions extended to children aged
10-16 as well

*HFSS: High in fat, sugar and salt. The Food Standards Agency has
developed a nutritional profiling model that designates certain products
as more harmful to health. These HFSS products are the target of the
proposed regulations, but the FSA's model is vigorously disputed by many
manufacturers and advertisers.

**Sometimes referred to as the "120 index", this defines programmes
aimed at children as any in which the proportion of children watching is
more than 20% higher than the proportion of children in the general
population.

***BCAP rules: New Broadcast Committee of Advertising Practice rules are
to be adopted to address the food advertising issue, banning the use of
cartoon or film characters, celebrities, or collectible gifts in ads
targeted at children.

TIME LINE

- 15 December 2006: End of consultation period on Modified Option 1,
Option 5 and Option 6

- Late January 2007: Final Ofcom statement on policy options. Broadcast
Committee of Advertising Practice content rules come into force for
those planning new campaigns

- 1 April 2007: Scheduling restrictions come into force for most
channels. On dedicated children's channels, HFSS ads must be reduced to
75% of usual levels

- 1 July 2007: Existing campaigns must comply with BCAP content
rules

- 1 January 2008: Dedicated children's channels must reduce HFSS ads to
50% of usual levels

- 1 January 2009: Dedicated children's channels must ban HFSS ads
altogether.