The value of television Advertising THE INCONVENIENT TRUTH ABOUT TV COMMERCIALS Advertising FREE-TO-AIR BROADCASTING IS Free… …BECAUSE IT IS FINANCED BY ADVERTISING. RTL Group 45, boulevard Pierre Frieden 1543 Luxembourg Luxembourg T: + 352 2486 5201 F: + 352 2486 5139 www.RTLGroup.com Status: 1 February 2010 2 RTL Group The inconvenient truth about TV commercials ADVERTISING PAYS ADVERTISING DRIVES BUSINESSES − AND TV IS ONE OF THE MOST EFFICIENT FUELS. RTL Group 3 Advertising ENJOY THE BREAK PAGE 14 4 RTL Group Photos: Deutsche Telekom The inconvenient truth about TV commercials CONTENTS 6 CEO STATEMENT 8 FREE-TO-AIR: how TV channels safeguard quality content for all 10 THE LEADING MEDIUM: how TV advertising works 14 ENJOY THE BREAK: effective commercials make great entertainment 18 REGULATION: why ad bans don’t necessarily protect consumers 24 DOUBLE VISION: how TV and internet complement each other 28 WHAT NEXT? Six rules for watching TV in the future 30 FACTS & FIGURES: commercial breaks, advertisers and products 32 SPOTS, CRAWLS AND SPLIT SCREENS: the diversity of ad formats RTL Group 5 Advertising CHIEF EXECUTIVE’S STATEMENT TV will continue to be the lead medium for a long time to come − not only for viewers, but also for advertisers. This brochure explains how and why. I’m sure you’ve heard it before – and maybe you’ve even said it yourself: TV commercial breaks are when people leave the room, or change channel, right? And yet, each day, over 200 million viewers all over Europe watch RTL Group’s free-TV channels, which are financed by advertising. Each day, our channels air more than 11,000 commercials, booked and paid for by hundreds of different advertisers. How can this be? The truth is simple: efficient TV advertising is often excellent entertainment. Commercials work when they tell interesting stories, appeal to our emotions, inform and surprise − in short: when they are just good television. And viewers understand that great TV content has its price − talent shows and coaching formats, news and sporting events, reality and fiction series. In the case of free-TV, the price is paid not in money, but in attention. In fact, the popularity of TV has always raised concerns from many politicians and regulators. Despite improvements to the new European TV 6 RTL Group The inconvenient truth about TV commercials Gerhard Zeiler Chief Executive Officer directive, broadcasters still have to deal with excessive regulation. Regu­­lation that tells us − unlike other media − precisely how much, and when advertising may be shown. As if responsible citizens exist among other media users, but not among TV viewers. Legislators are also increasingly considering advertising bans or complex restrictions on entire groups of legal products. We clearly see the impor - tance of severe problems such as obesity, excessive drinking or dangerous driving, and address them in our programmes, but to blame advertising is nothing but populist. Advertising restrictions won’t solve these problems. In recent months, it has become clear that in an economic downturn, people watch more TV. That’s the first piece of good news for us. The second is that without TV there can be no growth through advertising. TV is still the best medium for reaching a mass audience − especially in the digital media world with its many distribution channels and small target audiences. Here’s your chance to make up your own mind... happy reading! Gerhard Zeiler RTL Group 7 Advertising 1. Free-to-air broadcaster takes a risk when inves- ting in programming − such as news, drama, factual entertainment, sports rights and big entertainment shows. 2. Watch and enjoy: Broadcaster airs this programming so people can watch for free. THE VIRTUOUS CIRCLE 5. The more revenue Once a new programme the broadcaster has become an audience generates, the more favourite, the broadcaster money it can invest and the production company in even more attrac- can use the ‘format’s brand’ tive programming. to generate additional Back to number 1. revenue streams. 8 RTL Group The inconvenient truth about TV commercials Shows also become available free online 3. for a certain period of time The broadcaster offers once they have been advertisers slots during shown on regular TV − so the programming, for viewers can ‘catch-up’ which the advertiser with their favourite show pays, the price depend- any time, anywhere. ing generally on the number and demo- graphic of the people who watch. But there are also pay options, either for selecting archived shows and films or for watching episodes before they are broadcast. TV appeals to people’s emotions, and that’s what advertisers also wish to appeal to. So TV and advertising is a happy marriage, and the offspring of that marriage is free-to-air broadcasting. Here is how it all works. 4. The more people watch, the more money the broadcaster receives. Photos: iStockphoto, Sony BMG, Picture-Alliance/DPA Sony BMG, iStockphoto, Photos: RTL Group 9 Advertising WE HAVE SEEN THE FUTURE OF ADVERTISING AND... 10 RTL Group The inconvenient truth about TV commercials Remember when people said the internet would be the death of print? But who wouldn’t want a share of Amazon’s book trade? People also insisted that the internet would mean the end of writing. But indeed, we’ve wit- nessed an enormous and democratic proliferation of words in blogs, tweets, customer reviews and online communities. Internet killing off postal services? We refer to Amazon again, or Ebay. In the same way, pundits fairly routinely predict the death of the television commercial in the face of internet competition. But hey, we’ve all seen what happens to the pundit’s view. And the indications are that they are talking nonsense − again. ...IT STILL COMES IN A BOX Of course TV advertising will change in format and content – as it has since it began – and as you’ll see on pages 24 to 27, it works very well with the internet. But it will be a long, long while before consumer businesses risk removing television from their advertising budgets, if indeed, they ever do. TV is the leading medium, and people’s third main activity behind sleeping and working. Television remains one of the most effective and efficient advertising media. Sales still sky rocket with a well-made TV campaign – and growing businesses also create new jobs. The average western European supermarket group launches about 26,000 new or seasonal products a year. Marketers crave attention for these products, and they know how to get it. They choose television. RTL Group 11 Advertising LET’S LOOK AT SOME OF THE REASONS WHY TV IS STILL KING OF THE ADVERTISERS. TV IS PART OF EVERYDAY LIFE 97 per cent of European households own a television and it plays a central role in most people’s lives. TV IS A TRUE MASS MEDIUM TV viewing is on the increase almost all over the world and is the most efficient form of communication with the mass populace. In Europe, people spend an average of 227 minutes a day viewing. TV ADDRESSES THE EMOTIONS It’s a stimulating feast of moving images and sound. Added to that, people watch it when they are relaxed, with their barriers lowered. This isn’t just opinion – many neuroscience studies demonstrate that the parts of the brain most stimulated by TV are those relating to emotion and long-term memory. TV IS THE MOST PERSUASIVE TV reaches many people in a short space of time, and TV ads also offer people a common viewing theme to talk about. In a 2008 Nielsen survey 69.9 per cent of people said TV advertising was the most persuasive, compared to 9.5 per cent for newspapers and 5.1 per cent for the internet. If you see it on the television screen, you have “seen with your own eyes”. Price Waterhouse Coopers’ Payback study supports this by showing that on average, TV ads paid back 4.55 times in increased sales, 30 per cent more than press ads, the only other medium to show consistent payback. 12 RTL Group The inconvenient truth about TV commercials TV ADVERTISING − ANY TIME, ANY PLACE, ANYWHERE Interestingly, new technology makes entertaining TV ads all the more powerful as people can now watch or download them at the click of a mouse, mail them across the world and blog about them online. TV ALLOWS TO MEASURE RETURN ON INVESTMENT TV is the most measured medium and offers the most accurate data. This research provides a currency for buyers and sellers and generates a degree of trust. The measurement even extends now to establishing which TV channels are most effective for ads − a new study devised by RTL Belgium in cooperation with US statisticians eliminates a number of different variables to prove that the same message can have different impacts depending on where it is screened. TV STRENGTHENS THE PERFORMANCE OF OTHER MEDIA It establishes the central concept of a major campaign which then resonates through other media. TV ALLOWS PRECISE TARGETING Advertisers can pinpoint demographic and geographic groups quite precisely. And again, new technology makes this all the more powerful, with niche channels allowing even more precision. TV OFFERS FLEXIBILITY AS WELL With a multitude of channels, advertisers can place their campaign in many formats in many different programmes, to best meet their goals. RTL Group 13 Advertising THAT’S ADVERT-AINMENT Television adverts often make great entertainment, and play to people’s emotions. And when people enjoy the ads, they keep watching, the ads become a talking point and they create brand loyalty. Whether they are edgy car ads, comedy beer ads, or a series of coffee or cooking ads like a TV series in their own right, people like talking about them, sometimes even for years after they stop showing.