“The Advertiser-Dependent Television Model Can Not Survive. Those Broadcasters Who Cannot Resolve This Will Die” – Unilever Global Media Director

Philip M. Stone September 19, 2005

When the vice-president of global media for Unilever, one of the world’s largest television advertisers, tells the television industry it needs to change its ways or “die”, then the industry had better pay close attention.

And Unilever’s Alan Rutherford told the industry in a major speech at the UKs Royal Television Society that his company has already put its money where its mouth is – it has slashed its television advertising budget by 20% over the past three years.

Add that to Procter & Gamble’s TV spending cut of about 4.7% so far this year, according to TNS Media Intelligence, and the message should be getting through that it is no longer television advertising business as usual. In 2004 P&G spent some $2.5 billion on US television advertising. Unilever spends about $4 billion globally.

Jim Stengal, P&Gs global marketing officer, told the industry earlier this year that things had to change. “There must be and is life beyond the 30-second spot,” and P&G is actively finding that “life” in product placement and spreading the spend to the Internet. Peter Chermin, News Corp’s president and chief operating officer, also told TV executives,  “When we put six to eight 30-second commercials back to back, we put up a sign saying, ‘Go away now.’” He was talking about the viewer, but the advertiser obviously got the point, too.

Now with the world’s two largest consumer products groups giving the same message that television no longer delivers the value for money it once did, the television industry needs to stop talking about how things have to change, and instead start making the changes.

Rutherford in his speech was quite blunt about the problem. “Television is rather ill, it is not dead. But it is going through an evolutionary change. Advertisers are rethinking how they use television as part of their mix.”

He noted that in the past three years there had been a 20% volume increase of television advertising. “It is becoming increasingly difficult to break through the clutter,” he explained, saying that a US study shows that it is taking at least an additional 10% more advertising just to get where the advertiser was three years ago.

And Unilever already has under its belt successful projects that diminish TV’s role, including the enormously successful Internet and outdoor campaign for its Dove soap brand that proves there is an advertising video life beyond television. A year ago Unilever  set up its campaignforrealbeauty.com web site featuring real people -- elderly, wrinkled, love handles and all, certainly not super models --  to promote its 50-year-old Dove soap. The site makes good use of video and the net result is that web traffic has grown by some 200% since its start and for the $3 billion Dove brand its US sales now enjoys double digit growth.

Among Unilever’s major brands  are Hellmann's, Knorr, Lipton, Omo, Vaseline, Lux, Pond's and Dove.

Both P&G and Unilever are active with product placement in the US. In Europe it is more difficult since many countries have rules that forbid or severely restrict the practice.  Rutherford said, for instance, he would like to see Dove soap incorporated into storylines.

Unlever's Rutherford - "Change or die."

As if Rutherford’s message wasn’t enough, Spectrum Strategy told the same conference that conventional real-time television viewing could drop by some 50% in the UK by 2012 – not exactly what advertisers want to hear. It’s not that those viewers will be lost to television, but rather time-shifting via personal video recorders (PVRs), and on-demand viewing will take up the slack.

Advertisers hate PVRs because studies show that most users use them to skip the advertising. The more PVRs out there, the less that TV ad is likely to be seen. BSkyB plans to have PVRs in 2.5 million of its UK households  – about 25% of its customers -- by 2010. Spectrum strategy says that if PVRs and on-demand viewing become a way of life then TV advertising revenues could drop by more than 30% by 2012.

In the US product placement has become a very big television business. Coca-Cola led the field with 2,755 occurrences in the first half of the year, according to Nielsen Monitor-Plus.

Local US television is feeling the worst advertising-loss bite with revenues dropping 7.2% in Q2 compared to the year before.  According to TNS Media Intelligence/CMR, of local TV’s top 25 advertisers 16 spent less in the quarter, particularly automobile companies.  But the Television Bureau of Advertising believes things will pick up in 2006 – albeit at lower percentage rates than for previous political and Olympics years.

And if all of that wasn’t enough, television globally is getting hard hit by regulators concerned about food advertising aimed at children – a high-profit revenue stream for many stations. Regulators are concerned at junk food ads and even ads for every day products that are high in sugar content, aimed at kids during their morning and afternoon cartoon shows and the like.

Regulators are worried by what they see as a global obesity epidemic among the young, and they believe those TV ads have a lot to do with it. The regulators have put the food and television industry on notice that they must do something to curb such advertising voluntarily, or the regulators will do it for them.

And yet another warning of how the television spend is being dissipated. US Internet ad spending will surpass $10 billion for the first time this year, according to eMarketer. It predicts a total spend of $12.9 billion, double the $6 billion of just three years ago.

Add to that, advertising inside games is set to increase 40% nest year, Outdoor is enjoying its best renaissance in years, and the Internet is forecast to continue its  double digit growth, and television’s business as usual approach looks as though it is in for an even deeper shock.

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