Losing ads to Net worries TV, radio  
Broadcasters say trend has potential to make
`considerable impact,' CRTC report concludes

May 16, 2008 04:30 AM
RITA TRICHUR
BUSINESS REPORTER

The federal broadcast regulator's decision to revisit its 1999 new media exemption comes at a time when conventional broadcasters are increasingly worried about the growing share of advertising revenue that is migrating to the Internet, a report said yesterday.

The Canadian Radio-television and Telecommunications Commission report says some broadcasters are voicing concerns that budding trend has "the potential for considerable impact" on their ability to meet their regulatory obligations down the road. That includes their ability to "fund, exhibit and promote" Canadian content.

"These include concerns over the amount of Canadian online advertising that is being directed to non-Canadian owned and controlled entities and the sustainability of a separate Canadian programming rights market," said the report.

As a result, some industry players are pushing for more concessions under the Income Tax Act to give them a leg up on that competition. Specifically, some are suggesting the Act's current advertising tax deductibility provisions should be extended to include Canadian-owned new media platforms.

"A number of stakeholders have suggested that these provisions, which generally limit the deductibility of Canadian advertising as an eligible expense to Canadian rather than foreign owned media, should be extended to Canadian online media," the report added.

The commission also noted that when it first issued its new media exemption order in 1999, it did so partly on the basis that "evidence that the Internet had impacted advertising revenues of traditional broadcasters was not apparent."

A lot has changed since then. Advertisers are increasingly exploring "new media broadcasting marketing strategies," CRTC said, adding Internet ad expenditures "continue to grow at unsurpassed rates."

Quoting statistics from the Interactive Advertising Bureau of Canada, the study suggests that Canadian online advertising revenues surpassed $1 billion in 2006. The bureau only provides a forecast for 2007, projecting a 32 per cent year-over-year increase to an estimated $1.33 billion.

In 2006, the Internet had the seventh largest share of ad spending, ahead of only magazines and billboard advertising, the report said. "However, the Internet clearly has the greatest momentum."

In contrast, radio advertising is largely flat over the last decade with a 10 per cent market share. Television, meanwhile, has "shown remarkable resiliency" by maintaining a 24 per cent market share.

While the bulk of online advertising dollars is earmarked for search vehicles and classifieds/directories, "evidence suggests that new media broadcasting will become an increasingly important destination for advertising dollars as consumer usage grows."

Advertising is the bread and butter of the broadcast industry, pumping some $13.7 billion into the Canadian economy each year. Traditional over-the-air broadcasters are worried, however, that an increasing slice of that advertising pie is being gobbled up by specialty stations and now the Internet. The Association of Canadian Advertisers told the CRTC last month the Internet "now attracts just as much ad revenue per year as specialty stations in Canada."

While that may be the cause of some consternation, media strategists say the shift toward online advertising is also creating potential opportunities for traditional broadcasters. Alan Sawyer of Two Solitudes Consulting, who contributed to the CRTC's report, said pre-roll advertising – a commercial that plays before online content is accessed – is poised to become thedominant form on the Net.

American broadcasters are already embracing the concept, using the bulk of those pre-roll ads for corporate advertisements. Many of those commercials come complete with "click-through" capability where the user is redirected to the web page for the advertised product. "That is a compelling opportunity too because you don't have that with television," Sawyer said.

Canadian broadcasters, on the other hand, mostly use pre-roll advertisements for internal promotions. They are also generally reluctant to put a lot of content online because they have to pay extra costs for the content rights, while streaming content remains relatively pricey.

"You really have to come to the new consumer on his or her own turf. And if you want them to watch your content, you have to get it to them where they are, and they are not sitting in front of the television set," Sawyer said. "So it is a time for action, not inaction."

http://www.thestar.com/Business/article/425897

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We have only touched on this matter from time-to-time, but a consideration might be in the utter lack of quality and imagination contained in the vast majority of spots foisted on the public.

Somehow, this material isn't even considered as content by programmers; is considered only as a "necessary evil" by management, and is just barely tolerated by audiences.

When the time/cost factors  of creating advertising for Radio are compared to producing Creative for other media, one wonders how thick are the Radio-folk in not to taking advantage of such incredible advertising opportunities.