Why TVB ad slots are so expensive during World Cup

Hong Kong's dominant broadcast group TVB has landed itself in hot water after oversubscribed advertising demand on TVB Jade during the World Cup sent advertising rates higher than expected.Brands looking to target viewers outside of the World Cup have been left out in the cold with media buyers and clients saying it is nearly impossible to buy space.Some marketers were pushed to think on their feet while others have slammed the broadcaster for bad management of ad slots.Ray Wong, CEO at PHD, said that most of his clients have been affected and that he and his staff have had to devise strategies to quickly deal with the situation for clients' whose campaigns cannot be delayed until after the World Cup."Clients gave us a lot of grief - we are in between the client, who doesn't want to pay more than they budgeted for, and TVB, who can't do anything about the bidding price because it is determined by supply and demand through a preemption system.“Agencies are stuck between a rock and a hard place and we've had to go through rounds and rounds of negotiations with the client and TVB," Wong added.One factor pushing up the cost of ad slots are bonuses given by TVB along with its World Cup package, which is free money you can use to bid for non-World Cup ad slots."When TVB sold the World Cup packages, they gave out more bonuses than they usually do,” Wong said.“For example, in the past, if you spent HK$1 million on advertising, you might get 10% bonus money to spend on other slots. But in the World Cup package, TVB gave 100% bonuses for some types of packages."Wong added that TVB probably offered more bonuses because it's the first time they got the rights to broadcast the World Cup in many years and they were probably hoping that more clients would support them.Wong cites Standard Chartered as one of his clients who was able to advertise on TVB Jade during World Cup because it committed to a World Cup package and was able to use bonuses to purchase other ad slots.For his client Vita Milk Tea, he had to buy ad slots of shorter durations on TVB, supplemented by longer 30-second ad slots on other TV channels.Other marketers are unhappy with TVB because they were not able to implement campaigns during the World Cup season, even though they may not have been looking to target World Cup fans.One food and beverage marketer tried to place a prime time TVC outside of World Cup programming, but said the price of the non-World Cup prime-time slots was double her company's budget.The company did not intend to target World Cup fans and simply wanted the TVC to coincide with the launch of a new product.The TVC subsequently ran on TVB's J2 channel, online and the company will delay placing the TVC on TVB Jade until after the World Cup.One media planner said the price of TVB's advertising slots for non-World Cup slots exceeded her client's budget by about 30%, even though they had already expected advertising rates to be higher because it was World Cup season and budgeted for that accordingly."Our client which has a campaign during this period has two options: use a higher than expected rate to keep the exposure they wanted for the campaign or shift to other media to maintain noise. Alternatives such as online channels can only compensate for a few percent of the kind of exposure you would get on TV, which is a key channel."In response to marketers who say the advertising rates have exceeded their budgets, a source familiar with TVB ad sales said the broadcaster has spoken with both advertisers who have committed to the World Cup package as well as those who have not to see if they can delay their campaigns and free up slots."But there are some slots that will be full no matter what we do and some advertisers may have to target the audience they want in other ways," he said.There are several reasons, which, when compounded together, has led to the exorbitant cost of advertising slots at TVB this World Cup season.TVB has offered a number of World Cup packages to cater to different marketing budgets.Included in the packages are selected slots during commercial break before and after World Cup games in the early mornings and shows featuring World Cup highlights aired during prime time."There were numerous inquiries among advertisers ever since we announced the acquisition of broadcasts rights of FIFA World Cup 2014. In view of that, we decided to offer an early-bird commitment scheme for World Cup advertisers through which they would enjoy even greater discounts than their regular advertising booking with commitment submitted before Oct 21, 2013," Byron Yu, head of marketing and communications of the marketing and sales division at TVB, said.TVB cannot charge high prices for its advertising slots directly because usually, advertising slots are purchased through a preemption system. In this system, advertisers must propose a price for a slot they want and the highest bidder wins. This year's slots which were not part of the World Cup packages were purchased through this system.However, advertisers in the same category, meaning that they are competitors, for example in terms of products, cannot bid for slots in the same commercial break. This means that, for instance, if one advertiser has won the bid for a 30-second time slot in a 10-minute commercial break, another advertiser in the same category cannot bid for another slot in the same break.For marketers who did not commit to a World Cup package however, when they bid for a slot through the preemption system, they are competing with advertisers with bonus money to spend, and for whom every dollar spent bidding for the same slot is already paid for by the World Cup package they committed to.Even if the cost of the ad slots are pushed up, advertisers with bonuses are more able to pay for the higher rate classes because the cost of the bonus money is money they've already spent on their World Cup package.The media planner points out that when TVB asked for commitment to the World Cup package, her client did not set its marketing budgets yet.The source within TVB familiar with ad sales said that TVB usually promotes its advertising slots for the upcoming year in late November or early December, which is normally when companies work out their marketing budgets for the coming year.Asking for a commitment in mid-October means that TVB only asked for a commitment a few weeks earlier than usual."We did it so that they can better plan their budgets after committing to our package. The time when a company starts working on their upcoming year's budget depends on its work cycle, which means the timing could be good for some companies and bad for others," he said.The F&B marketer said most companies buy advertising slots two or three weeks before launching their campaigns, but TVB asked for a commitment for the World Cup package over six months in advance.She adds that usually when TVB asks for an annual commitment in November, they ask for the total advertising expenditure that a company or an agency plans to spend on TVB in the upcoming year rather than committing to the purchase of specific ad slots.The media planner said that the situation is exacerbated because the middle of the year is the busiest time, a time when most companies are launching new products or campaigns to promote them."Even without the World Cup, the middle of the year is always the busiest because many companies launch products then. That's when you start going after the revenue for the year. If you don't do well in the middle of the year, your accounts would look bad in Q3 and Q4," she said.Another factor are the low ratings for the Journey to the West drama shown during prime time, overlapping with the World Cup season, meaning that many advertisers are avoiding the drama's advertising slots like the plague. Wong and the F&B marketer both said they avoided placing ads during times when the drama was showing.This means a higher demand for fewer non-World Cup ad slots during prime time, further pushing up the cost of such slots in the preemption system, which is determined by supply and demand.The TVB source added situations where the cost of ad slots are pushed up happens outside of the World Cup season, for example, when a particular drama has especially high ratings and clients are all going after the same slots.For the F&B marketer, the fundamental problem is that there is no diversity of TV channels to choose from in Hong Kong to advertise to the masses."Marketers need a medium with which to reach the masses. In Hong Kong, there's not much choice when it comes to TV channels," she said.Meanwhile, for Wong, the main problem is that there is limited time for commercials across all existing TV channels in Hong Kong."When I first entered the industry, the highest rate class an advertiser would pay for a TV ad slot was F4. Two years ago, it hit F9 and now in the last two years, F15 was the highest rate class. This is part of a larger trend of TV advertising costs shooting up because there is only a limited amount of time allocated to commercial breaks," said Wong.He added, "So I understand the difficulties faced by TVB. Every broadcaster only gets a maximum of 10 minutes of commercial breaks between shows, which was the case since at least 1985. The government monitors this and will penalise TV stations if they go above the allotted 10 minutes. With limited air time for commercials, TVB can't do anything about the price going up due to increased demand. The government should loosen up on this policy," said Wong. "If the client has to pay more, nobody wins."And as the media planner said, "In the end, it is consumers who pay."[Image]: Shutterstock