Advertising to children Main outcome of egta study May 2001

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1 position paper Advertising to children Main outcome of egta study May 2001 The position of egta with regard to advertising to children is based on considerations of a quantitative and qualitative nature. From a quantitative standpoint, egta draws a link between the revenues generated from TV advertising to children and the amounts spent on children's programmes. This link is illustrated in the results of a questionnaire sent to egta member sales houses that carry out activities in EU countries. This survey uses 1999 data and does not include TV channels that do not broadcast advertising to children. Egta wanted to go beyond a simple quantitative analysis. We therefore chose to add qualitative considerations by examining the numerous self-imposed rules applied by all egta member sales houses in terms of protecting the psychological well-being of children. egta is the association of television and radio sales houses The egta membership is composed of: 51 TV members (30 independent and/or private sales houses) based across 26 European countries + Canada, Korea, Morocco, New-Zealand and South-Africa. All together, the egta TV members collect 19.1 billion (consolidated turnover) through more than 100 mainstream TV channels almost equally public and private. That amount of money represents 65% of the TV advertising investments in Europe. 25 Radio members based in 16 European countries. In 2003, these members collected over 2 billion (consolidated turnover) through over 150 radio stations. That amount represents 50 % of the Radio advertising investments in the countries represented within egta s radio department. Egta provides a network for its members based on relationships with more than 1000 high-level executives from 32 countries. Over the years, egta has clearly becomes the reference centre for television and radio advertising in Europe. WITH THE PARTICIPATION OF MEGA CHANNEL WHICH KINDLY ANSWERED THE QUESTIONNAIRE.

2 ADVERTISING TO CHILDREN ECONOMIC ASPECTS Results of the questionnaire In most countries, viewers are no longer considered to be children when they reach the age of 12. Advertising revenues The gross overall annual revenue that egta members based in the European Union earned from advertising to children was 320 million Euros. On average, advertising to children represents +/- 4.2% of overall turnover for egta members. When assessing the net overall annual revenue received by the channels, we need to deduct +/- 20%, which corresponds to the commissions paid to various intermediaries (advertising agencies, media buyer companies, etc.). This leaves us with approximately 256 million Euros. TV channels pay for children's programmes Each year, these same channels spend 241 million Euros to purchase or produce children's programmes. This figure is calculated as follows: 51.5% (+/- 124 million Euros) spent on original in-house productions; 15% (+/- 36 million Euros) spent to purchase the right to broadcast children's programmes produced in Europe; 33.5% (+/- 81 million Euros) spent to purchase the right to broadcast children's programmes produced outside of Europe. The amounts spent on children's programmes therefore represent 94% of the net revenues generated by advertising to children and do not take into account the general overheads for children's programmes: This means that TV channels actually lose money in the final analysis. Advertising to children made it possible for 13 of the 15 TV channels surveyed to broadcast a combined total of 271 hours of children's programmes per week*. *(RAI and TVE hours/week unavailable). Were revenue from advertising to children cut off, both public and private TV channels would have major difficulties financing children's programmes. In fact, some of the private channels obtained their broadcasting rights for the children's programmes through a bidding system. Under the terms of this system, they were forced to make long-term financial commitments that certainly did not take into account future legal restrictions on advertising to children.

3 Other TV channels have signed terms of reference with government authorities with subsequent commitments over several years. Such commitments would be put at risk by such restrictions on advertising to children. As for public channels, any reduction in advertising revenues would result in the need for increased public funding, which is unlikely to be forthcoming. The importance of children's programmes for the European media industry 66.5% of the total sum spent on children's programmes are invested in the European media industry (original in-house productions + purchasing of rights to broadcast programmes produced in Europe). This amounts to 160 million Euros for just the 15 television channels surveyed. Conclusion Producing and broadcasting children's programmes costs more money than TV channels earn from advertising to children. Any loss of advertising revenue would force TV channels (both public and private) to adopt one of the following courses of action: find another source of funding: example, increased public funding for public service channels (extremely unlikely); discontinue children's programmes; import cheap programmes (Japanese cartoons, for example). Moreover, the consequences of the above alternatives for the European media industry would clearly be in contradiction with EU efforts aimed at developing this industry. In fact, regardless of the course of action adopted by TV channels in light of restrictions and subsequent reduction of revenues from advertising to children, a considerable amount of the money currently injected into the European media industry would be put at risk (160 million Euros for the 15 TV channels surveyed).

4 PROTECTING THE PSYCHOLOGICAL WELL-BEING OF CHILDREN Egta has been very anxious to practically assess the degree of protection nowadays accorded to children in the field of television advertising. In order to do this, a questionnaire was sent out to all egta member sales houses regarding all restrictions on advertising to children that are applied by egta members established in the European Union. For each provision, egta members were also asked to specify the origin of the restriction: 1 «Television without Frontiers» Directive (3 October 1989) 2 National legislation 3 Self-regulatory code 4 Licence obligations (specific state contractual obligations) 5 In-house rules established by the TV channel itself. Three outcomes of responses to the questionnaire 1. There is a common core of restrictions which are applied by all the egta members (see the list). This proves that children are already afforded very adequate protection, a fact that often goes unrecognised. Indeed, egta members share the same concern of not misleading or manipulating children. The restrictions imposed tend to make children responsible consumers by not treating them like children. Other restrictions have come about from ethical considerations and concerns relating to physical safety, health and hygiene. 2 By analysing the origin of this common core, we find that 43% of the restrictions stem from self-discipline (self-regulatory codes or in-house rules established by TV channels themselves) and restrictions imposed by the "Television without Frontiers" Directive. It is worth noting that these restrictions are adhered to specifically because TV channels have adopted them and have been free to apply them. 3 Numerous restrictions have not been included in the "common core" because they differ from one country to another; an analysis of these restrictions shows the effectiveness of self-regulation. Indeed, self-regulation makes it possible for Northern and Southern European countries to translate their cultural differences into specific restrictions that European-wide restrictions would be unable to do. In order to gauge the relevance of the restrictions shown in the list, let's compare them with the results of the study carried out by the ITC (the UK Independent Television Commission) on TV sponsorship of children's programmes. Although the egta survey is broader in scope, the ITC survey covers both commercial advertising and TV sponsorship.

5 It is interesting to note that most of the wishes expressed by parents and children in the ITC study are satisfied by current rules applied by all egta members, namely: advertisements should not encourage children to pester their parents to make them buy whatever they want; advertisements for alcoholic beverages should not be targeted towards children; Revenue earned from advertising to children should be spent on children's programmes (a wish also expressed by children); there is should be a clear distinction between advertisements and programmes; sponsors should not be permitted to influence programme content and the broadcaster's editorial integrity must be respected. Children would also like to be considered as responsible decision-makers; they do not feel that they are being manipulated when their programmes are sponsored. Conclusions The egta survey is intended to bring more rational thinking to a discussion that is all too often characterised by demagogic comments or pre-conceived notions that focus on only one specific aspect of the problem. Egta members feel that the problems raised by advertising to children must once again be put back into their overall perspective. Finally, in order to ensure that protective measures will be effective, there needs to be coherence between the various restrictions placed on how advertising is permitted to reach children. In this respect, television is undoubtedly a victim of its own success. It now finds itself chained down at various levels by numerous regulations (in addition to those indicated in the list). Such regulations are disproportionate with respect to the aims sought and may lead to an unnecessary and unjustified proliferation of regulations imposed on it. The danger is to restrict the free movement of commercial communication but nevertheless fail to obtain intended objectives of such restrictions. egta - rue Wiertz 50, B-1050 Brussels - michel.gregoire@egta.com