Broadcasting Act s81 Advertising Restrictions. Discussion Paper. August 2012

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1 Broadcasting Act s81 Advertising Restrictions Discussion Paper August 2012 Prepared by Rick Friesen Chief Executive ThinkTV DDI (09) Mobile

2 1. Background Section 81 of the Broadcasting Act forbids advertising on Television on certain days and portions of days. The relevant Section reads as follows: 81 Advertising hours (1) Subject to subsection (4), no broadcaster shall broadcast advertising programmes on television (a) during the hours between 6 am and noon on (i) Sunday; or (ii) Anzac Day; or (b) on (i) Christmas Day; or (ii) Good Friday; or (iii) Easter Sunday. (2) Subject to subsection (4), no broadcaster shall broadcast advertising programmes on sound radio on (a) Christmas Day; or (b) Good Friday; or (c) Easter Sunday. (3) Every person commits an offence and is liable on summary conviction to a fine not exceeding $100,000 who contravenes subsection (1) or subsection (2). (4) Nothing in this section prevents the inclusion in any programme broadcast on television or sound radio of a credit in respect of a sponsorship or underwriting arrangement entered into in relation to that programme. (5) Nothing in this section applies to any programme broadcast on television, where the signal for that programme (a) originates outside New Zealand; and (b) is produced and transmitted simultaneously to both New Zealand audiences and audiences outside New Zealand; and (c) is targeted primarily at audiences outside New Zealand. (6) Nothing in this section prevents the broadcasting of advertising programmes on any broadcasting service that is primarily directed at persons temporarily resident in holiday accommodation 1

3 In summary, the prohibitions are: Every Sunday from 6am to noon Anzac Day from 6am to noon All day on Good Friday, Easter Sunday and Christmas Day. This prohibition applies to all television channels other than those channels that are brought in from another country with no change to their signal. A foreign news service like BBC News or Al Jazeera would be examples as long as local advertising is not inserted into the programming. During commercial free times, broadcasters play programming which often still contains short ad breaks, but instead fill the time with promotions for their various other programmes. They also run sponsorship credits as permitted by the Act. The total amount of time which is required to be advertising free is approximately 300 hours per annum per television channel. Television companies still choose to run programming in these time periods but are not able to offset the cost of the programming by selling advertisements into it. 2. The Broadcasters Concerns Broadcasters feel that Section 81 is out of date, inconsistent and unfairly constrains broadcasters commercial opportunities without creating any legitimate gain for the public. The Section sets up a regime that: creates an unfairness in advertising opportunity between media; imposes restrictions on only one section of the media while not meaningfully reducing overall exposure by the public to advertising during the prohibited advertising times; potentially negatively affects programme quality during the prohibited times; reduces advertising revenue opportunities for broadcasters but not for other media. 3. Unfairness Between Media During the period when Television is prohibited from advertising, most other media are permitted to continue their normal advertising patterns: Radio is prohibited from advertising on the three full day prohibitions (Good Friday, Easter Sunday and Christmas Day), but is allowed to advertise on all Sunday mornings and Anzac Day morning; Daily newspapers generally do not publish on Christmas Day or Good Friday, but that is a business decision they make for their own reasons; they are not restricted from publishing or presenting advertising on these days; 2

4 Other print media, such as community newspapers and magazines, continue to publish as normal and their advertising is in full view on newsstands during the prohibited periods; Cinema advertising continues as normal; There are no restrictions for Online advertising, and it continues as normal; While regular mail delivery does not normally occur on these days, private distribution of flyers and other unaddressed mail is not restricted; Outdoor advertising such as billboards, busbacks, bus shelters, mall posters and other forms of ambient advertising continues to be seen by the public on all days and at all times. New Zealand is unique in the world with this type of restriction. We could find no other country that totally bans advertising on certain days and in certain selected media. 4. Public Exposure It has not been possible to clearly identify the legislative rationale for the advertising restrictions we can speculate that some restrictions were intended to reflect non-trading periods for business and others may have been intended to allow audiences a rest from exposure to advertising on television. Whatever the rationale we suggest that the restrictions cannot be justified in today s media and business environment. Thinking about this Easter, for example, on Easter Sunday the Sunday papers published were full of advertising for the Easter Week sales beginning on Monday. Outdoor billboards and busbacks were not covered and anyone passing by them was exposed to the material. Magazines sold in dairies and other shops allowed to open on Easter were full of their normal advertising. Cinema advertising and Online advertising continued unabated. On a normal Sunday, all media, other than Television, operate in full commercial mode. There is virtually no difference in advertising exposure between Saturday and Sunday mornings, other than on Television. We suggest that Television is already behaving responsibly with respect to advertising as it has well established self imposed restrictions on advertising in relation to the totality of advertising, and with respect to advertising to children and of alcohol. There is no advertising in programmes aimed at pre-school aged children; a reduced level of advertising in programming targeting school-age children, and restrictions on products that can be advertised to children. Alcohol advertising is restricted to post 8:30pm. Overall advertising is limited to an average of 12.5 minutes per hour. Even though other media have no such restrictions, we do not advocate for a change in those self imposed restrictions. We take seriously our social responsibilities to our audience and the responsibility we have to our younger viewers. 3

5 5. Programme Quality A few years ago, an analysis of Sunday morning programming was done by the Foundation for Advertising Research. A comparison was made between several countries where advertising is permitted and New Zealand. In his conclusion, the author states: The overall impression gained when watching Sunday morning programmes in New Zealand is that they are broadcast at the least possible cost. The choice is very limited. New Zealand is alone in the world in having a ban on advertising on Sunday mornings. Clearly the viewers have suffered the consequences of that policy, which were undoubtedly unforeseen at the time. We recommend that the policy be revisited. If advertising was allowed on Sunday morning it would allow normal market forces to operate, as they do overseas, with a consequential improvement in the quality, breadth and diversity of programmes. There has been some concern expressed in the past that if advertising were to be allowed on Sunday mornings it would spell the end for some of the NZ On Air subsidised niche programming that now appears on the schedules during that time. There is no reason to believe that would be the case. Programmers will continue to compete for ratings just like they do now, but there will be the opportunity to monetise the time period and support the programming, creating new advertising opportunities for those advertisers interested in reaching the audience watching at that time. During most programming run in advertising prohibited times now, promotional material is run for upcoming programmes, so the addition of advertising will not be a big step for the consumer. Anecdotally, we believe most viewers aren t even aware of the restrictions. 6. Opportunity Cost of this Lost Advertising Time Television competes with all other media for its share of the overall advertising market. FTA Television relies on advertising revenue to maintain the viability of its business. Share of the advertising market is important. In the past five years, there has been no growth in Television revenues. In 2007, Television ad revenue was $654 million. By 2011, that had shrunk to $618 million. If the Television industry is to remain healthy it must be allowed to capitalise on all revenue opportunities. The statutory effect of the restrictions means that FTA Television is effectively required to provide over 300 hours annually of ad free airtime per channel. This creates an unfair constraint on the ability of FTA Television to fully exploit all advertising opportunities. With Television advertising revenue at $618 million, the opportunity to provide three more full days of advertising could be significant. It is worth noting that one of the busiest retail weeks of the year is the last week of the year, from 26 to 31 December. The opportunity to advertise on Christmas Day would be of interest to most retailers, who must now use other media to reach their clients on that day (primarily to advertise Boxing Day sales). 4

6 Easter is also a very busy retail period, and with Television advertising not available for two days in a single week advertisers must alter their marketing strategy and employ other media to meet their communication targets. The average day now sees approximately $1.7 million in advertising placed on Television. With the three days in question falling into peak demand seasons, it is not unreasonable to assess that the opportunity cost to the FTA broadcasters of the three days together could be $5.5 to $6.5 million. The addition of Sunday mornings would also add revenue but, due to the significantly smaller audiences, the revenue gain will be much smaller. The opportunity cost is estimated to be between $400k and $600k for Sunday mornings. Together the opportunity cost for the Television industry is between $5.9 and $7.3 million, assuming inventory was able to be fully sold. Take-up will of course be dependent on advertiser demand. 7. The Religious Objection No doubt there will be those who claim that Television should remain ad free for these periods for religious reasons. There will be pressure to say that Sunday is a day of rest and that surely Easter and Christmas should be ad free days. While not disrespectful of religious beliefs, we point to the fact that these days are not ad free in any other Christian country nor in fact in any other country at all. New Zealand is essentially a secular society; we are a modern thriving multicultural country without any history of religious beliefs driving such restrictions. We do not consider that religious objections are valid as a rationale for maintaining the restrictions. 8. The Proposal We propose that in any review of the Broadcasting Act Section 81 be eliminated entirely. Rick Friesen Chief Executive - ThinkTV 5