Sky may lose $181m a year as Ofcom revises ad limits on PSB channels

LONDON: Sky’s pay-TV service could be braced for annual losses of about $181 million in advertising revenue owing to proposals to allow Britain’s major free-to-air broadcasters to run as much advertising as rivals are permitted.

Ofcom, the UK’s communications regulator, announced that it is revising rules that prevent public service broadcasters ITV, Channel 4, and Channel 5 from profiting as much as non-PSB channels from advertising, The Guardian reported.

The rules, introduced in 1991, supported UK pay-TV and cable companies, including Sky, through allowing their channels to air more minutes of ads per day and enjoy unlimited ad-break durations.

Ofcom is considering allowing the PSBs’ main channels – ITV1, Channel 4 and Channel 5 – to increase the number of evening ads (airing between 6 p.m. and 11 p.m.) from 40 to 60 minutes, and the total for the day from 168 to 216 minutes, in addition to scrapping the regulation restricting individual ad breaks to a maximum length of 3 minutes, 50 seconds.

This, according to Ofcom, would level the playing field for all broadcasters.

The Incorporated Society of British Advertisers, which represents most of the UK’s advertisers, said if the rules are reviewed, Sky could find up to £150 million ($181 million) of advertising per year is lost to ITV — given its current market share.

“We would anticipate that the proposed changes will simply move ad-spend away from smaller broadcasters towards the largest commercial public service broadcasters,” said Paramount, the US TV giant that owns Channel 5, MTV, and Comedy Central, in a proposal to Ofcom.

Channel 5 said that it was against any regulation change. However, ITV and Channel 4 argued that with the significant rise in TV ad costs, which have increased by 30 percent in the last year alone, boosting the supply by hundreds of hours annually would make commercial airtime cheaper compared to shifting budgets to online media companies.

“This should help reduce the inflationary pressures and so make the commercial TV ad market overall more competitive with the likes of Google, Amazon and Facebook,” ITV said.

Channel 4 added that with more than 480 non-PSB channels thriving in the UK, the scheme designed to support the early survival of the then-fledglings is no longer needed.

Ofcom, which has reviewed the rules in 2011 and 2015 but each time decided against any amendments, said that this time it was taking into account “sustaining our traditional broadcasters, which includes helping them compete with American streaming platforms.”

Coba, the association for commercial broadcasters and on-demand services, whose members include Sky, Discovery, and Walt Disney, argued that adding about 850 hours of new advertising space a year will not only be bad for viewers, but will significantly reduce ad prices, and that the UK TV market could ultimately lose as much as £300 million.

However, ITV said: “Audiences are unlikely to be negatively impacted by a small increase in peak-time advertising on PSB channels.

“The wider commercial market is unlikely to be significantly affected, and commercial television as a whole may benefit by becoming more competitive versus the global streamers.”

Ofcom is expected to publish its decision on the potential ad rule changes early next year.

ITV’s advertising sales operation makes about £2 billion annually, while Channel 4, which also sells ads on third-party channels including BT Sport and Dave for the Gold owner UKTV, makes about £1.2 billion.

In addition to Sky’s multibillion pound pay-TV, broadband and mobile business, the company’s ad sales department makes about £1.4 billion in revenues annually.