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Review of television advertising and teleshopping regulation

Summary

Introduction

1.1 This document:

explains the present rules on when advertising breaks can be taken, and when advertising should be banned from particular types of programme, and asks for your views on our suggestions for change. We will consider all the views expressed, and make decisions on whether the rules should be changed, and if so how, later this year;
explains the present rules on how much advertising and teleshopping there can be on different kinds of channel, what would be the possible effects if we changed the rules in different ways, and asks for your views on whether the rules should be changed. We will consider all the views expressed, and make suggestions later this year if we think that the rule should be changed. We shall ask for views on the proposed changes from anyone who is interested then; and
explains the matters we believe Ofcom should consider when deciding on any changes to the rules, and how these matters should be balanced.

1.2 We are asking interested people to tell us by 28 May 2008 what they think about these issues.

1.3 This summary explains:

why Ofcom thinks that advertising is important to TV viewers;
what the rules on TV advertising are now;
why we are thinking about changing the rules; and
what the new rules might say.

1.4 Our consultation principles (Annex 1) say that summaries intended for the general public should be no longer than two pages. However, given the complexity of the issues we are consulting on, we decided that it would be better to provide more information than could be provided within two pages.

The importance of advertising to TV viewers

1.5 Television viewers in the UK now have more choice than ever before, whether they watch free-to-air television channels such as ITV1, Channel 4 and Virgin1, or pay TV channels such as Sky One, Nickelodeon and UKTV Gold. When digital switchover is complete in 2012, most households will be able to receive at least 20-40 channels, with many more available from pay TV providers.

1.6 The main reason why viewers have this choice is that television channels can earn money by showing advertising. Advertisers pay broadcasters to show adverts on their television channels. Most channels get some or all of their income from advertising. The exceptions are the BBC channels, which are funded through the licence fee, and some pay TV channels (e.g. Disney’s channels), which are wholly funded by subscriptions.

1.7 Advertising is also important to the quality of television programmes. Those channels that earn most advertising revenue can afford to invest in higher quality programmes, with more of them made in the UK, and fewer repeats. By contrast, channels that don’t earn much advertising revenue must rely more heavily on imported programmes, or cheaply-made local programmes, and repeat their programmes more often.

1.8 But viewers have made clear that advertising is important to them in other ways. We sometimes get complaints that there is too much advertising on TV, or that programmes are interrupted by advertising too often, or both. Most of this concerns advertising on the commercial channels that have most viewers – ITV1, Channel 4 and Five. In particular, viewers notice changes in advertising patterns. When advertising patterns change, some viewers have complained that there is too much advertising on television (even if the amount has stayed the same), or that it interrupts programmes too often (even if there is no change to the number of advertising breaks). Usually these complaints die down, as people adjust to the new patterns. But regulators (and broadcasters) are well aware that advertising can be irritating to viewers.

1.9 Regulators take viewers’ interests seriously – Ofcom’s main job is to further the interests of consumers and citizens. For many years, there have been limits on both the amount of advertising, and how often there can advertising breaks during programmes. Some of the rules have been decided by the European Union, and others by Ofcom and its predecessors.

1.10 In making these rules, regulators have to balance the interests of viewers. On the one hand, viewers want the choice and quality of programmes paid for by advertising. On the other hand, viewers may be irritated if they think there is too much advertising, or that programmes are interrupted too often. Regulators also have to think about whether particular rules might be unfair or too expensive for broadcasters and advertisers.

What the rules are now

1.11 The current European rules are set out in a law called the Television without Frontiers Directive, known for short as the TWF Directive. This limits the daily amount of advertising on television channels to an average of 9 minutes an hour (plus up to 3 minutes of teleshopping spots ), but no more than 12 minutes in any one hour. This means that a channel broadcasting for 24 hours a day could show up to 216 minutes of advertising spots (9 minutes x 24 hours), and up to 72 minutes of teleshopping spots, a combined total of 288 minutes.

1.12 In addition, there must be a break of 20 minutes between advertising within a programme. The effect of this rule is to allow two breaks within a half hour programme. This does not affect the advertising shown between programmes, however short the programme may be. Except in special cases, advertising must be taken during a ‘natural break’ in programming (e.g. at the end of a comedy sketch, rather than half way through).

1.13 Ofcom applies these rules to most TV channels licensed in the UK. But, like its predecessor, the Independent Television Commission (ITC), Ofcom applies stricter rules to the public service channels (ITV1, GMTV1, Channel 4, Five, S4C). The daily amount of advertising on these channels is limited to an hourly average of 7 minutes (with no additional amount allowed for teleshopping spots), subject to a cap of 12 minutes in any one hour. During peak viewing times, there are further restrictions on the amount of advertising. From 7am to 9am, and from 6pm to 11pm, broadcasters may only show an average of 8 minutes an hour of advertising. PSB channels also have stricter rules on advertising breaks, which means that they can only have one break in a half-hour programme.

1.14 There are some more detailed rules (explained in detail in section 6 ) that:

limit advertising in particular kinds of programme. There are restrictions on advertising in programmes with a religious theme, news and current affairs programmes, children’s programmes and others; and
explain what is meant by ‘natural breaks’ and ‘special cases’ in different kinds of programming.

1.15 All the rules are set out in an Ofcom code called the ‘Rules on the Amount and Distribution of Advertising’, or RADA for short. The ‘Amount’ refers to the number of minutes of advertising allowed in any one day or in any one hour on a television channel. The ‘Distribution’ refers to the rules on when advertising breaks can be taken, and what restrictions apply to advertising in particular kinds of programmes. Annex 3 sets out all the current rules in full.

Why we are considering changing the rules

1.16 When Ofcom took over regulating advertising on television from the ITC, we did not make many changes to RADA. One reason for this was that we knew there could be changes to the European Union rules. We thought that it would make sense to find out what changes might be made before we looked again at RADA.

1.17 The new European rules were published in December 2007. The rules set out in the TWF Directive have been changed, and the Directive is now called the Audiovisual Media Services Directive, or the AVMS Directive for short. The relevant parts of both Directives are shown in Annex 2.

1.18 The changes made to the European rules are explained in detail in section 6. In brief, they would allow Ofcom:

to let any TV channel show up to 12 minutes an hour of advertising (including up to 3 minutes teleshopping) across the day (288 minutes a day for a 24 hour channel, or 4 hours 48 minutes); and
to get rid of or relax many of the detailed rules banning or limiting advertising in certain types of programme.

1.19 Ofcom can make stricter rules if it believes that these would be better for viewers. But we could not make less strict rules. For example, we could carry on limiting TV channels to a daily average of 9 minutes of advertising an hour, but we could not allow them to increase their advertising to a daily average of 15 minutes an hour. The Communications Act also says that whatever rules we do make, we must strike the best balance we can between the different considerations set out in the law. We explain more about what these different considerations are, and how we plan to balance them under ‘What happens next’ below.

1.20 Since Ofcom was formed in 2003, there have been other changes that make it sensible to look at RADA again:

over the past few years, the cost of advertising time on television has fallen. That means that some TV channels have less money than they used to, which could affect the range, quality and repeat rate of the programmes they can afford to show. Advertisers and broadcasters have told us that they do not expect the total amount of money earned from TV advertising to grow much in the next few years, as other ways of advertising (such as using websites) are becoming more popular; and
PSB channels now face much more competition, as most people can now receive many other channels, via Freeview or pay TV. By 2012, virtually all households will be able to receive at least 20-40 channels. As a result, PSB channels have lost viewers to other channels. For some PSB channels, this means that they have less advertising revenue. We think that this is particularly important for viewers; as their name suggests, the law expects PSB channels to do more than other channels to provide viewers with a wide range of original high quality programming, including national and regional news.

1.21 It is also clear that the rules that Ofcom inherited from the ITC:

have not stopped most PSB channels from showing almost as much advertising in the most popular viewing hours (7pm to 10pm) as other channels – that is, nearly 12 minutes an hour. They do this by concentrating their peak-time allowance (40 minutes between 6pm and 11pm) in the hours when most people are watching; and
have not stopped the more popular non-PSB channels that are able to sell all their advertising allowance from showing 12 minutes of advertising an hour at most times of the day. They do this by not showing adverts very late at night or in the early morning, when very few people are watching.

1.22 Despite this, given the number of people watching TV in the UK, and the time they spend watching TV, there have been relatively few complaints about the amount of peak-time advertising on PSB channels, or about advertising on non-PSB channels. Over the last three years (from 2005 to 2007), most of the complaints from viewers about the amount of TV advertising, or the frequency of TV advertising breaks have been about single programmes that have breached the rules on advertising, or which have adopted new break patterns.This may suggest that most viewers are prepared to tolerate 12 minutes an hour of advertising. However, Ofcom’s research also seems to suggest that most people would not like to see any more advertising. Some viewers may have switched their viewing to BBC channels, which carry no paid-for advertising.

1.23 We also think that many of the more detailed rules are no longer necessary, for the following main reasons:

many of the restrictions on advertising in particular kinds of programme (e.g. documentaries with a religious theme) reflect the social attitudes prevailing more than 60 years ago. Because these rules make it less profitable to show these programmes, particularly during peak viewing hours, they may even discourage broadcasters from making or acquiring such programmes; and
the prescriptive rules on what is meant by ‘natural breaks’ and ‘special cases’ in different kinds of programming may have been appropriate in the early days of broadcasting, when experience was lacking, and when there were very few channels. But we see no reason why broadcasters should not be permitted to use their own judgement to decide on such issues today.

The changes we are suggesting

1.24 We explain below (‘Rules on how much advertising there can be’) how we will deal with the rules on how much advertising and teleshopping should be allowed on PSB and non-PSB channels.

1.25 In this document, we are only making firm suggestions about changes to the rules on:

when advertising breaks can be taken; and
when advertising should be banned from particular types of programmes.

1.26 We explain in more detail in section 6 why we think changes should be made, and what they are. The new rules we propose are set out in Annex 5. They deal with four main areas.

1.27 First, we suggest that the rule requiring a 20 minute interval between breaks should be scrapped. The current rule means that programmes must be made to fit an artificial break pattern. It is unlikely that this break pattern will always be the best for each programme, especially for programmes acquired from overseas, where different break patterns are normal. We think that allowing flexibility on the timing of breaks is likely to be better for viewers.

1.28 Second, we suggest there should be some limits on the frequency of advertising breaks. If there were no limits, it seems likely that the desire of advertisers to have shorter more frequent breaks would lead to an increase in the number of breaks over time, to the irritation of viewers. For the time being, we are proposing to have rules that would limit broadcasters to the same number of breaks that they would be allowed at present.

1.29 However, we have also set out a number of other possible approaches:

keeping things as they are – that is, for example, allowing up to two breaks per half-hour programme on non-PSB channels, and one break per half-hour programme on PSB channels (Option 1);
increasing the number of breaks on PSB channels to the same as those allowed on non-PSB channels, that is two breaks in a half-hour programme, three in a 60-minute programme, and five in a 90-minute programme (Option 2);
limiting the number of breaks on non-PSB channels to the same as those allowed on PSB channels, that is one break in a half-hour programme, three in a 60-minute programme, and four in a 90-minute programme (Option 3);
having rules that would limit the number of breaks on PSB channels, but allow non-PSB channels to decide for themselves how often they should have breaks (Option 4); and
letting all channels decide for themselves how often to have advertising breaks (Option 5).

1.30 We would like to know whether viewers and broadcasters think we have identified the right options. We would also like to know what issues stakeholders believe we should consider in preparing proposals for consultation. Having thought about what stakeholders say, and considered other relevant matters, we may then propose changes on which we will invite views. However, for the time being, we propose to keep the existing limits on the number of breaks in programmes shown on PSB channels, and put in place limits on non-PSB channels that maintain the same frequency as under the 20-minute rule.

1.31 Third, we think that the rules on natural breaks should be simplified, with the aim of allowing broadcasters to exercise their best judgement about how to meet the European rules. These rules say that advertising breaks should not harm the integrity of programmes.

1.32 Fourth, we think that the restrictions on advertising in particular types of programming should be removed or relaxed so far as the new European rules allow. For example, this would mean that films could be interrupted by advertising once every 30 minutes, rather than once every 45 minutes. It would also mean that the restrictions on advertising breaks during current affairs and religious programmes would be removed, but that there would continue to be a ban on interrupting programmes of religious services with advertising.

Rules on how much advertising there can be

1.33 We are also asking people what their views would be on:

possible changes to how much advertising and teleshopping is allowed on television; and
whether we should carry on applying stricter rules on the amount of advertising on PSB channels, and if so, what those rules should be.

1.34 However, we are not making any firm proposals now. We will consider what people say before making suggestions later in the year. In particular, we would like to hear more about what members of the public, broadcasters and advertisers think about these issues. To help those who are interested to think about different ideas, we have set out several possible approaches in section 7. In that section, we explain what we believe would be the effects of each approach on viewers and broadcasters in particular.

1.35 There is no one approach that would benefit everyone. Broadly speaking:

keeping the rules as they are is likely to mean that the way advertising income is divided amongst broadcasters would remain much the same as now;
cutting the amount of advertising might also cut the total amount of advertising revenue, though not by much. But the effects on broadcasters would be different. PSB channels (particularly ITV1) would get a little more money from advertising, but other channels would lose advertising money;
letting PSB channels show more advertising (especially in peak time) would benefit them, but cost other channels about the same amount of money. The more the rules were relaxed, the more advertising revenue PSB channels would gain, and the more other channels would lose. Allowing PSB channels to benefit from the same rules that apply to other channels would cost these other channels tens of millions of pounds each year.

1.36 We explain our reasoning in section 7 and in the Impact Assessment at Annex 4.

What happens next

1.37 We shall consider what people say about the ideas in this paper. We shall also take account of the matters that the law says we must consider. These are set out in more detail in section 3 (Legal Considerations). In brief, the law says that:

Ofcom’s main aim must be to do what is best for consumers (in this case, TV viewers) and citizens (all members of the public in the UK). In this connection, we should listen to what consumers say;
in particular, we must make sure that there is a wide range of television channels provided by a range of different companies, and that these channels should, overall, provide a good choice of different types of high quality programming appealing to different people;
we should do our best to make sure that the PSB channels can meet the tasks set out for them in the law, including making and showing good quality programmes that deal with the different interests of viewers; and
in doing the things set out in (a) (b) and (c) above, we should make sure that we understand how the changes would affect viewers, broadcasters, advertisers and other interested parties. So far as possible, we should avoid changes that would be very costly or disruptive for any of them. We should also try to scrap or simplify the rules on broadcasters, so long as this would not stop us doing the things described in (a), (b) and (c).

1.38 We must strike the best balance we can between the different tasks set out in the law. We propose to balance these tasks by considering how much each possible change would:

further the interests of citizens and consumers, in particular, in relation to:
- the range, quality and appeal of television services available throughout the UK and in different parts of the UK, and, in particular, public service channels;
- the importance of securing a sufficient degree of plurality of providers of television services; and
- such other matters as appear, having regard to the opinions expressed by consumers, important to them.
in furthering the interests of citizens and consumers, so far as possible:
- be evidence-based, transparent, proportionate, consistent, and limited to the measures needed to achieve the first objective;
- avoid the imposition or maintenance of regulation that is unnecessary; and
- take account of the desirability of promoting competition, and the nature and interests of different consumers in relevant markets.

1.39 In other words, we shall consider whether each idea could be shown to benefit people in the UK, in ways that would avoid unnecessary or harmful regulation, and which would comply with the law. We would welcome your views on whether these are the right aims for Ofcom in considering the rules on TV advertising. However, we would not be able to change the aims just because a lot of people disagreed with them. We would need to be sure that any changes to the aims would fit the duties given to Ofcom by law.

1.40 When we have finished considering what people have told us, we shall:

decide what to do about the rules on the distribution of advertising. We hope to publish our decision in the summer. We expect that the rules would come into force straight away; and
make suggestions about the rules on the amount of advertising. We expect to do this in the Autumn of 2008. We expect that any changes to the rules would happen from the beginning of 2010.

Review of television advertising and teleshopping regulation

Summary

Introduction

The importance of advertising to TV viewers

What the rules are now

Why we are considering changing the rules

The changes we are suggesting

Rules on how much advertising there can be

What happens next

Other parts of this document

Further information

Help

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