Advertising Pays 3: The value of advertising to the UK's culture, media and sport.

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Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
Advertising
Pays 3:
The value of
advertising
to the UK’s
culture, media
and sport.

   In association with:
                          NE
                            WS
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
2   Sport
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
Advertising Pays 3:
The value of advertising
to the UK’s culture, media
and sport
Report by Deloitte LLP commissioned by the Advertising Association

Published by the Advertising Association, 7th Floor North, Artillery House, 11-19 Artillery Row, London SW1P 1RT

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                    In association with:

                                                                                                                              Advertising Pays 3   3
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
Contents
Foreword by Andy Duncan, Chief Executive, Camelot UK             5
and President of the Advertising Association
The value of advertising to the UK’s culture, media and sport    6
Executive Summary                                                8
        1 Scope of this Report                                  10
        2 Advertising and Sponsorship in the UK                 14
        3 Free-to-air TV and Radio                              16
        4 Online Services                                       28
        5 Newspapers and Magazines                              38
        6 Arts, Culture, Music and Cinema                       48
        7 Sport                                                 56
        8 Bibliography                                          64
Appendices		                                                    69
        Appendix A The consumer survey methodology              70
        Appendix B Estimating individual value                  72
Acknowledgements and Contacts                                   74

4   Contents
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
Foreword

                       Andy Duncan, Chief Executive, Camelot UK
                       and President of the Advertising Association
People are choosing to watch,        In other words, there is more             People may often overlook these
read, or listen to more media        advertising in people’s lives simply      very real personal and social benefits.
than ever; they are going to         because advertising is paying for the     But how much do the same people
more events, artistic or sporting,   things they most like doing. Take it      value those services that advertising
than ever; they are absorbed in      away, and in one fell swoop you would     helps to fund? Can we put a figure
online resources, from search to     also take away, or make unaffordable,     on this value? That is what this
social, every single day. Without    an enormous slice of all the TV,          report explores.
advertising, they just wouldn’t be   magazines, newspapers, radio, social
able to do all this, and certainly   networks, movies, search engines and      What we learned was that taking
not do so much of it for free.       video that people so enjoy, as well as    away advertising would most likely
                                     reduce the quality of the sports and      mean the introduction of subscription
                                     arts they love.                           fees beyond the means of millions,
                                                                               denying them so much of what they
                                     The advertising-funded media not only     now enjoy. Even more strikingly,
                                     give individuals what they want; they     many of the services we now take for
                                     also enhance the country as a whole.      granted would simply cease to exist in
                                     All the various news media keep           their current form without the revenue
                                     people informed and strengthen our        that advertising brings.
                                     democracy. The many media channels
                                     open up precious opportunities for new    Such revealing answers can help our
                                     talent. They give minorities a voice      industry clearly demonstrate its place
                                     and the opportunity to influence public   in the lives of real people, over and
                                     debate. The resulting rich culture        above its vital contribution to the UK
                                     breeds worldwide admiration, and          economy. I hope you agree.
                                     boosts tourism to the UK.
                                                                               Andy Duncan

                                                                                                     Advertising Pays 3   5
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
The value of advertising to the
                                                  Total £17.5bn on adspend made up of:

                                                                         £5.5bn Online Services/Internet
             Source: AA/Warc Expenditure Report
    £14.337bn

                                                                         £4.6bn Television
      Subtotal

                                                                         £2.74bn Newspapers

                                                                         £1.0bn Magazines
                                                                         £537m Radio
             Source: AA/Warc Expenditure Report
    £3.075bn

                                                                         £1.9bn Direct Mail

                                                                         £990m Out-of-home
      Subtotal

                                                                         £185m Cinema
                                                  Sponsorship:

                                                                         £866m Sponsorship (Arts/Sport)
                                                                         Source: Deloitte analysis

6     Infographic
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
UK’s culture, media and sport
                                                                                                                                         Advertising finances media
                                              S p o n s o r s hi p                                                                       content, which people value by
                                                                                                                                         almost £10 billion a year1

                                                                                                                                                   Annual brand
                                                                                                                                                   sponsorship provides a
                                                                                                                                                   further £866 million2

                                                                                           O th
                                                                                                  er
                                                                                                       me
                                                                                                            di a
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                                                                                                                                  ls

                                                                                                   M
                                                                                                       ed
                                                                                                            ia
                                                                                                             ch
                                                                                                                 an
                                                                                                                   ne
                                                                                                                    ls
                                                                                                                         in
                                                                                                                            our

                                                      Almost
                                                                                                                                  s ur

                                          £10bn
                                                                                                                                   vey

                                          value    to people in
                                                      the UK

  1
       igures are based on Deloitte analysis of Deloitte Survey/Ipsos (August 2014) survey results.
      F
  2
      Figures are based on Deloitte analysis of Key Note (2013), Sports Sponsorship: Market Update 2013; Arts and Business (2012); Deloitte Survey/IPSOS (August 2014)

                                                                                                                                                                    Advertising Pays 3   7
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
Executive Summary
Advertising’s primary role in                                     Its £100 billion contribution to the UK                   engaging an audience, but it is hugely
society is economic. It helps to                                  economy, as analysed in Deloitte’s                        significant nonetheless.
fuel growth, competition and                                      first report for the Advertising
innovation, while enabling firms                                  Association, Advertising Pays (2013),3                    This report examines the impact of
to bring people better, more                                      comprises the many ways in which                          advertising on the media, and on the
affordable products and services.                                 UK citizens and companies benefit                         activities that people enjoy in their
                                                                  economically from advertising activity.                   everyday lives. We estimate the
                                                                                                                            “individual value” that this amounts
                                                                  But there is another way in                               to. This is the value, translated into
                                                                  which advertising, in its broadest                        monetary terms, of the perceived
                                                                  sense, enhances the quality of                            benefits people get from using
                                                                  people’s lives. It funds the media,                       services that are free or subsidised
                                                                  culture and sport people love                             by advertising. We focus on
                                                                  and enjoy. Without the funding                            television and radio, online services,
                                                                  that advertising provides, much                           newspapers and magazines, cinema
                                                                  of what people value could face                           and the arts, and sport. Each of
                                                                  a significant decline in quality;                         these is integral to society, and each
                                                                  much else would require fees and                          also relies heavily on funding from
                                                                  charges beyond what millions                              advertising and sponsorship.
                                                                  would be able to pay. Some things
                                                                  might even become unviable in                             We asked 1,000 people a series of
                                                                  their current form.                                       structured questions to discover how
                                                                                                                            important these services were to
                                                                  The bulk of the £17.5 billion spent                       them, calculate individual value, and
                                                                  on advertising in 2013,4 and the                          understand what might happen in the
                                                                  further £866 million in related brand                     absence of advertising.
                                                                  sponsorship,5 reaches its audiences
                                                                  through the media people consume,                         The survey clearly shows that while
                                                                  the sports they are passionate about,                     people greatly value access to these
                                                                  and the arts they appreciate. This                        services, they are not able (or willing,
                                                                  may be an unintended effect of                            when set against their other
                                                                  advertising’s commercial objective of                     financial constraints) to meet the
                                                                                                                            full costs themselves.

3
     dvertising Association/Deloitte (2013), Advertising Pays: How advertising fuels the UK economy.
    A
4
    Advertising Association/Warc (2014), Expenditure Report. http://expenditurereport.warc.com/FreeContent/Q2_2014.pdf
5
     Based on Deloitte analysis of Key Note (2013), Sports Sponsorship: Market Update 2013 and Arts and Business (2012),
      Private Investment in Culture Survey 2010/11.

8       Executive Summary
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
£17.5 billion spent on
advertising, and £866
million in brand sponsorship,
reaches its audiences
through the media people
consume, the sports they
are passionate about, and
the arts they appreciate.

Our findings reveal that advertising                                  Our estimate of total individual                                    participation in these fields, boosting
and sponsorship are vital to the                                      value suggests that people greatly                                  many people’s quality of life. The
continued quality, range and                                          appreciate these benefits in their                                  wider culture and wellbeing of the UK
availability of these services to the                                 everyday lives. In monetary terms,                                  are richer as a result.
general public. They also play                                        we estimate the total individual
an important social function –                                        value attributed to advertising                                     Advertising and sponsorship are
ensuring valuable services are                                        and sponsorship across television                                   funding an increasingly diverse range
available to all and promoting                                        and radio, online services, and                                     of media, social activities and arts that
plurality in media provision.                                         newspapers and magazines, at                                        people enjoy in their everyday lives.
                                                                      almost £10 billion.6 In comparison,                                 While some services might be able
For example, free-to-air broadcasting                                 the current Department for Culture,                                 to replace advertising/sponsorship
could not exist in its current form                                   Media and Sport (DCMS) budget is                                    finance through subscription charges,
without the financial support of                                      just £1.4 billion.7                                                 the levies would be prohibitive for
advertising. Our research and analysis                                                                                                    many and would lead to widespread
shows that TV broadcasting in the                                     Furthermore, the figure of almost                                   reductions in choice and quality.
UK would lose much of its original                                    £10 billion does not include the                                    Some services might cease to exist in
content, and subscription costs would                                 broader benefits that these media                                   their current form.
be prohibitively expensive for many.                                  provide. For example, with the
The impact on commercial radio                                        development of advertising-funded
would be even more far-reaching: it                                   platforms, such as YouTube, Vevo and
is doubtful whether the industry could                                Facebook, it has never been easier or
continue at anything approaching its                                  cheaper for ordinary people to create
current scale. Our study reached a                                    videos and make them available to
similar conclusion for the other sectors                              millions around the world. This has
we looked at. Advertising reduces the                                 given us all the opportunity to express
cost of access to services, allowing                                  our creativity in a way that, until
for much wider participation and                                      recently, was simply not possible.
choice as a result. News services, for
instance, would be radically reduced                                  Sport, cinema and the arts in the
without it.                                                           UK have also benefited greatly from
                                                                      the funds provided by sponsorships.
                                                                      Such funds have promoted
                                                                                                                          NE
                                                                                                                            WS

6
     his individual value is separate from the £100 billion figure from Advertising Pays 1, which refers to the economic contribution of advertising.
    T
7
    HM Treasury (2013), Spending Round 2013.

                                                                                                         NEW
                                                                                                             S
                                                                                                                                                                 Advertising Pays 3   9
Advertising Pays 3: The value of advertising to the UK's culture, media and sport.
1
The value of advertising                                                                       Scope of
                                                                                               this Report
to the UK’s culture,
media and sport

Scope of this Report
This is the third report in a series                            • In the first Advertising Pays report,8                          an estimated 10,000 jobs10 and over
of Deloitte studies looking at                                     we investigated the broad economic                              50,000 bus shelters in the UK.11
the contribution that advertising                                  impact of advertising, estimating
makes to the UK. The economic                                      that its overall contribution to                              •C
                                                                                                                                   ommercial direct mail has
story of advertising has been                                      the economy is worth more than                                 assisted with the efficiency of the
increasingly well documented in                                    £100 billion in GDP. This impact is                            mail network, helping to reduce
recent years.                                                      produced in a number of ways –                                 stamp prices and improve delivery
                                                                   through the economic activity that                             times for personal letters and
                                                                   advertising generates, the price                               parcels.12 The UK is still one of the
                                                                   competition it strengthens, and the                            cheapest countries in the world in
                                                                   innovation it helps to encourage.                              which to send these items.13

                                                                • In the second report,9 we focused                             In this report, we focus on services
                                                                   on the benefits to smaller                                    that people choose to enjoy in their
                                                                   businesses, investigating how                                 everyday lives. We examine the role of
                                                                   advertising can help unlock                                   advertising in providing these services,
                                                                   their growth potential, stimulate                             and seek to quantify the value of its
                                                                   innovation, and boost exports.                                contribution to people’s lives.

                                                                • Research into the role of outdoor
                                                                   advertising has found that it has
                                                                   enhanced public transport services
                                                                   through providing and maintaining

8
   dvertising Association/Deloitte (2013), Advertising Pays: How Advertising Fuels the UK Economy.
  A
9
  Advertising Association/Deloitte (2014), Advertising Pays 2: How Advertising Can Unlock UK Growth Potential.
10
    Outdoor Media Centre, Creativity with Responsibility: Introducing Outdoor Advertising, http://www.outdoormediacentre.org.uk/resources/OMC%20Brochure%20Final.pdf
11
    Outdoor Media Centre (2012), ‘Legal, Professional, Creative, Responsible.’
12
     In 2013/14 marketing mail generated £1.1 billion for Royal Mail, representing 12% of its total revenue. Royal Mail plc (2014), Annual Report and Financial Statements 2013-14.
13
      Ofcom, UK communications deals cheaper than in other major countries, http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr13/
    international/

10     Scope of this Report
Almost
                                                                                                                      £10bn
                                                                                                                      value

The report illustrates these effects                                For these latter areas, we examine            In this report, we
across the following three sectors:                                 the importance of sponsorship as
                                                                    a source of funding and its wider             focus on services that
                                                                    social and cultural impact. We look
                                                                    at several specific examples, such as
                                                                                                                  people choose to enjoy
TV and radio                                                        outdoor cinema, art exhibitions, and          in their everyday
                                                                    grassroots initiatives.
                                                                                                                  lives. We examine
                                                                    The report uses the same definition
Online services                                                     of advertising as the previous two
                                                                                                                  the role of advertising
                                                                    Advertising Pays reports, namely “any         in providing these
                                                                    paid-for communication intended to
Newspapers and                                                      inform and/or influence one or more           services, and seek to
magazines
                                                                    people”.14 For the purpose of this            quantify the value
                                                                    report, we also define sponsorship
                                                                    as the funding of various activities          of its contribution to
                                                                    by commercial organisations for the
The report also considers the role                                  express purpose of fulfilling their
                                                                                                                  people’s lives.
sponsorship plays in:                                               broader communication objectives,
                                                                    relating to the promotion of the
                                                                    organisation’s overall brand and
                                                                    name.15 Although there is often some
Arts, culture, music,                                               overlap in people’s understanding
cinema and sports.                                                  of these terms, the main difference
                                                                    is that advertising is usually more
                                                                    focused on promoting specific
                                                                    product information.

14
     J. J. D. Bullmore in Bullmore, J. J. D. and Waterson, M. J. (eds) (1983), Advertising Association Handbook
15
     Adapted from KeyNote (2013), Sports Sponsorship: Market Update 2013

                                                                                                                                Advertising Pays 3   11
1.1
The value of advertising                                                                        Surveying
                                                                                                perceptions
to the UK’s culture,                                                                            of value
media and sport

Surveying perceptions
of value
We commissioned a survey of                                     The results of our survey feed             Appendix A, but an illustration of the
1,000 individuals, examining their                              directly into our estimates of             general approach is presented in
attitudes to determine the value                                how people’s lives are enriched.           Figure 2. The results of this analysis
that people place on the services                               Economists typically calculate the         are then used to calculate individual
considered in this report.16 For                                value that consumers gain from the         value. A full explanation of how this
example, we asked how often                                     consumption of a good or service           is done is contained in Appendix B.
people use the services, what they                              by first estimating how much they
use them for, and the extent to                                 would be willing to pay for it and         The survey asked all 1,000 respondents
which the presence of advertising                               then subtracting from that the cost of     to imagine they had to pay for access
and sponsorship influences their                                purchasing it. For example, someone        to services such as commercial
enjoyment of them. The results                                  who would pay at most £5 for a             free-to-air TV, commercial radio and
of these questions are used                                     magazine that retails for £2 will gain     email. For each service, respondents
throughout the report to provide                                a value of £3 when she buys it. In the     were asked whether they would be
context to the main findings,                                   economics literature, this is known as     willing to pay a given monthly
and offer insights into the                                     consumer surplus. A more detailed          subscription or whether they would
broader social impact of                                        explanation of this concept is given       forgo access to the service instead.
advertising and sponsorship.                                    in Appendix B. In this report, we use      A number of different prices were set
                                                                consumer surplus as our key measure        for each service and respondents
                                                                of value, but for the sake of clarity we   were presented with these prices in a
                                                                refer to it in terms of the value to the   random order.
                                                                individual (in this report expressed
                                                                                                           Based on their answers, it is possible
                                                                simply as individual value).
                                                                                                           to calculate how much people value
                                                                To estimate the individual value           these services. For example, if a
                                                                that advertising delivers, our             respondent says she would pay £1 a
                                                                survey examined how much each              month for commercial radio but would
                                                                consumer would be willing to pay           not pay £2, then we can conclude that
                                                                for free services (TV, radio, email,       her valuation of commercial radio is
                                                                internet search engines and social         somewhere between £1 and £2.
                                                                media) and gauged the changes in
                                                                                                           The fact that a consumer values the
                                                                their demand for newspapers and
                                                                                                           service by more than the price she has
                                                                magazines in response to changes
                                                                                                           to pay for it represents a quantifiable
                                                                in price. The methodology adopted in
                                                                                                           benefit to the consumer. Adding up
                                                                our survey is based on best practice
                                                                                                           all the gaps between value and price
                                                                drawn from a large body of academic
                                                                                                           for each individual across the whole
                                                                literature. A more detailed discussion
                                                                                                           population allows us to determine a
                                                                of this methodology is contained in
                                                                                                           total benefit from the service.
16
     Deloitte Survey/Ipsos (August 2014)

12        Surveying individuals to understand what they value
Figure 1: Some highlights from the survey

            60%                                        79%                                        86%                                       54%
            Say their                                  Use online                                 Use email                                 Use social
            favourite                                  search tools                               every day                                 media
            shows are on                               every day                                                                            every day
            commercial
            free-to-air TV

Figure 2: Calculating individual value

              Respondent A                                      Respondent B                                      Respondent C
   £4      Q1. Would you be willing to pay £4?              Q3. Would you be willing to pay £4?                Q1. Would you be willing to pay £4?
                                                 NO                                               NO                                                 NO

   £3      Q2. Would you be willing to pay £3?              Q2. Would you be willing to pay £3?                Q2. Would you be willing to pay £3?
                                                 NO                                               NO                                                 YES

   £2      Q3. Would you be willing to pay £2?
                                                 NO
                                                            Q1. Would you be willing to pay £2?
                                                                                                  YES
                                                                                                               Q3. Would you be willing to pay £2?
                                                                                                                                                     YES

   £1      Q4. Would you be willing to pay £1?
                                                 YES
                                                            Q4. Would you be willing to pay £1?
                                                                                                  YES
                                                                                                               Q4. Would you be willing to pay £1?
                                                                                                                                                     YES

   £0

                           Individual Value                                                            Total Individual Value
  £7                                                                            £7
  £6                                                                            £6
  £5                                                                            £5
  £4                                                                            £4                                                               Respondent C

  £3                                                                            £3                                                               Respondent B

  £2                                                                            £2                                                               Respondent A

  £1                                                                            £1
  £0                                                                            £0
            Respondent A             Respondent B      Respondent C                                         Total Individual Value

Source: Deloitte analysis

                                                                                                                                           Advertising Pays 3   13
2
The value of advertising                                                                         Advertising and
                                                                                                 Sponsorship in
to the UK’s culture,                                                                             the UK
media and sport

Advertising and
Sponsorship in the UK
In 2013, advertising spend                                        In addition to advertising spend,
in the UK amounted to £17.5                                       annual sponsorship spend is around
billion.17 The largest recipients                                 £866 million.18 The large majority
were the online, broadcasting                                     of this – around 80% – is sports
(TV and radio), and publishing                                    sponsorship, with a further £80
(newspapers and magazines)                                        million spent in support of the arts.
channels, accounting for 82%                                      Sponsorship also benefits individuals
of advertising spend in the UK                                    by providing funds to help cover the
overall. A mutually beneficial                                    costs of these activities.
relationship between advertisers
and individuals operates in these
sectors. Individuals benefit from
the services that advertising
funds, while advertisers benefit
from being able to reach an
audience. In many cases,
such as in broadcasting and
online services, the revenues
generated by advertising spend
allow people to receive valuable
services for free.

17
     Advertising Association/Warc (2014), Expenditure Report
18
     Based on Deloitte analysis of Key Note (2013), Sports Sponsorship: Market Update 2013 and Arts and Business (2012), Private Investment in Culture Survey 2010/11.

14        Advertising and sponsorship in the UK
Individuals benefit from the
services that advertising funds,
while advertisers benefit from
being able to reach an audience.
In many cases, the revenues
generated by advertising spend
allow people to receive valuable
services for free.

Figure 3: Breakdown of advertising spend and sponsorship

      £17.5 billion in advertising spend
                                                                                              £866 million in brand
                                                                                                  sponsorship
                   Direct Mail,          Main FTA TV channels,
                   £1.9 billion          £2.6 billion
                                                                                                          Other,
                                                                                                          £94 million

                                                                            +
                                                                                            Arts,
                                                                                            £81 million
                                                    Other TV channels,
                                                    £2.0 billion

  Online
  (Internet),                                        Radio,
  £5.5 billion                                       £537 million
                                                   Out of home,
                                                   £990 million                                                              Sports,
                                                                                                                             £691 million

                 Cinema,                  Newspapers,
                 £185 million             £2.7 billion
                         Magazines,
                         £1.0 billion

Source: Deloitte analysis on Advertising Association/Warc (2014), Arts & Business (2012),
Key Note (2013)

                                                                                                                        Advertising Pays 3   15
The value of advertising
to the UK’s culture,
media and sport

Free-to-air
TV and Radio
Television and radio are heavily       TV would not be able to continue
reliant on advertising revenues as     in its current form. A subscription
a source of income, and continue       fee, beyond the means of large
to be a valuable source of             sections of society, would need
entertainment and information for      to be introduced. However, even
people in the UK. Our estimates        this would not compensate for the
suggest that by enabling free-to-air   absence of advertising, and the
TV and radio content, advertising      resulting loss in revenue would
benefits individuals by a total of     inevitably bring down the quality
£2.8 billion each year. Without        of TV programming. Commercial
advertising, commercial free-to-air    radio would be hit even harder.
3
3.1
The value of advertising                                                                                           Television
to the UK’s culture,
media and sport

Television
Most television that is watched                                   Figure 4: Share of viewing audience in 201322
is free-to-air.19 However, while
the BBC channels are funded by
the proceeds of the licence fee
(approximately £12 per month                                                                                                                      BBC
per household, totalling £3.7
billion for the BBC’s 2013/14                                                              40%                       32%
                                                                                                                                                  BSkyB
financial year),20 the commercial
free-to-air channels, such as ITV,                                                                                                                Other multichannel
Channel 4 and Channel 5, receive
no such financial support.                                                                                               8%                       Main free-to-air
These channels are almost                                                                               20%                                       (ITV, Channel 4, Channel 5)

totally reliant on revenues from
advertising and sponsorship to
fund their operations. In 2013 the                                Source: BARB (2014)
combined value of advertising
revenue received by ITV,                                          Figure 5: Revenues of major free-to-air TV broadcasters in 2013
Channel 4 and Channel 5 was £2.6                                  (in £ millions)
billion, accounting for 66% of their
total revenues.21 This is equivalent                                        Channel 5 259 67
to just over £100 per household.

                                                                            Channel 4                846            62

                                                                                     ITV                    1,542                               1,211

                                                                                                   Advertising Revenue                         Other Revenue

                                                                  Source: Company reports (2013)

19
   In 2013 the BBC and the commercial free-to-air channels accounted for 79.1% of audiences. BARB (2014), Trends in Television Viewing 2013.
20
   BBC (2014), BBC Full Financial Statements 2013/14.
21
   Estimates based on ITV (2014) annual report 2013, Channel Four (2014) annual report 2013, Northern and Shell (2013) trading update and Ofcom (2013) Communications Market Report.
    While ITV have sought to diversify their revenue sources and are aiming for an even split of advertising revenues and programme sales, this understates their reliance on advertising as their
    ability to make programme sales depends on the advertising revenues they receive. ITV (2014), ITV plc Annual Report and Accounts for the year ended 31 December 2013.
22
    Figure 4 reports annual percentage shares of total viewing by individuals of selected broadcasters and broadcaster groups. BARB (2014), Trends in Television Viewing 2013.

18      Television
Approximately 97% of UK
households own a television,23
and the average person watches
around four hours of TV a day.24 As                                                                         The number of hours of TV
well as being an important source                                                                           viewed by the average person
of entertainment for individuals,
the survey found evidence of an
important social contribution – more
                                                                                 4                          every day
than half like to watch it with friends
and family.25 TV is also a vital source
of information, providing people with
direct access to news, sport and
analysis.26 TV is especially central to
the lives of those over 65. Compared                                                                        Compared to the population
to the population average, over-65s                                                                         average, over-65s watch 1.8
watch 1.8 more hours of television
each day.27                                                                                                 more hours of television
                                                                                                            each day

                                                                                                            9.5 million
                                                                                                            The number of people who
                                                                                                            tuned in to the 2013 UK
                                                                                                            season premiere of
                                                                                                            Downton Abbey

23
    Thinkbox (2014), Thinkbox H1 Review 2014.
24
    Ofcom (2014a), Communications Market Report 2014.
25
    Deloitte Survey/Ipsos (August 2014)
26
   According to a recent Ofcom report 54% of people consider TV as their most important source of news, while in our survey 47% of respondents said TV gives them information and
    entertainment they cannot get elsewhere: Ofcom (2014b), News Consumption in the UK: 2014 Report
27
    Ofcom (2014a), Communications Market Report 2014

                                                                                                                                                                Advertising Pays 3   19
3.1
The value of advertising                                                                                           Television continued...
to the UK’s culture,
media and sport

Television continued...
Commercial free-to-air TV is central                              season premiere of Downton Abbey                                  “There’s no doubt
to the variety and quality of television                          on ITV, which amounted to a 39.5%
in the UK. At the 2014 Television                                 viewing share for the timeslot that                               Channel 4 has given
BAFTA awards, 15 out of the 24                                    it was broadcast in,30 while 6 out
competitive awards were given to                                  of the 10 most tweeted about TV
                                                                                                                                    talent more breaks
shows broadcast on commercial                                     moments in 2013 were broadcast on                                 than any other
free-to-air TV, including awards for                              free-to-air channels.31
Drama, News, Comedy and Current                                                                                                     broadcaster.”
Affairs. In addition, commercial                                  Meanwhile, Channel 4 has been
                                                                                                                                    Stephen Lambert, television
free-to-air channels have been                                    behind some of the most innovative
                                                                                                                                    producer and executive32
essential for media plurality,28                                  and exciting programming on British
especially in news sources. The BBC                               television since its founding in
currently dominates news source                                   1982, as well as producing many
penetration in the UK, with 65%                                   successful independent films, such
of all adults using BBC One as a                                  as 12 Years a Slave and Slumdog
source of news. However, the very                                 Millionaire. The channel is also
existence of commercial free-to-                                  responsible for helping establish the
air channels has helped contribute                                careers of many household names in
to a greater plurality, with ITV and                              entertainment, such as Sacha Baron
Channel 4 achieving 37% and 12%                                   Cohen, Ricky Gervais, Jonathan
penetration respectively.29                                       Ross and Graham Norton.

Free-to-air channels host some of                                 The presence of advertising breaks
the most important television events                              is one key way that the experience
in the country. For example, 9.5                                  of watching commercial free-to-air
million people watched the 2013                                   channels differs from watching the

28
    here is no formal definition of media plurality, but the DCMS view it as a means towards ensuring that the public are exposed to different opinions and information derived from a range of
   T
   sources. DCMS (2013a), Media Ownership and Plurality: Consultation
29
    DCMS (2013a), Media Ownership and Plurality: Consultation.
30
   The Guardian (23 Sept. 2013), ‘Downton Abbey lords it over rivals with more than 9.5 million viewers’, http://www.theguardian.com/media/2013/sep/23/downton-abbey-fourth-series-viewers
31
    Freeview (12 Dec. 2013), ‘1.5m tweets bag Jessie J top TV moment of 2013’, http://www.freeview.co.uk/articles/about-us/press-releases/1-5-million-tweets-bag-jessie-j-top-tv-moment-
     of-2013.html
32
     Oliver and Ohlbaum, (2014) “Channel 4: Taking risks, Challenging the mainstream”

20      Television continued...
Our survey suggests that
                                                        advertisements do not
                                                       have a significant effect
                                                         on the quality of the
                                                         viewing experience.

BBC channels, which are funded by       Our survey suggests that while
the licence fee. These advertisements   most viewers might prefer to avoid
allow people to watch without being     them, advertisements do not have
charged. Essentially, there is a        a significant effect on the quality of
trade-off between viewing               the viewing experience. Many would
programmes for free and watching        prefer to view these programmes with
advertisements, which is central to     advertisements than pay a significant
the commercial free-to-air TV viewing   amount to remove them. For example,
experience. Figure 4 demonstrates       when free-to-air TV viewers were
that despite the presence of            asked how much they would be willing
advertising breaks, large numbers       to pay to remove advertisements from
of people continue to tune in to        TV content, only 50% say they would
commercial free-to-air channels.        pay £1 a month to do so.

                                                                                   Advertising Pays 3   21
3.1.1
The value of advertising                                                                                                                 Quantifying the
                                                                                                                                         benefits of
to the UK’s culture,                                                                                                                     TV advertising
media and sport

Quantifying the benefits
of TV advertising

The results of our survey suggest                                     Figure 6: The average household value from free-to-air commercial TV
that there is some variety in how
much people value free-to-air TV.
While most households value free-                                                                                                                      6 million
                                                                                                                                                       households
to-air TV at up to £50 a year, almost
1 in 5 value it at more than £200 a
year. By ensuring that the service                                                                                                       £115
can be made free-to-air, advertising
benefits both the most avid viewers
and those who have a more casual                                                                                                               £300                3.5 million
interest in free-to-air TV. When
                                                                                             16 million
                                                                                                                       £30                                         households
added together, we estimate                                                                  households
that commercial free-to-air TV
generates a total household value
of £2.2 billion per year, equivalent
to £83 for every household.33

                                                                                                                                                    £2.2
                                                                                    £83                                                            billion
                                                                         Average annual                                                              Total
                                                                         household value                                                        household value
                                                                      Source: Deloitte Survey/Ipsos (August 2014)

33
     As TV subscriptions are typically paid per household rather than individual, we consider the household value of the service, rather than individual value.

22         Quantifying the benefits of TV advertising
A more detailed analysis of the data                               We based the estimates of household                                              The ability of commercial free-to-air
suggests that while households                                     value on how the survey respondents                                              TV to provide this household value
with younger adults typically value                                reported their willingness to pay for                                            depends very largely on funding from
commercial free-to-air TV the most,                                commercial free-to-air TV. However,                                              advertising revenues. Without these
the value that people place on the                                 respondents’ answers to other                                                    revenues, commercial free-to-air TV
service does not vary greatly with                                 questions in the survey, for example                                             would not be able to continue in its
income, as Figure 7 illustrates. This                              the amount of time spent watching                                                current form.
emphasises its importance across                                   television, suggests that this may
the social spectrum.                                               understate their true valuation.                                                 Broadcaster interviews suggest
                                                                                                                                                    that a subscription model would
Figure 7: How income affects the household value from free-to-air                                                                                   be the most likely alternative
commercial TV                                                                                                                                       funding model if it were no longer
                                                                                                                                                    possible to source revenues from
                                                                                                                                                    advertising. However, the results
                                                                                                                                                    of our consumer survey indicate
                                                                                                                                                    that the loss of viewers could be so
                                                                                                                      £83 per household each year

                                                                                                                                                    great that it would not be possible
                                                                                                                                                    to replace advertising revenues with
                                                                                                                                                    subscription revenues.34 This loss
     Households with
                               £11                                                                                                                  of revenue could also undermine
                               per 1
     people earning
     more than                                                                                                                                      the ability of broadcasters to fund
     £45,000 a year
                                  ye                                                                                                                original UK productions, resulting in
                                         ar                                                                                                         an increased reliance on purchases

                                                                       £83                                                                          of imported shows and of repeats.

                                 £76
     Households with
     people earning
     less than
     £20,000 a year             per
                                    year

Source: Deloitte analysis on Deloitte Survey/Ipsos (August 2014)

34
      he higher the charge for the service, the greater would be the reduction in demand and so the smaller the base of customers from which revenues can be recouped. According to our
     T
     analysis, the demand for television is such that the advertising revenues could not be recouped through a subscription charge.

                                                                                                                                                                       Advertising Pays 3   23
3.2
The value of advertising                                                                                   Radio
to the UK’s culture,
media and sport

Radio
Radio is part of most people’s                                   Almost all radio can be accessed                  of settings – at work, at home and on
daily routine. In any given week,                                free in the UK. The market is shared              the road – and it remains the most
almost 90% of people in the UK                                   between the BBC and commercial                    popular method for listening to music
listen to some radio, while the                                  radio stations, with just under                   for people in the UK, especially for
average adult listens to around                                  half of all listening hours in the                those over 55.
three hours a day.35 This comes                                  UK accounted for by commercial
as no surprise, given the sheer                                  radio. However, unlike BBC radio
variety and amount of content                                    stations, which are funded by the
aired and produced by radio                                      BBC TV licence, commercial radio
stations in the UK. Every week,                                  is funded entirely by advertising and
37,000 hours of music are                                        sponsorship revenues, amounting to
broadcast, and on average, over                                  £537 million in 2013.37
10 hours of public service content,
including weather reports, news                                  Radio allows people to access news,
and travel events, are aired from a                              sport and entertainment in a variety
UK commercial radio station.36

In any given week, almost 90%
of us listen to some radio, while
the average adult listens to
around three hours a day.

35
    Rajar (2014a), Rajar Data Release: Quarter 1 2014
36
    Radio Centre (2014), Action Stations: The Output and Impact of Commercial Radio
37
   This revenue includes spot advertising and branded content, which has given the industry a financial
    boost since it was permitted in 2010: presenters, celebrities and brand ambassadors are now able to
    endorse and promote brands/products live on air. Advertising Association/Warc (2014), ‘About the AA/
    Warc data’, http://expenditurereport.warc.com/AboutTheData.aspx

24      Radio
While commercial radio stations are

                                                    75%
                                                                                                       enjoyed by listeners throughout the
                                                                                                       UK, local commercial radio stations
                                                                                                       often provide valuable services to
                                                    The proportion of                                  communities, reporting on regional
                                                                                                       news items, traffic information, events
                                                    people who listen to                               and activities that would otherwise
                                                                                                       be difficult to follow. For some
                                                    the radio at home39                                communities, commercial local radio
                                                                                                       plays a particularly important role in
                                                                                                       community life. Recent developments
                                                                                                       in digital radio mean that people are

                                                    24%
                                                                                                       now increasingly able to access their
                                                                                                       favourite stations for free and with
                                                                                                       fewer geographical limitations.42
                                                    The proportion of
                                                    people who listen to
                                                    the radio at work40

                                                    79%
                                                    Commercial radio’s
                                                    share of local radio
                                                    listeners41

39
   Rajar (2014a), Rajar Data Release: Quarter 1 2014
40
   Ibid.
41
   Deloitte analysis on Rajar (2014b), Rajar Data Release: Quarter 1, 2014 – May 15th 2014
42
   51% of adults now use a digital radio platform. Rajar (2014a), Rajar Data Release: Quarter 1 2014

                                                                                                                           Advertising Pays 3   25
3.2.1
The value of advertising                                                                                       Quantifying
                                                                                                               the benefits of
to the UK’s culture,                                                                                           advertising to
media and sport                                                                                                individuals

Quantifying the benefits of
advertising to individuals

Around 2 in 3 listeners would not                             As with TV, these results highlight            Our analysis indicates that people
be willing to pay a substantial fee                           the dual role that advertising plays           benefit by £633 million per year, or
for radio if it were not free to use,                         in providing benefits for both an avid         £17 per adult listener.
a much lower proportion than                                  minority of radio listeners and a large
for TV. However, 1 in 3 value the                             population of occasional listeners.
service highly. In particular we
estimate that for around 4.5 million                          Figure 8: The individual value of commercial radio
adults, commercial radio delivers
an average of £87 in individual
value a year. As Figure 8 shows,                                                                             7.8 million
                                                                                                                                         Age
this group includes both young                                                                               adults
and old, illustrating the broad
appeal of commercial radio.                                                                      £21                             16–34          32%

                                                                                                                  4.5 million 35–54                   42%
                                                                                                      £87         adults
                                                              25.8 million
                                                              adults
                                                                                    £3                                           55–75         26%

Local radio is
important in a
community.
                                                                             £17                                     £633
                                                                Average individual                                  million
                                                              value per adult listener                        Total individual value

                                                              Source: Deloitte analysis on Deloitte Survey/Ipsos (August 2014)

26   Quantifying the benefits of advertising to individuals
While commercial radio listeners
still experience a trade-off between
advertisements and content, our
survey suggests that it is minimal with
most listeners generally ambivalent         Our analysis indicates that people
towards them: 55% of respondents            benefit by £633 million per year, or
say that they have little or no effect on
their listening experience.                 £17 per adult listener.
People listen to radio in a variety of
ways, with the result that introducing
a subscription service would be
more challenging than for TV. Given
the challenges of finding alternative
sources of funding, it would be hard to
imagine how commercial radio would
be able to continue in its current form
and deliver its benefits if advertising
revenues were not available.

                                                                                   Advertising Pays 3   27
The value of advertising
to the UK’s culture,
media and sport

Online
Services
Advertising plays a central role
in ensuring that popular online
services are free to use. Our survey
suggests that advertising, by
making these services so readily
accessible, brings £4.3 billion of
value to individuals in the UK.
Many search engines, social media
sites and email services which we
take for granted would simply be
unable to function in the same way
without advertising.

28   Sport
4
Advertising Pays 3   29
4
The value of advertising                                                                               Online Services
to the UK’s culture,
media and sport

Online Services
The internet has rapidly become part                                  attractions and businesses) to extend              Many of the most popular websites
of the everyday lives of most adults                                  the internet’s reach to people’s                   in the UK are almost entirely funded
in the UK. In 2013, an estimated 36                                   surroundings, like the London                      by advertising. The overwhelming
million adults accessed the internet                                  Underground and bus shelters.45                    proportion of the revenues generated
every day, more than double the                                                                                          by Google,46 Facebook,47 and
number in 2006.43 People spend on                                     Advertising is pivotal to the continued            Twitter48 comes from advertising. In
average 35.4 hours a month browsing                                   development of the most popular                    total, advertising revenue is worth
on a computer, and 5.2 hours                                          online services, such as search,                   £6.2 billion to online services in the
per month on their mobile phone.44                                    email and social media. Through the                UK each year.49
                                                                      revenues it generates, advertising
Technological advances in                                             provides incentives for leading
advertising and outdoor media                                         online service providers, such as
have allowed online service                                           Google and Facebook, to develop
campaigns like ‘Google Outside’                                       their offerings and ensure that their
(involving large display screens that                                 services remain free to use.
provide information on local tourist

Our survey suggests that advertising,
by making these services so readily
accessible, brings value amounting to
£4.3 billion to individuals in the UK.

43
    Office for National Statistics (2013), Statistical Bulletin: Internet Access – Households and Individuals, 2013.
44
    Ofcom (2013), Communications Market Report 2013.
45
    Clear Channel (2014), ‘Rewarding Excellence in Outdoor Planning’, http://www.clearchannel.co.uk/
    press-centre/events/2014/outdoor-planning-awards-2014/2014-winners/best-use-of-digital-in-outdoor
46
     Google Inc. (2014), Annual Report 2013.
47
     Facebook Inc. (2014), Annual Report 2013.
48
    Twitter Inc. (2014), Annual Report 2013.
49
   This figure includes the advertising revenues for the digital components of the TV, newspaper
    and magazine sectors. Advertising Association/Warc (2014), Expenditure Report

30      Online Services
Figure 9: The role of advertising revenue in funding the 10 most popular                                 Our survey finds that 79% of people
websites in the UK50                                                                                     polled use search engines, and
                                                                                                         86% use email every day.52 The
     Google        1                                                                 91%                 development of such free online
                                                                                                         services has had a major impact on
     Facebook      2
                                                                                                         the lives of most people in the UK,
                                                                                   89%
                                                                                                         with 79% of people using email for
                                                                                                         their social life, and 81% using it for
     YouTube       3                                                                      95%
                                                                                                         leisure activities.53

     BBC           4    0%                       Funded by the licence fee in the UK*

     eBay          5       14%                   Funded primarily by transaction revenues

     Amazon        6
4.1
The value of advertising                                                                         Search, email
                                                                                                 and other online
to the UK’s culture,                                                                             services
media and sport

Search, email and other
online services
Internet search is the most                                         As well as saving people time            Search providers are also the main
common form of web-based activity                                   when they look for things online,        providers of free email services. In
in the UK, with almost every user                                   search engines help increase             2013, there were approximately 41
visiting a search engine at some                                    consumer awareness and improve           million email accounts registered
point in their internet session. In                                 price transparency. The main             with Hotmail, Yahoo! and Google,
2013, Google Search alone was                                       search engines, such as Google,          all of which operate search facilities.
visited by 88% of web users.                                        Yahoo! and Bing, do not charge           In addition, the major online service
                                                                    for use. They can offer this free        providers typically offer a range of
                                                                    service because they are funded by       other services, such as maps, news,
                                                                    advertising revenues. It is estimated    chat and games, all generally free to
                                                                    that internet search generated £3.49     use. We estimate that these services
                                                                    billion in advertising revenues in the   generate an additional £300 million
                                                                    UK in 2013, more than half of the        of advertising revenues in the UK.55
                                                                    online total.54

                                                                            Search engines help
                                                                            increase consumer
                                                                            awareness and improve
                                                                            price transparency.
                                                                            The main search
                                                                            engines can offer this
                                                                            free service because
                                                                            they are funded by
                                                                            advertising revenues.

54
     Advertising Association/Warc (2015), Expenditure Report.
55
     Internet Advertising Bureau (2014a), Digital Adspend Report.

32         Search, email and other online services
http://             Search

email                chat

maps                 games

news
        We estimate that these
        services generate an
        additional £300 million
        of advertising revenues
        in the UK.

                             Advertising Pays 3   33
4.2
The value of advertising                                                                                          Social media
to the UK’s culture,
media and sport

Social media
Social media allow people to
create, share and discuss content
such as written posts, pictures,
videos and audio. Over two-thirds
                                                                                                           24 million
of adults, and 97% of 16–24-year-                                                                          The number of people in the
olds, now access social media and
networking services at least once a
                                                                                                           UK who log into Facebook
week, while 78% of 16–24-year-olds                                                                         every day57
say they access them every day.56

                                                                                                           15 million
                                                                                                           The number of Twitter users
                                                                                                           registered in the UK58

                                                                                                            640%
                                                                                                            The growth in the number
                                                                                                            of Tumblr blogs over the last
                                                                                                            three years59

56
   Internet Advertising Bureau (2014a), Digital Adspend Report.
57
   The Guardian (14 Aug. 2013), ‘Facebook: four out of five daily users log on via smartphone or tablet’, http://www.theguardian.com/technology/2013/aug/14/facebook-users-smartphone-tablet
58
   Tweeted by Twitter (Sept. 2013)
59
    Statista, ‘Cumulative total of Tumblr blogs between May 2011 and October 2014 (in millions)’, http://www.statista.com/statistics/256235/total-cumulative-number-of-tumblr-blogs/

34      Social media
Facebook, Twitter and Google+                                    Case study
are among the most popular social
networking sites in the UK. These
sites are all free to use and are                                YouTube and creative talent
almost entirely funded by advertising
revenues. Many other popular                                     YouTube is at the forefront of the                                For many, therefore, YouTube offers
social media services are owned by                               rapid growth in popularity of online                              an unprecedented opportunity to
these organisations. For example,                                videos. According to the website’s                                pursue a creative interest and to gain
Instagram is owned by Facebook,                                  own statistics, users upload 100 hours                            some recognition for their talent. For a
YouTube is owned by Google, and                                  of video to the site every minute, while                          few, this exposure may even develop
Vine is owned by Twitter. In 2013,                               other industry research estimated that                            into much more. Some of the world’s
advertising contributed an estimated                             during a single month in 2012, UK                                 most famous pop stars – artists such
£589 million worth of funding to                                 users spent close to 16 billion minutes                           as Justin Bieber, Lana Del Rey and
social media sites.                                              watching YouTube videos. This works                               Soulja Boy – were discovered on
                                                                 out as an average of 8.8 hours for                                YouTube.
                                                                 each of the 30 million users.60
                                                                                                                                   YouTube’s role in the democratisation
                                                                 YouTube has been a key contributor                                of creativity also benefits the arts.
                                                                 to what has been labelled the                                     In both 2008 and 2010, the site
                                                                 democratisation of creativity.61                                  launched a competition inviting people
                                                                 This is where ordinary people have                                to audition for a part in an orchestra
Industry research                                                the opportunity to showcase their                                 made up entirely of YouTube
                                                                 creative talent to audiences around                               uploaders. In 2008, more than 3,000
estimated that during                                            the world with minimal cost or                                    individuals entered the competition
                                                                 technical requirements. As it is free                             and were scrutinised by YouTube
a single month in                                                to use, almost anyone can upload                                  viewers and a panel of expert
2012, UK users spent                                             a video of their work on YouTube,                                 musicians.62 Successful individuals
                                                                 and tap onto the huge worldwide                                   were given the unique opportunity of
close to 16 billion                                              audience. All that is needed to upload                            performing in Carnegie Hall and the
minutes watching                                                 or view content is a working internet
                                                                 connection, with no requirements
                                                                                                                                   Sydney Opera House.

YouTube videos.                                                  placed on an artist’s expertise or
                                                                 experience as a content creator.

60
    omScore (7 Mar. 2012), ’64 percent of UK online video audience exposed to video ads in January’, http://www.comscore.com/Insights/Press-Releases/2012/3/64-Percent-of-UK-Online-
   C
   Video-Audience-Exposed-to-Video-Ads-in-January
61
   The Guardian (23 Feb. 2012), ‘the future of video: democratisation of creativity and production’ http://www.theguardian.com/media-network/2012/feb/23/democratisation-creativity-production
62
    The Telegraph (6 Apr. 2009), ‘YouTube Symphony Orchestra – Carnegie Hall, review’ http://www.telegraph.co.uk/culture/music/classicalmusic/5163420/YouTube-Symphony-Orchestra-
     Carnegie-Hall-review.html

                                                                                                                                                                  Advertising Pays 3       35
4.3
The value of advertising                                                                                     Quantifying
                                                                                                             the benefits to
to the UK’s culture,                                                                                         individuals of
media and sport                                                                                              online advertising

Quantifying the benefits to
individuals of online advertising

As with the other sectors                                     Figure 10: Average individual value from internet search, email and
considered in this report, our                                associated services
survey reveals a range of opinions

                                                                                                                                      £68
among the population about the
value of online services. Email,
search and social media occupy
a large part of people’s lives,                                                                                            Average individual
and many therefore benefit from
having these services provided
                                                                                   16.6
                                                                                  million
                                                                                                                          value per adult user
free of charge. For around 1 in 4                                                            14.3
adults the individual value enjoyed                                                         million
from email and search alone is
worth at least £100 a year, while                                                                                   £3.1 billion
                                                               Number of adults

1 in 10 value free social media at
more than £200 a year. There are                                                                         7.4            Total individual value
                                                                                                        million
also many who appreciate the
                                                                                                                       5
benefits of online services, but do                                                                                 million
not value them quite as highly.                                                                                                  2.8
                                                                                                                                million

                                                                                   £6        £36        £90 £180 £340
                                                                                            Average individual value per year
                                                              The individual value that adults enjoy from internet search and email varies significantly.
                                                              Around 1 in 3 adults value it at an average of £6 a year, but 1 in 10 value it at more than
                                                              £200 a year. Across all adults, the individual value averages £68 a year.

                                                              Source: Deloitte Survey/Ipsos (August 2014)

                                                              Online services, particularly social                       and that over half of these people
                                                              media, are generally valued more                           are between 16 and 24 years old.
                                                              highly by young adults. For example,
                                                              we estimate that approximately 2.2                         By helping to make the services free to
                                                              million adults value advertising-                          use, advertising helps them to attract
                                                              funded social media at £120 a year,                        new and casual users. This generates

36   Quantifying the benefits to individuals of online advertising
A recent report estimated
that the price transparency
brought about by search
engines makes online prices
10% lower on average than
offline prices.

important network benefits to all                                    Overall, our analysis suggests that                individuals value these services
users of the system – Facebook is                                    through its support of search, email               much higher.
only useful to someone if they can                                   and social media alone, advertising
engage with other people through it.                                 provides approximately £4.3 billion                Respondents may well have
The more users there are, the more                                   of perceived benefit to people in the              understated their true valuations in
likely it is that a person will be able                              UK each year. This is equivalent to                this area. For example, although more
to engage with a wide range of their                                 roughly £90 per adult each year.                   than a third of respondents claimed
friends, family and colleagues.                                      However, a large proportion of                     they would be unwilling to pay £1
                                                                                                                        a month for email services, 78% of
Figure 11: Individual value provided by free, advertising-funded                                                        this group said they use email every
social media                                                                                                            day. Moreover, the individual value
                                                                                                                        estimated here does not account for
                                                                                                                        the broader positive impact that these
                                                                                                                        services have on people’s lives. A
                                                                                                £28 per user per year

                                                                                                                        recent report estimated that the price
                                                                                                                        transparency brought about by search
                                                                                                                        engines makes online prices 10%
                                                                                                                        lower on average than offline prices.63
          Adult users
          under the
          age of 25
                             £51
                            per                                          £28
                                year

                                                                           Average all adults

                   £1.1 billion
           Total individual value per year
The individual value that adults enjoy from social media is worth,
on average, £28 per year. However, for young adults the individual
value is particularly high – it is worth £51 per year for adults under
the age of 25.

Source: Deloitte analysis on Deloitte Survey/Ipsos (August 2014)

63
     McKinsey (2011), The Impact of Internet Technologies: Search.

                                                                                                                                            Advertising Pays 3   37
The value of advertising
to the UK’s culture,
media and sport

 Newspapers
 and Magazines
By providing a key source of
funding for the newspaper and
magazine industries, advertising
allows millions of UK consumers
to read a variety of print and digital
content at subsidised cost. Our
analysis suggests that this funding
is worth approximately £2.3 billion
to consumers each year. In the
absence of advertising, prices
would increase to a point that
would make reading newspapers
and magazines unaffordable and
inaccessible to many.

38   Sport
5
Advertising Pays 3   39
5.1
The value of advertising                                                                                             Newspapers
to the UK’s culture,
media and sport

Newspapers
The newspaper industry remains                                    A crucial source of funding for                                   circulation, which in turn makes
an important part of British                                      newspapers is advertising revenue.                                newspapers more appealing
society. Approximately 91 million                                 In 2013, the industry received a total                            to advertisers. In some cases,
local and national newspapers are                                 of £2.74 billion from advertising,                                advertising allows consumers to
sold each week,64 and 41 million                                  equating to approximately 50% of                                  access print newspapers free of
people read newsbrands across                                     industry revenue.66 These advertising                             charge. For example, the Metro,
print and digital each month.65                                   revenues take the funding burden                                  which has an estimated daily
                                                                  away from consumers and allow                                     readership of over 3 million people
                                                                  newspapers to set lower prices than                               across 15 different cities,67 and the
                                                                  they otherwise would.                                             London Evening Standard, which has
                                                                                                                                    an estimated daily readership of 1.8
                                                                  Advertising forms part of a virtuous                              million,68 are both free and funded
                                                                  circle in the newspaper industry.                                 primarily by advertising revenue.
                                                                  By keeping prices low, it increases

                                                                  Figure 12: The virtuous circle of advertising in the newspaper industry

                                                                                                                 Advertisers are willing
                                                                                                                 to pay more for ad spaces
In 2013, the industry
received a total
of £2.74bn from
advertising, equating
to approximately                                                                                                                                    Newspapers are able
60% of the revenue                                                                                                                                  to lower their prices

from sales.                                                                           Consumers buy
                                                                                      more newspapers

64
   Deloitte analysis based on ABC (2014), ‘ABC Market Summary Report – July-December 2013’.
65
   National Readership Survey (2014), ‘Print and Digital: Consumption of Newsbrands’, http://www.nrs.co.uk/training-2/helpful-tools/useful-chart/
66
   Deloitte analysis based on data from IBISWorld (2014), ‘Newspaper Publishing in the UK: Market Research Report’.
67
   Metro (2013), https://metrouk2.files.wordpress.com/2013/09/metro-platforms-print-august.pdf
68
   Newsworks (2014), http://www.newsworks.org.uk/London-Evening-Standard

40      Newspapers and magazines
NEWS TODAY
                                                                                 7
               91                                                                out of
                                                                                                                                             £2.74
             million                                                                      10
                                                                                                                                             billion
            The number of                                         Number of the most                                                     The value of
          local and national                                     popular news websites                                               advertising revenue
           newspapers sold                                        that are free to use                                                 received by the
              each week                                            and supported by                                                  newspaper industry
                                                                  advertising revenue                                                      in 2013

In an age when UK consumers have                                 As print sales have fallen in recent                            As they do not have the same space
never had more choice, newspapers                                years, newspapers have developed                                constraints as the print editions,
are still a trusted source of news.69                            an increasing online presence, with                             newspaper websites often have more
63% of newspaper readers say that                                many offering a free-to-use digital                             content. For example, of the 600
newspapers form part of their daily                              service. Even without the BBC,                                  articles The Telegraph produces every
ritual, while 61% enjoy discussing                               free online news sites dominate the                             day, only a third make it to print.70
what they read in the paper with                                 market for online news.                                         News websites for British titles have
friends and family.                                                                                                              become highly popular internationally,
                                                                                                                                 and place the UK as a key exporter of
Figure 13: Active reach of news websites in the UK (unique audience in                                                           online news services. The Daily Mail
millions via laptop or desktop computer)                                                                                         and The Guardian are among the top
                                                                                                                                 10 most popular news websites in the
     16                                                                                                                          world,71 with the large majority of their
                                                                                                                                 content free to access.
     14         13.5

     12                   11.3
                                     10.6
     10
                                                8.3
      8                                                    7.4
                                                                                                                                 In an age when UK
      6                                                          5       4.7       4.6
                                                                                             4.2
                                                                                                                                 consumers have never
      4                                                                                                3.5
                                                                                                                                 had more choice,
      2                                                                                                                          newspapers are still a
      0                                                                                                                          trusted source of news.
                              ws

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                                                                                                       r

                                                                                                      s
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                                                                                                   rro
                            ew

                                                                                                    es
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                                                                                                  Pr
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          * denotes subscription based, all others free to use

Source: Ofcom (2013)

69
   Newspaper Society (2011), ‘Loving Local Survey’, http://www.newspapersoc.org.uk/sites/default/files/lovinglocal/quant.html#!prettyPhoto[quant]/8/
70
   Internet Advertising Bureau (2014b), The Data Deal: How Data Driven Digital Advertising Benefits UK Citizens.
71
   eBiz MBA (2014), ‘Top 15 Most Popular News Websites – September 2014’, previously available at: http://www.ebizmba.com/articles/news-websites

                                                                                                                                                       Advertising Pays 3   41
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