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.
In association with:
NE
WS
2 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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contract with them dated 15 September 2014 (“the Contract”) and on the basis of the scope and limitations set out below.
The Final Report has been prepared solely for the purpose of assessing the benefits of advertising to individuals, through its role as an
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In association with:
Advertising Pays 3 3
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
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
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
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
ch
an
ne
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
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
£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
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 ReportAlmost
£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 3 111.1
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 valueFigure 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 3 132
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 UKIndividuals 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 15The 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 TelevisionApproximately 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 3 193.1
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 3 213.1.1
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 advertisingA 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 3 233.2
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 RadioWhile 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 3 253.2.1
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 individualsWhile 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 27The 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 ServicesFigure 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 64.1
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 serviceshttp:// Search
email chat
maps games
news
We estimate that these
services generate an
additional £300 million
of advertising revenues
in the UK.
Advertising Pays 3 334.2
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 mediaFacebook, 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 3 354.3
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 advertisingA 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 37The 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 magazinesNEWS 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
ian
il
h*
s
nt
*
r
s
Gr uest
rro
ew
es
un
Ma
p
de
ap
Ne
ou
Pr
rd
oN
eS
Mi
en
dia sq
gr
ily
ua
C
n
ele
Th
ep
Me New
ho
sto
Da
BB
eG
nd
eT
Ya
hn
Th
eI
Th
Jo
Th
* 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 41You can also read
