RTE, advertisers agree plan to control cost inflation

In an initiative to curb the effect of runaway media inflation on RTE television, the station and the Association of Advertisers in Ireland (AAI) have completed a deal involving an inflation cap and a rebate scheme.

Advertisers spending more than £80,000 (€101,580) on RTE television during September-December 1999 will be rebated on a 50/50 basis for any year-on-year cost increases of more than 14 per cent.

Inflation on RTE has averaged out at 17 per cent for the year to date and as the last quarter is traditionally the busiest with the run up to Christmas, inflation is expected to exceed 17 per cent.

An £80,000 outlay includes 98 per cent of all TV advertisers. All sides in the negotiation, which included the Institute of Advertising Practitioners in Ireland (IAPI) - representing advertising agencies - accepted an inflation level of 14 per cent.

"Of course we would like a lower threshold figure," says Mr Aidan Burns of AAI, "but we have to acknowledge reality and this if the best offer we could get." He describes the deal hammered out over the past two months as "reasonable".

Mr Paul Mulligan, head of marketing at RTE, said the agreement would cost the station more than £1 million should inflation run at 17 per cent.

The new deal comes in the same week as the spending figures for the advertising industry were announced. About £216 million was spent during the first half of 1999, an increase of 12 per cent on the same period last year.

The figures, compiled by IAPI, reflect a buoyant economy but Mr Ian Fox of IAPI says they also indicate a media-starved environment that is worrying everyone in the industry.

"Budgets are good," he says. "But unfortunately the availability of media has not grown significantly over the same time so most of the increases are due to the rapidly rising costs of buying existing time and space." Advertisers are pushing RTE to review available advertising time. At present there is an average of six minutes of advertising per hour. This can be as high as 7 1/2 minutes during peak viewing. The AAI argues that 8 1/2 minutes at peak time would significantly ease the pressure for advertisers and that every half minute made available would reduce inflation by 56 per cent.

EU legislation allows nine minutes and TV3 regularly broadcasts nine minutes of ads per hour.

IAPI's figures show that independent radio enjoyed the biggest increase in advertising spend - at 25 per cent - which is good news for the applicants for new radio licences. It is difficult to see, however, how the availability of this new air time will effect the current inflationary climate. It is likely that major advertisers will use the new stations as add-on media and still spend on RTE.

That was certainly what happened to TV advertisers when TV3 got under way.

Unsurprisingly, the only media sector which showed a significant decline was the Irish magazine sector which follows on from poor showing in the most recent JNRR figures.

"Overall these half yearly figures are very good," says Mr Fox, "but the reality is that if a client came to an agency tomorrow wanting to start a £1 million campaign, the agency would have severe difficulty booking the ads and that's a situation that can't be allowed to continue for much longer."