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SBS advertising revenue

Estimates & Committees
Scott Ludlam 15 Jul 2011

Senate Standing Committee on Environment and Communications
Budget Estimates Hearings May 2011
Broadband, Communications and the Digital Economy Portfolio
Special Broadcasting Service
Question No: 60

Senator Ludlam asked:
Senator LUDLAM: Since you mention it, I just want to dwell on that very briefly-I think it was last October I asked this. You calculated an estimated $36 million shortfall if you removed the in-program advertising in the current financial year and backed it off into the top of the hour or the half-hour. I am interested to know what kinds of assumptions you used and whether you would care to explain for us what assumptions and what evidence you could provide to support that figure, because it is substantial.
Mr Brown: The new numbers that I have given you are not the result of a specific analysis in this area. As to the assumptions that are made, the first number is a calculation on what our revenue is currently expected to be, and the germane number is what it might be if we had ads between programs. I think that, when I talked to you about $20 million being a possible base, that reflected the fact that when we moved ads to inside programs we were receiving about $26 million or $27 million, and both our view and the view of the external consultants who did some work for us was that that would be an amount of money that would gradually diminish because the advertising industry had no appetite for that particular model. I am now saying to you, when I adjust that number down to $10 million, that my observation would be that there is even less appetite for that now and that some of the tension that exists for SBS in the market is that it is a highly commoditised market now, and the idea of having a premium because you are in a good environment or are associated with a distinctive programme is very hard, if not impossible, to secure now. Most of the buying is done on a highly computerised model operated by quite junior people who are making decisions on where to place ads simply on the basis of what the numbers tell them, and our numbers between programs would be appalling.
Senator LUDLAM: I do not want to lag here too long, but are you able to table any kind of methodology or the basis on which those were arrived at? I am not disputing them; I am just wondering if you could provide that
for us.
Mr Brown: Certainly.

SBS currently estimates that due to reductions in commercial revenues, removing in-program advertising would result in a shortfall of approximately $45 million, or 90 per cent of SBS's revised forecast television advertising revenue of $50 million for 2011/12.

SBS's consideration of how removal of in-program breaks would affect television advertising revenue is based on advice from an independent consulting firm. Based on the advice, SBS considers that its commercial model would be challenged if it were to revert to advertising between programs. This would contribute to a loss of confidence in SBS's product from media buyers. Coupled with increased competition from multichannels and their impact on SBS's share of audience, SBS considers these forecasts to be accurate.

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