Friday, February 19, 2010
Desire's Ocean Guardian Rig arrives on Liz field
Channel 4 news web site has just published a story that the Ocean Guardian rig drilling for Desire Petroleum has arrived at the Liz field in the UK exclusion zone off the Falklands Islands. Position topped up at 110p.
PRODUCT PLACEMENT AND IMPACT ON ITV REVENUES
Paid for product placement on TV is currently outlawed in the UK and as recently as March 2009, Andy Burnham, the Secretary of State at the time, showed no signs this was going to change. He stated he had “very serious concerns” about the relaxation of product placement laws because it was “blurring the boundaries between advertising and editorial.”. Six months on, the new Secretary of State, Ben Bradshaw, is expected to make an announcement this week at the Royal Television Society which will pave the way for relaxation of the rules on commercial television. A consultation is expected to take place over the next three months with changes, if they are to occur, being implemented next year. A change in the rules has the support of the Conservatives and the Liberal Democrats so even a change in Government next year is unlikely to affect the outcome of the consultation.
Currently producers of UK TV programmes are allowed to include “real” products as props in the production of television programmes. As a result an industry that has grown out of this need in which placement agencies are paid by advertisers to arrange for their brands to be placed into TV programmes by providing the product as a free prop to production companies. This saves the producers money as they don’t have to buy the products they need and, for the client, they get some “free” exposure for their placed product. However, due to the rules preventing undue prominence of products in programmes, the exposure brands get is normally small, uncontrolled and incidental. This, in itself, is not a problem as the money invested by the brand is usually a relatively modest fee paid to the placement agency, in return for what can be potentially high profile media exposure.
What might happen?
At this point no one knows what the Government policy will be on this matter as they seem set to take a significant u-turn in the space of just six months. It seems, however, increasingly likely that some form of paid for placement will be allowed on commercial TV from some time next year. In other words, brands will be able to pay for the right for their product to be featured in the programme, in return for a certain set of contracted rights and benefits from the producer of the programme. This has divided the commercial television broadcasters with ITV keen to see the rules relaxed, whilst the likes of Channel 4 and many of the others less enthusiastic. ITV are the broadcaster and the producer in many cases, while the others are largely just broadcasters who are commissioning the programmes for the independent producers - it’s more difficult for them to see the commercial benefits.
The Arguments in favour of relaxation are;
• Product placement already exists in Film and imported US TV programmes which are broadcast, unedited, in the UK. Viewers are used to it and it levels the playing field for UK producers
• Content broadcast online is not regulated and product placement is common place in dramas such as Kate Modern and Sophia’s Diary
• Real products lend credibility to programmes; it makes the programmes more “real”
• Product placement in programmes gives credibility to brands
• It can help change consumer behaviour by allowing advertisers to demonstrate how they want their products to be used e.g. new mobile phone functions
• Media exposure can be easily measured and priced
• Advertisers who fund TV shows will be able to include their products
The Arguments against are;
• It will blur the lines between editorial and advertising causing viewer confusion and/or cynicism
• Editorial integrity will be compromised by the demands of the advertisers who have their products placed
• The use of the product is not controlled so that clients run the risk of inappropriate use of their product or it being placed in a bad light e.g. brake failure on a car, skin issues from cosmetics etc
• You might be able to put a price on exposure but if it’s subliminal how do advertisers put a value on its effectiveness?
• Paid products placed in programmes could be ambushed by brands who sponsor the programme unless safeguards are put in place
• Logistically and contractually complex to deliver
• A marginal commercial benefit for significant editorial compromises
Figures of £100 million in product placement revenues have been banded around, but this seems to be a long term goal. If this iniative is allowed, this is good news for ITV revenues and therefore shareholders though the actual effect on the bottom line may not be felt to a great extent for many years.
Currently producers of UK TV programmes are allowed to include “real” products as props in the production of television programmes. As a result an industry that has grown out of this need in which placement agencies are paid by advertisers to arrange for their brands to be placed into TV programmes by providing the product as a free prop to production companies. This saves the producers money as they don’t have to buy the products they need and, for the client, they get some “free” exposure for their placed product. However, due to the rules preventing undue prominence of products in programmes, the exposure brands get is normally small, uncontrolled and incidental. This, in itself, is not a problem as the money invested by the brand is usually a relatively modest fee paid to the placement agency, in return for what can be potentially high profile media exposure.
What might happen?
At this point no one knows what the Government policy will be on this matter as they seem set to take a significant u-turn in the space of just six months. It seems, however, increasingly likely that some form of paid for placement will be allowed on commercial TV from some time next year. In other words, brands will be able to pay for the right for their product to be featured in the programme, in return for a certain set of contracted rights and benefits from the producer of the programme. This has divided the commercial television broadcasters with ITV keen to see the rules relaxed, whilst the likes of Channel 4 and many of the others less enthusiastic. ITV are the broadcaster and the producer in many cases, while the others are largely just broadcasters who are commissioning the programmes for the independent producers - it’s more difficult for them to see the commercial benefits.
The Arguments in favour of relaxation are;
• Product placement already exists in Film and imported US TV programmes which are broadcast, unedited, in the UK. Viewers are used to it and it levels the playing field for UK producers
• Content broadcast online is not regulated and product placement is common place in dramas such as Kate Modern and Sophia’s Diary
• Real products lend credibility to programmes; it makes the programmes more “real”
• Product placement in programmes gives credibility to brands
• It can help change consumer behaviour by allowing advertisers to demonstrate how they want their products to be used e.g. new mobile phone functions
• Media exposure can be easily measured and priced
• Advertisers who fund TV shows will be able to include their products
The Arguments against are;
• It will blur the lines between editorial and advertising causing viewer confusion and/or cynicism
• Editorial integrity will be compromised by the demands of the advertisers who have their products placed
• The use of the product is not controlled so that clients run the risk of inappropriate use of their product or it being placed in a bad light e.g. brake failure on a car, skin issues from cosmetics etc
• You might be able to put a price on exposure but if it’s subliminal how do advertisers put a value on its effectiveness?
• Paid products placed in programmes could be ambushed by brands who sponsor the programme unless safeguards are put in place
• Logistically and contractually complex to deliver
• A marginal commercial benefit for significant editorial compromises
Figures of £100 million in product placement revenues have been banded around, but this seems to be a long term goal. If this iniative is allowed, this is good news for ITV revenues and therefore shareholders though the actual effect on the bottom line may not be felt to a great extent for many years.
2/3 of S&P 500 companies have beaten on top line
This morning I was listening to the the excellent and highly recommended S&A Investor Radio Podcast by Frank Curzio (available for free from the Itunes store). Frank interviewed head of research for TheStreet.com's Action Alerts portfolio (Jim Cramer's Charitable portolion), Stephanie Link, and she cited the statistic that 2/3 of companies that had reported so far in the S&P 500 had beaten on revenues. This is an interesting statistic since it indicates that perhaps economic recovery in the U.S. is better than expected as the hypothesis has been that aggressive cost cutting has grown bottom line profits but the sales revenues were still weak due to low economic activity.The U.S. economy looks to be set for good growth in the next 6 months, helped by the continued stimulus package.The continued deficit issues make the back end of 2010 and 2011 much more hazy.
Although I have been selling down portfolio positions over the last week to bank some profits in stocks such as Coal of Africa (CZA), Intel (INTC) and Amgen (AMGN), any significant weakess in the markets is very much seen as a buying opportunity for favoured names. Certainly a trading market, not a buy and hold by any means!
Although I have been selling down portfolio positions over the last week to bank some profits in stocks such as Coal of Africa (CZA), Intel (INTC) and Amgen (AMGN), any significant weakess in the markets is very much seen as a buying opportunity for favoured names. Certainly a trading market, not a buy and hold by any means!
Coal of Africa positioned offloaded on share price strength
The holding in South African miner Coal of Africa was sold yesterday as the price surged to £1.53. The price is off nearly 5% today to £1.46 as commodity prices have been under pressure as the U.S. dollar has risen on the news that the Fed has tightened the discount window for emergency funds. CZA rose from around £1.30 earlier in the week and moved to a year high (marginally higher than the Vele mine approval news day). Although it is considered a great long term play, a 15% rise on no news is seen as a selling opportunity particularly given the U.S. and UK markets have shown a strong rally since early February. Overall Contrarian Investor has been trimming holdings on the market strength.
U.S. Federal Reserve in surprise increase in emergency loan rate
The FTSE 100 was recently up 8 points and Dow Futures were off 50 points on the news that the U.S. Federal Reserve was to begin lifting its benchmark lending rate earlier than previously thought. The Fed announced last night that it would lift the rate it charges banks for emergency loans by a quarter percentage point from 0.5% to 0.75%. It is considered unlikely that the more important Fed Funds rate will rise anytime soon as economic recovery is still weak.
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