Analysis: What "No Billag" could mean for the Swiss advertising market

"No Billag" - and TV is losing massive relevance in the advertising market

Both in terms of social policy and media policy, the topic has been and continues to be dealt with widely and not too briefly, and is dominating the reporting of all the media as the voting date in early March approaches. However, we are particularly interested in what an acceptance of the No - Billag initiative would mean for the Swiss advertising industry - an aspect that has hardly been mentioned or thought through in the entire discussion.SRG finances various radio and TV programs with its total budget. German-speaking Switzerland subsidizes French-speaking Switzerland, Ticino and the Rumantsch-speaking part of Graubünden. SRG receives around CHF 1.2 billion from the fee pot. This corresponds to a share of 91%. These in turn account for around three quarters of SRG's total revenues. Or to put it another way: Only a quarter of the SRG's total budget is generated by advertising revenues.

A funding gap is to be feared

If the fees fall away, there will consequently be a large funding gap. It is an illusion to assume that this gap can be filled by additional advertising revenues - or do the advertisers suddenly want to pay a premium of 300% for the same service in order to close this gap? Or do the publishers want the SRG to be allowed online and radio advertising?35 private local stations (radio and TV stations) receive the remaining 9% from the fee pot, which amounts to a comparatively meager 60.75 million francs per year. Nevertheless, the fees account for an average of 50% of the total budget of the stations concerned. Since these stations have a limited catchment area and thus limited advertising potential, a subsidy freeze would mean the certain "end" for most stations. Only those regional stations that do not receive fees would have a chance of survival: for example, Tele Züri, Radio Lausanne FM or Radio Basilisk.If the hole created by the discontinuation of fees cannot be plugged by additional advertising revenue, the question also arises: How should a market be able to develop and how should new offerings be created if this market (based on the 2016 figures) is deprived of almost 60% of funds? Less money, but more supply?

Sports events: Free TV obligation under the law

The arguments of Billag opponents that SRG could monetize the biggest sporting events via pay TV are simply not true. The RTVG stipulates that they must be freely accessible. And a "No" to Billag changes nothing at all. Various private broadcasters have expressed interest in taking over ratings hits such as the Lauberhorn race, the Davis Cup and the Tour de Suisse. But who can afford the material, the human resources and the costs? SRG was able to cover just 17 % of the costs of the Winter Games in Sochi through TV spots and sponsoring (TA, 19.1.2018).

Reach and advertising revenues

For national campaigns, the medium of television, and SRG in particular, is of great importance: Hardly any other medium guarantees such a rapid build-up of coverage and such high reach as TV, and this with a relatively good cost-performance balance. In addition, TV also offers advantages in conveying emotional and/or complex messages that other media types cannot match. Without SRG or with a reduced SRG, however, certain media strategies can no longer be implemented, and the medium of TV loses its overall appeal.Advertising revenues and audience ratings are directly related: If ratings collapse due to a lack of viewers, the same will happen to advertising revenues, since these are based on the contact service provided. It is therefore illusory to believe that pay TV formats could compensate for the lack of fees. After all, if other countries continue to broadcast for free, why should Mr. and Mrs. Swiss spend money on Swiss pay TV?if not to SRG, then where does the advertising money that is freed up flow to? To Tamedia/Goldbach and thus to Germany? Maybe, but this is not thought through to the end either. The total achievable reach will fall, and the advertising blocks will become even longer (provided the legal framework permits this). TV will become uninteresting, especially for brands with high-quality positioning. And this will also be problematic for Tamedia/Goldbach.

Clear cutting in western Switzerland and Ticino

For the language regions of French-speaking Switzerland and Ticino, it will be bitter if the initiative is adopted: these are currently massively subsidized by the SRG, at the expense of German-speaking Switzerland. In French-speaking Switzerland, Swiss advertisers would still be able to implement TV campaigns on the advertising windows of foreign broadcasters (with the above-mentioned restrictions regarding reach), but in Ticino there would no longer be any Swiss TV advertising. This is because an acceptance of the No Billag initiative would certainly mean the end not only for the two SRG stations, but also for the regional station Tele Ticino.For international customers, this does not matter, they benefit from the overspill from abroad. For national customers, however, such as the retail trade, insurance companies, banks and health insurance companies, a weighty reach medium would be missing. But perhaps that would no longer be a problem. After all, SRG is also the largest employer in Ticino today. If it ceased to exist, the unemployment rate in Ticino would skyrocket, purchasing power would dwindle, and the consumer market would become less attractive. And what does a local customer do then? Instead of placing TV ads on a local station, he probably shifts his money to Google, Facebook & Co. In the local market, too, there is a danger that, if the initiative is accepted, foreign media will be promoted and the added value will no longer remain in Switzerland but flow abroad.

TV research massively endangered

Another important aspect is the entire research area. This is financed by a contribution from the proceeds of the levies on radio and television and the contributions of the broadcasters or marketers. Their contributions, in turn, depend on the market significance of the respective stations. Who would be able to bear the costs if the contributions from the Billag fees and the SRG broadcasters were to disappear? For media planning, this would mean that it would be deprived of the basis for serious planning if there were no data on the advertising performance of the individual stations. Even performance reviews, which are part of the market standard today, could no longer be carried out.Conclusion: Either SRG will not survive at all or it will become unattractive for the advertising industry. The TV advertising market is already under pressure and will become more difficult if the "Yes" massively lose relevance. Therefore we demand: #NoNoBillag!*The authors are holders of the Konnex Agency for Media Communication in Winterthur.