The Television Advertising Market: Off Limits to Small Business

July 2006
No. 16
Executive Summary
The Television Advertising Market:
Off Limits to Small Business
Meytal Snir
Koret-Milken Institute Fellow
About the Koret-Milken Institute Fellows Program
The Koret-Milken Institute Fellows Program accelerates Israel’s economic growth through innovative,
market-based solutions for long-term economic, social, and environmental issues. The program focuses
on connecting government, philanthropic, and business resources that are vital to national growth and
development.
Directed by the Milken Institute Israel Center, the Koret-Milken Institute Fellows Program awards
annual fellowships to outstanding graduates of Israeli and international institutes of higher education.
Fellows serve yearlong internships at the center of the nation’s decision-making—the Knesset,
government ministries, and other Israeli agencies—and aid policymakers by researching and
developing solutions for various economic and social challenges.
In addition, fellows craft their own policy studies aimed at identifying barriers to economic and
employment growth in Israel. The fellows’ studies, carried out under the guidance of an experienced
academic and professional staff, support legislators and regulators who shape the economic reality in
Israel. The program offers the ultimate educational exercise, combining real-life work experience with
applied research five days a week.
Throughout the year, fellows receive intensive training in economic policy, government processes, and
research methods. They acquire tools for writing memorandums, presentations, and policy papers, and
they develop management, marketing, and communication skills. The fellows participate in a weekly
workshop, where they meet senior economic and government professionals, business leaders, and top
academics from Israel and abroad. They also participate in an accredited MBA course that awards three
graduate-level academic credits that are transferable to other universities in Israel. The course, which
focuses on financial and economic innovations, is taught at the Hebrew University of Jerusalem’s
School of Business Administration by Professor Glenn Yago, Director of the Milken Institute Israel
Center and Director of Capital Studies at the Milken Institute in California.
Fellows Program alumni can be found in senior positions in the public and private sectors. Some
serve as advisers to government ministries while others work at private-sector companies or go on
to advanced studies at leading universities in Israel, the United States, and Great Britain. Within the
program’s framework, more than 80 research papers have been published, catalyzing reforms, reducing
barriers, bringing about economic growth, and improving the quality of life for Israeli citizens.
The Koret-Milken Institute Fellows Program is nonpolitical and nonpartisan. It is funded by the Koret
Foundation, the Milken Institute, and other leading philanthropic organizations and individuals in the
United States and Israel.
More about the program: www.kmifellows.org
Contact us: [email protected]
4HE 4ELEVISION !DVERTISING -ARKET
/FF ,IMITS TO 3MALL "USINESS
"Y -EYTAL 3NIR
+)%$& +ORET &ELLOW
!DVERTISING SHOULD BE AVAILABLE ON ALL TELEVISION BROADCAST MEDIUMS IN )SRAEL n
TELEVISION CABLE AND SATELLITE OUTLETS
%XPANDED BROADCAST ADVERTISING OPPORTUNITY IS THE ONLY WAY TO ENABLE SMALL
BUSINESSES AND MOST ADVERTISING AGENCIES TO COMPETE IN THE )SRAELI BROADCASTING
MARKET
#OMMERCIAL ADVERTISING SHOULD BE INITIATED IMMEDIATELY ON THE )SRAEL "ROADCASTING
!UTHORITY TO REDUCE OR ELIMINATE TELEVISION FEES AND GOVERNMENT SUBSIDIES AND TO
ENABLE THE CHANNEL TO AGAIN BE COMPETITIVE
)MMEDIATELY ALLOW ADVERTISING ON NICHE CHANNELS THAT CATER TO SPECIlC AUDIENCES
WITH COMMON CHARACTERISTICS INTERESTS OR NEEDS AND ON COMMUNITY CHANNELS AND
LOCAL NEWS PROGRAMS
#OMMENCE ADVERTISING ON ALL CABLE AND SATELLITE CHANNELS UPON THE EXPIRATION OF
THE CURRENT #HANNEL FRANCHISE
)NTRODUCTION
)N THERE WAS MILLION SPENT ON TELEVISION ADVERTISING IN )SRAEL -ORE THAN
OF THIS SUM WAS ON ONE STATION ALONE h#HANNEL v 3INCE #HANNEL HAS VIRTUALLY
COMPLETE CONTROL OF THE LOCAL TELEVISION ADVERTISING MARKET IT HAS SET HIGH ADVERTISING PRICES
THAT MAKE TELEVISION AN UNATTAINABLE MEDIUM FOR OF THE BUSINESSES IN )SRAEL !S A RESULT
CONSUMERS ARE ADVERSELY AFFECTED BECAUSE THEY PAY MORE FOR PRODUCTS AND SERVICES DUE TO THE
HIGH ADVERTISING COSTS AND SMALL AND MEDIUMSIZED BUSINESSES HAVE ESSENTIALLY NO OPPORTUNITY
TO ADVERTISE ON TELEVISION TO ATTRACT CUSTOMERS
"ACKGROUND
#HANNEL BEGAN BROADCASTING IN AS PART OF THE )SRAEL "ROADCASTING !UTHORITY )"!
THAT WAS ESTABLISHED IN *UNE OF AND FOR MANY YEARS WAS THE SOLE CHANNEL AVAILABLE TO THE
RESIDENTS OF )SRAEL
!UTHORIZED CABLE BROADCASTS WHICH BEGAN IN &EBRUARY BROUGHT )SRAELI VIEWERS AN
ARRAY OF CHANNELS FROM )SRAEL AND ABROAD #ABLE BROADCASTS ARE REGULATED AND SUPERVISED BY THE
-INISTRY OF #OMMUNICATIONS #OUNCIL FOR #ABLE 3ATELLITE "ROADCASTING THE #OUNCIL WHICH
WAS ESTABLISHED PURSUANT TO THE #OMMUNICATIONS ,AW "EZEQ AND "ROADCASTS OF )N #HANNEL OFlCIALLY COMMENCED BROADCASTING lNANCED BY COMMERCIALS AND
IT WAS AN INSTANT SUCCESS 4HE CHANNEL WHICH IS SUPERVISED AND MONITORED BY THE STATES
3ECOND !UTHORITY FOR 4ELEVISION AND 2ADIO WAS AWARDED AND OPERATED BY THREE FRANCHISEES
4ELAD +ESHET AND 2ESHET &OLLOWING A RENEWAL TENDER PUBLISHED IN ONLY TWO OF THESE
[1]
FRANCHISEES WERE AWARDED RENEWED FRANCHISES +ESHET "ROADCASTING ,TD AND 2ESHET !DDITIONAL
BROADCASTERS ARE THE )SRAEL .EWS #OMPANY ,TD lNANCED BY +ESHET AND 2ESHET AND )SRAEL
%DUCATIONAL 4ELEVISION lNANCED MOSTLY BY THE 3TATE OF )SRAEL
)N CONTRAST TO THE FORMIDABLE SUCCESS OF CABLE CHANNELS AND #HANNEL )"! BROADCASTS
HAVE LAGGED BEHIND 6IEWER RATINGS DECLINED AS THE )"!S DElCITS ROSE )N #HANNEL S
lRST YEAR OF OPERATION )"! HAD A DElCIT OF MILLION THAT WAS COVERED BY THE &INANCE
-INISTRY1 )"! SUBMITTED A BUDGET FOR WITH A PLANNED DElCIT OF .)3 MILLION ABOUT
MILLION2 )N .OVEMBER THE AVERAGE )"! RATING FOR PRIMETIME n WAS
ONLY COMPARED TO A RATING FOR +ESHET AND FOR 2ESHET ON #HANNEL 3
'IVEN THE POOR RATINGS HIGH DElCITS AND ADDITIONAL NATIONAL SUBSIDIES QUESTIONS BEGAN
BEING POSED REGARDING THE NECESSITY OF PUBLIC BROADCASTING AND ITS CONTINUED lNANCING BY
ANNUAL FEES PAID BY CITIZEN OWNING A TELEVISION SET $EMANDS TO CLOSE )"! OR CANCEL THE
TELEVISION FEES BECAME MORE FREQUENT 4HESE DEMANDS RESULTED IN THE ESTABLISHMENT OF A LONG
LINE OF COMMITTEES THROUGHOUT THE S AND INTO THIS CENTURY TO RECOMMEND STEPS TO REVAMP
THE )"! AND IMPROVE ITS OPERATIONAL EFlCIENCY
4HE 0ELED #OMMITTEE APPOINTED IN RECOMMENDED OPENING A NEW COMMERCIAL
CHANNEL THAT THE GOVERNMENT hDESIGNATEv A GROUP OF CHANNELS MEANT TO APPEAL TO PARTICULAR
AUDIENCES SUCH AS MUSIC !RAB LANGUAGE AND *EWISH HERITAGE STATIONS AND THE LICENSING
OF SATELLITE BROADCASTS &OLLOWING THE COMMITTEEgS DECISION A SECOND COMMERCIAL STATION
#HANNEL WAS LAUNCHED IN *ANUARY 4HE NEWLY LAUNCHED STATION FACED lNANCIAL
DIFlCULTIES ALMOST IMMEDIATELY AND DID NOT BEGAN TO SHOW SIGNS OF VIBRANCY UNTIL -ARCH 3ATELLITE BROADCASTS WERE ALSO INITIATED IN BY 9%3 A SUBSIDIARY OF "EZEQ UTILIZING
)SRAELgS !MOS SATELLITE 4HE SATELLITE BROADCASTS WERE SUPPOSED TO COMPETE WITH THE CABLE
COMPANIES AND lNANCING WAS RESTRICTED TO SUBSCRIPTION FEES 4ODAY THE BASIC MONTHLY PACKAGE
PRICE IS WITH VIEWERS PAYING MORE FOR OPTIONAL PACKAGES WITH PREMIUM CHANNELS 4 !S
RECOMMENDED BY THE 0ELED #OMMITTEE THE GOVERNMENT THE #OUNCIL FOR #ABLE 3ATELLITE
"ROADCASTING AND THE +NESSETgS &INANCE #OMMITTEE APPROVED lVE DESIGNATED CHANNELS TO
BE lNANCED BY COMMERCIALS 5 /NLY TWO SUCH CHANNELS 2USSIAN AND -USIC AS WELL AS A
3HOPPING #HANNEL ARE NOW OPERATING
)N SUMMARY THE LAWS IN )SRAEL DICTATE THE SOURCES OF lNANCING FOR THE THREE FORMS OF 46
BROADCASTING 4HE STATE )"! CHANNEL IS lNANCED BY AN ANNUAL .)3 6 TAX ON ALL OWNERS
OF 46 SETS AS WELL AS BY ADVERTISEMENTS DElNED AS SPONSORSHIPS AND LIMITED TO A SELECT
NUMBER OF ORGANIZATIONS OR COMPANIES PROMOTING THE PUBLIC GOOD THE COMMERCIAL STATIONS
#HANNELS AND AND THE DESIGNATED CHANNELS ARE lNANCED BY COMMERCIAL ADVERTISING
AND CABLE AND SATELLITE BROADCASTS ARE lNANCED BY MONTHLY SUBSCRIPTION FEES WITH THE PRICE
OF PACKAGES RANGING FROM TO 7 4HIS STRICT DIVISION IN lNANCING THE HOLY TRINITY
APPROACH OR MORE APPROPRIATELY THE UNHOLY TRINITY APPROACH REQUIRES EACH BROADCASTING
COMPANY TO lNANCE ITS OPERATION BY ONLY ONE METHOD 3UPPORTERS OF THIS APPROACH CLAIM THAT
A HOLY BALANCE IN lNANCING EXISTS AND IF THIS BALANCE WERE VIOLATED THE STRUCTURE OF )SRAELI
BROADCASTING WOULD COLLAPSE
4ELEVISION !DVERTISING
4HESE REGULATORY LIMITATIONS ON THE )SRAELI TELEVISION MARKET ARE UNPARALLELED ANYWHERE
[2]
IN THE WORLD #LUSTERS OF COMMERCIALS CAN BE BROADCAST ON #HANNELS AND AS WELL AS
ON AUTHORIZED hDESIGNATEDv CHANNELS WHEREAS ON CABLE AND SATELLITE STATIONS COMMERCIALS ARE
PROHIBITED BY THE #OMMUNICATIONS ,AW 8
,EGISLATION EXCLUDES THE CABLE AND SATELLITE BROADCASTERS FROM PARTICIPATING IN THE ADVERTISING
PIE DIVIDED CURRENTLY BETWEEN #HANNELS AND THE DESIGNATED CHANNELS AND A FEW FOREIGN
STATIONS !S SEEN IN 'RAPH THE PIE IS DOMINATED BY #HANNEL )N THE INCOME FROM
ADVERTISING ON #HANNEL ALONE WAS MILLION DOLLARS
'RAPH 4ELEVISION !DVERTISING 0IE 3OURCE (AARETZ *ANUARY CITING DATA OF )FAT !DVERTISING -ONITORING AND THE !SSOCIATION
OF !DVERTISERS
! NUMBER OF GOVERNMENT COMMITTEES APPOINTED OVER THE YEARS BY VARIOUS -INISTERS OF
#OMMUNICATION HAVE RECOMMENDED MAINTAINING THE BAN ON ADVERTISING ON CABLE AND SATELLITE
STATIONS 9 AND THE +NESSET HAS REJECTED BILLS AUTHORIZING SUCH ADVERTISING 10
)MPACTS OF THE !DVERTISING 2ESTRICTIONS
4HE HIGH COSTS OF TELEVISION ADVERTISING ARE ULTIMATELY PAID BY CONSUMERS ! SURVEY OF THE
MOST MEMORABLE COMMERCIALS IN VERIlES THAT MOST COST FROM MILLION PE TO OVER
MILLION PER COMMERCIAL 11 4HESE HIGH COSTS INmATE COMPANY ADVERTISING EXPENSES WHICH
WHEN ADDED TO OTHER PRODUCTION COSTS END UP INTO THE PRODUCT RETAIL PRICES #ONSEQUENTLY
CONSUMERS ARE PAYING HIGHER PRICES BECAUSE OF HIGH ADVERTISING COSTS 4HE ABILITY TO PASS
COSTS ON TO CONSUMERS IS DETERMINED IN PART BY THE AMOUNT OF COMPETITION BECAUSE SO FEW
COMPANIES CAN ADVERTISE THE ELASTICITY IN DEMAND IS LOW AND ABILITY TO PASS ON COSTS IS HIGH
[3]
.O #OMPETITION
)N ONLY )SRAELI COMPANIES ADVERTISED ON TELEVISION LESS THAN ONE PERCENT OF ALL
COMPANIES REGISTERED IN )SRAEL 12 4HESE COMPANIES ALONE ARE THE BENElCIARIES OF THE RESTRICTIONS
ON TELEVISION ADVERTISING !N EFFECTIVE ADVERTISING CAMPAIGN REQUIRES A MINIMAL INVESTMENT OF
IN 46 TIME NOT INCLUDING COMMERCIAL PRODUCTION COSTS 13 ONLY CAMPAIGNS THAT
INVEST OR MORE IN COMMERCIALS BROADCAST ARE INCLUDED IN THE LOCAL 6ISIBILITY )NDEX
WHICH MEASURES THE EFFECTIVENESS OF COMMERCIALS14 )N ADDITION COMMERCIAL PRODUCTION COSTS
VARY FROM TO 15 ! COMPANY MUST SPEND AT LEAST TO ADVERTISE ON
46 IN )SRAEL 3INCE ACCORDING TO ADVERTISING PROFESSIONALS 46 MAY CONSTITUTE TO OF
TOTAL ADVERTISING SPENDING THE TOTAL COST OF AN ADVERTISING CAMPAIGN INVOLVING 46 IS NORMALLY
APPROXIMATELY MILLION
,ARGE WELLKNOWN COMPANIES USUALLY INVEST TO OF THEIR REVENUE IN ADVERTISING
&OR EXAMPLE FASHION COMPANY &OX INVESTED APPROXIMATELY OF ITS REVENUE IN ADVERTISING
IN WHILE 3ANO DETERGENTS INVESTED OF IT REVENUE IN ADVERTISING16 )T IS REASONABLE TO
ASSUME THAT A SMALL LESS WELLKNOWN COMPANY WOULD NEED TO INVEST BETWEEN TO OF
ITS REVENUE IN ADVERTISING BOTH BECAUSE IT HAS NO OR MINIMAL NAME RECOGNITION AND ITS TOTAL
SALES REVENUE IS LOWER 3INCE AN ADVERTISING CAMPAIGN THAT INCLUDES TELEVISION COMMERCIALS
COSTS AT THE VERY LEAST MILLION A COMPANY MUST HAVE REVENUES OF A MINIMUM OF MILLION IN ORDER TO INVEST IN A SINGLE TELEVISION CAMPAIGN WITH NO ASSURANCE OF SUCCESS )N
ESSENCE OF ALL BUSINESSES IN )SRAEL ARE BARRED FROM ADVERTISING ON TELEVISION !DVERTISING !GENCIES
)N ADVERTISING AGENCIES OPERATED IN )SRAEL PLACING ADS IN VARIOUS MEDIA /F
THAT TOTAL LARGE AGENCIES CONTROL OF THE TELEVISION MEDIA OPERATIONS .OT ONLY
ARE SMALL AND MEDIUMSIZED ENTERPRISES BARRED FROM ADVERTISING ON 46 BECAUSE OF THE HIGH
COSTS BUT SMALL AND MEDIUMSIZED ADVERTISING AGENCIES ARE UNABLE TO COMPETE FOR TELEVISION
ADVERTISING BUSINESS AND ARE COMPELLED TO MAKE DO WITH OPERATING IN OTHER LESS LUCRATIVE
MEDIA MARKETS %XPANDING THE NUMBER OF TELEVISION ADVERTISING TO SMALLER ADVERTISERS WOULD
IN ALL LIKELIHOOD INCREASE OPPORTUNITIES FOR SMALL ADVERTISING AGENCIES
,ACK OF #HOICE
,IMITING ADVERTISERS ON TELEVISION MEANS LIMITED OR DISTORTED INFORMATION TO CONSUMERS )N
OF THE HOUSEHOLDS IN )SRAEL MILLION HOUSEHOLDS THERE IS AT LEAST ONE TELEVISION SET AND AVERAGE VIEWING TIMES ARE SIX HOURS A DAY 4ELEVISION THEREFORE HAS NO SIGNIlCANTLY MEDIA
COMPETITION FOR THE FREE TIME OF )SRAELI CITIZENS 0RODUCTS NOT ADVERTISED ON TELEVISION HAVE
DIFlCULTY ACHIEVING CONSUMER AWARENESS )F A 46 CONSUMER SEEKS AN ALTERNATIVE PRODUCT HE
EITHER SPENDS TIME AND MONEY SEARCHING FOR LESS EXPENSIVE COMPETITORS OR SPENDS THE MONEY
PURCHASING THE MORE EXPENSIVE PRODUCT ADVERTISED
&INALLY #HANNEL BROADCASTS NATIONWIDE TO THE GENERAL PUBLIC WITH LIMITED SPECIALIZED
PROGRAMMING !DVERTISERS INTERESTED IN REACHING A SPECIlC AUDIENCE MUST ADVERTISE NATIONALLY
AND PAY HIGH ADVERTISING RATES #ABLE AND SATELLITE CHANNELS POTENTIALLY OFFER TARGETED ADVERTISING
TO PARTICULAR AUDIENCES ON SPECIALIZED CHANNELS
[4]
(ARM TO )SRAELI -ANUFACTURERS
)SRAELS CABLE AND SATELLITE COMPANIES BROADCAST FOREIGN CHANNELS FROM AROUND THE WORLD
AND ADVERTISEMENTS OF FOREIGN COMPANIES PLACING )SRAELI COMPANIES THAT ARE NOT PERMITTED TO
ADVERTISE ON THESE CABLE CHANNELS AT A COMPETITIVE DISADVANTAGE &OR EXAMPLE INTERNATIONAL
COMPANIES SUCH AS #OCA #OLA AND -C$ONALDS WHO DO BUSINESS IN )SRAEL ARE EXPOSED TO )SRAELI
VIEWERS WHILE THEIR )SRAELI COMPETITORS 0RIGAT AND "URGER 2ANCH ARE NOT ALLOWED TO ADVERTISE
THEIR PRODUCTS ON CABLE
3OME )SRAELI COMPANIES ATTEMPT TO BYPASS THE REGULATORY BAN BY ADVERTISING ON FOREIGN
CHANNELS HOWEVER THEIR ADVERTISING BUDGETS ARE INVESTED IN FOREIGN STATIONS AND FOREIGN
ADVERTISING AGENCIES RATHER THAN INVESTING IN )SRAELI STATIONS AND ADVERTISING AGENCIES 4HUS THE
BAN ON 46 ADVERTISING ON CABLE HURTS LOCAL INDUSTRY TWICE OVER BY FAVORING FOREIGN COMPANIES
AND BY TRANSFERRING EXPENDITURES ABROAD
!DVERTISING #AN 2EDUCE 3UBSCRIPTION &EES
!DVERTISING ON CABLE AND SATELLITE CHANNELS WOULD INCREASE SIGNIlCANTLY THE INCOME OF THE
CABLE AND SATELLITE COMPANIES AND WOULD ENCOURAGE COMPETITION TO REDUCE SUBSCRIPTION FEES
)N )SRAEL SUBSCRIPTION FEES ARE OF THE AVERAGE WAGE WHILE IN THE 53 AND 5+ THEY ARE ONLY
AND RESPECTIVELY )NTERNATIONAL /VERVIEW
)SRAEL IS THE ONLY 7ESTERN COUNTRY WITH SUCH A LIMITED NUMBER OF COMMERCIAL CHANNELS )T
IS ALSO THE ONLY COUNTRY IN WHICH MORE THAN OF ADVERTISING SUMS ARE INVESTED IN A SINGLE
CHANNEL
4HE MAJORITY OF %UROPEAN COUNTRIES OPERATE PUBLIC BROADCASTING STATIONS THAT ARE lNANCED
BY 46 FEE PAYMENTS SIMILAR TO THE )"! IN )SRAEL 9ET THESE BROADCASTS HAVE A MARKET SHARE THAT
IS ON AVERAGE THREE TIMES THAT OF )"!S #HANNEL IN )SRAEL AS SHOWN IN 4ABLE 4ABLE -ARKET 3HARE OF 0UBLIC "ROADCASTING IN %UROPE
#OUNTRY
$ENMARK
5+
0OLAND
"ELGIUM
3WEDEN
)TALY
3PAIN
)SRAEL
2ATING
3OURCE -ARKET SURVEY BY THE %UROPEAN #ENTER FOR -EDIA 3URVEYS IN (ALEVI $WECK !SSOC
3UPPORTING )SRAELI &ILMMAKING4URNING THE !UTHORITY FROM A 0RODUCTION (OUSE TO A "ROADCASTING (OUSE IN
4ELEVISION *ERUSALEM (ALEVI $WECK #O P ;(EBREW=
-OREOVER IN MANY %UROPEAN COUNTRIES AS SHOWN IN 4ABLE PUBLIC CHANNELS ARE ALSO
lNANCED BY COMMERCIALS THUS REDUCING THE FEE BURDEN ON THE CITIZENS
[5]
4ABLE !DVERTISING AND 46 &EES FROM 4OTAL "UDGETS OF 0UBLIC #HANNELS 3ELECTED
%UROPEAN #OUNTRIES
#OUNTRY
Albania
Czech Republic
France
Germany
Hungary
Italy
Poland
Macedonia
Latvia
Romania
Slovenia
Turkey
UK - BBC
UK – Channel 4
Israel (IBA)
0ERCENTAGE OF LICENSE FEE
lNANCING
0
66.7
64.8
94.0
0
55.2
31.9
80.2
0
75.5
72.8
53.7
94.0
0
80
0ERCENTAGE OF ADVERTISING AND
SPONSORSHIP lNANCING
8.6
29.1
30.3
6.0
12.0
38.8
56.3
12.1
43.0
8.38
16.5
10.4
0
100
0.7
3OURCE #ARMELA 9ISRAELI )"! COMMISSIONER IN CHARGE OF IMPLEMENTATION OF THE &REEDOM OF
)NFORMATION ,AW LETTER TO AUTHOR &EBRUARY /THER COUNTRIES 4ELEVISION ACROSS %UROPE
2EGULATION 0OLICY AND )NDEPENDENCE n 2EPORTS HTTPWWWSOROSORGINITIATIVESMEDIA
ARTICLES?PUBLICATIONSPUBLICATIONSEUROTV?SUMMARY?PDF PAGES -ARCH )N ADDITION IN 7ESTERN COUNTRIES ADVERTISING IS SPREAD OVER NUMEROUS CHANNELS INCLUDING
CABLE AND SATELLITE )N THE 53 THE TELEVISION ADVERTISING PIE IS DIVIDED BETWEEN HUNDREDS OF
STATIONS 4HE ADVERTISING SHARE OF CABLE CHANNELS OUT OF THE TOTAL ADVERTISING PIE IS ABOUT
)N THE 5+ WITH DOZENS OF COMMERCIAL CHANNELS INCLUDING LOCAL OUTLETS THE
ADVERTISING SHARE OF CABLE AND SATELLITE CHANNELS IN WAS NEARLY !NOTHER EXAMPLE IS 3LOVENIA A SMALL COUNTRY WITH A POPULATION OF MILLION IN AND A '$0 OF BILLION IN THAT UNTIL THE S WAS UNDER SOCIALIST RULE ,IKE
)SRAEL AT THE BEGINNING OF THE S TELEVISION BROADCASTING WAS ONCE EXCLUSIVELY PUBLIC AND
GOVERNMENT CONTROLLED #URRENTLY OF 3LOVENIAN HOUSEHOLDS HAVE AT LEAST ONE TELEVISION
SET WITH CHANNELS AIRING COMMERCIALS OPERATED BY FRANCHISERS &IVE STATIONS HAVE A
VIEWING SHARE OF OF THE POPULATION
/NE WAY TO COMPARE ADVERTISING COSTS IN DIFFERENT COUNTRIES IS BASED ON ADVERTISING AS A
PERCENTAGE OF '$0 4ABLE SHOWS TELEVISION ADVERTISING SPENDING IN SEVERAL %UROPEAN COUNTRIES
AS A PERCENTAGE OF THEIR '$0 )T IS EVIDENT THAT )SRAEL IS FAR BEHIND AS THE CONTRIBUTION OF
[6]
THE TELEVISION ADVERTISING MARKET TO THE '$0 IS MUCH GREATER IN THESE COUNTRIES /NE OF THE
POSSIBLE EXPLANATIONS IS THE PROFUSION OF COMMERCIAL CHANNELS IN THESE COUNTRIES AS COMPARED
TO )SRAEL #LEARLY GROWTH IN THE TELEVISION ADVERTISING MARKET CAN CONTRIBUTE TO THE GROWTH
POTENTIAL OF AN ENTIRE ECONOMY
4ABLE 46 !DVERTISING AS OF '$0 57BEWFSUJTJOH
BTWPG(%1
0.73%
0.82%
0.41%
0.39%
0.40%
1.60%
0.54%
0.62%
0.60%
0.39%
0.43%
0.41%
0.29%
0.20%
$PVOUSZ
Italy
Hungary
Germany
UK
France
Turkey
Slovenia
Croatia
Latvia
Czech Rep.
Estonia
Poland
Bulgaria
Israel
3OURCES '$0 DATA IS BASED ON THE #)! 7ORLD &ACTBOOK HTTPWWWGEOPLACECOM
HOTTOPICS#)!WFBFACTBOOKlELDSHTML *UNE !DVERTISING DATA IS BASED ON 4ELEVISION
ACROSS %UROPE 2EGULATION 0OLICY AND )NDEPENDENCE n 2EPORTS HTTPWWWSOROSORGINITIATIVES
MEDIAARTICLES?PUBLICATIONSPUBLICATIONSEUROTV?SUMMARY?PDF *UNE
P !NOTHER METHOD OF COUNTRY COMPARISON IS THE #04 #OST 0ER 4HOUSAND INDEX USED TO
CALCULATE ADVERTISING COSTS PER VIEWERS
#HANNEL HAS AN AVERAGE OF VIEWERS DURING PRIMETIME AND THE COST OF A
COMMERCIAL SPOT IS 4HIS MEANS THAT THE #04 IS &OR THE SAKE OF COMPARISON
THE 3UPER "OWL THE 53 SPORTS EVENT WITH THE HIGHEST ANNUAL VIEWER RATING HAD AN
ESTIMATED COST OF ADVERTISING OF APPROXIMATELY MILLION PER SPOT 4HE NUMBER OF 3UPER
"OWL VIEWERS IN WAS MILLION "ASED ON THESE lGURES THE #04 FOR THE 3UPER "OWL
WAS WHICH IS IDENTICAL TO PRIMETIME ADVERTISING ON A REGULAR DAY ON #HANNEL !NOTHER
EXAMPLE IS ADVERTISING COSTS ON LOCAL CHANNELS IN THE 5+ /N THE 5+gS CTV CHANNEL AN
ADVERTISER CAN ENJOY A #04 COST OF ONLY 'RAPH ILLUSTRATES THE #04 lGURES FOR VARIOUS
STATIONS
[7]
'RAPH #04 #OMPARISON )T IS ALSO POSSIBLE TO ADVERTISE IN THE 53 AT LOW PRICES ! BUSINESS OWNER IN CENTRAL #ALIFORNIA
CAN ADVERTISE ON PRIME TIME TELEVISION ON A POPULAR CHANNEL SUCH AS %30. AT A TOTAL COST OF
PER ADVERTISEMENT AND ON "RAVO CHANNEL FOR WITH PRICES LOWER FOR SMALLER AREAS #OMMUNITY ,OCAL .EWS #HANNELS
!N )SRAELI BUSINESS WITH AN ANNUAL TURNOVER OF LESS THAN MILLION OR A BUSINESS THAT
EMPLOYS LESS THAN WORKERS IS DElNED AS A SMALL BUSINESS "ASED ON THE NUMBER OF EMPLOYEES
SMALL BUSINESSES CONSTITUTE OF ALL BUSINESSES IN )SRAEL 4HESE BUSINESSES EMPLOY OF
THE TOTAL )SRAELI WORKFORCE 29
4HE MOST COMMON ADVERTISING OUTLETS FOR SMALL BUSINESSES IN )SRAEL ARE LOCAL NEWSPAPERS
LOCAL RADIO AND PUBLIC ADVERTISEMENTS ON SIGNS AND BILLBOARDS THROUGHOUT A CITY 4ELEVISION IS
NOT A VIABLE ADVERTISING MEDIA FOR LOCAL BUSINESSES
)N A STUDY WAS CONDUCTED IN DIFFERENT REGIONS OF THE 53 FOCUSING ON THE
SUBSTITUTABILITY OF ADVERTISING IN LOCAL NEWSPAPERS LOCAL RADIO AND LOCAL TELEVISION STATIONS
30
4HE STUDY FOUND THAT NEITHER RADIO NOR NEWSPAPER ADVERTISING CONSTITUTES AN ALTERNATIVE
TO TELEVISION ADVERTISING 4HE LIMITATIONS ON 46 ADVERTISING IN )SRAEL PREVENT SMALL BUSINESSES
FROM UTILIZING ADVERTISING OPTIONS THAT ARE AVAILABLE TO MOST SMALL BUSINESSES IN THE WORLD
#OMMUNITY BROADCASTS ON CABLE AND SATELLITE CHANNELS AND LOCAL NEWS SHOWS ON CABLE
SHOULD PROVIDE A VIABLE ADVERTISING OPTION FOR SMALL AND LOCAL BUSINESSES SINCE THEY ARE REGION
SPECIlC )NTERNATIONAL SURVEYS INDICATE THAT IN SOME COUNTRIES SUCH AS THE 53 AND 'ERMANY
ADVERTISING IS BANNED ON COMMUNITY CHANNELS WHILE IN OTHER COUNTRIES SUCH AS THE 5+ AND
THE .ETHERLANDS ADVERTISING IS PERMITTED ON THESE CHANNELS 9ET IN ALL THESE COUNTRIES n UNLIKE
IN )SRAEL THERE IS A TELEVISION ADVERTISING ALTERNATIVE FOR SMALL BUSINESS AS ADVERTISEMENTS ARE
ALLOWED ON LOCAL CHANNELS OR DURING LOCALADVERTISING TIMES
[8]
2ECOMMENDATIONS
/PENING THE ADVERTISING MARKET TO THE VAST MAJORITY OF BUSINESSES IN )SRAEL WILL INTRODUCE
NEW FACTORS INTO THE MARKET AND REDUCE THE DEPENDENCY OF TELEVISION ADVERTISING ON A SMALL
NUMBER OF LARGE ADVERTISERS )T IS UNLIKELY TO CAUSE THE COLLAPSE OF EXISTING COMMERCIAL CHANNELS
4HIS SYSTEM IS WELLESTABLISHED AND SUCCESSFUL IN MANY COUNTRIES THROUGHOUT THE WORLD
)N ORDER TO IMPROVE THE TELEVISION ADVERTISING MARKET IN )SRAEL WE RECOMMEND
)SRAEL "ROADCASTING !UTHORITY n #OMMERCIAL ADVERTISING SHOULD BE PERMITTED AND THE
46 FEE AND TAXPAYER lNANCING VIA THE STATE BUDGET SHOULD BE REDUCED OR ELIMINATED 4HE
)"! IS THE SENIOR BROADCASTER IN )SRAEL WITH A RICH ARCHIVE THAT COUPLED WITH OTHER ADVANTAGES
AND NEW INCOME SOURCES FROM ADVERTISING CAN UPGRADE ITS PROGRAMS AND IMPROVE ITS VIEWER
RATINGS
#ABLE 3ATELLITE n #ABLE AND SATELLITE CHANNELS SHOULD BE OPENED TO ADVERTISING IN TWO
STAGES
&IRST IMMEDIATELY ALLOW ADVERTISING ON NICHE CHANNELS THAT CATER TO A SPECIlC AUDIENCE
WITH COMMON CHARACTERISTICS INTERESTS OR NEEDS
3ECOND OPEN ALL CABLE AND SATELLITE CHANNELS TO ADVERTISING 4HIS SHOULD BE DONE GRADUALLY
AFTER THE lRST TO ENABLE THE OTHER STATIONS AND OWNERS TO PREPARE FOR THE STRUCTURAL CHANGE IN
THE MARKET
#OMMUNITY AND ,OCAL .EWS #HANNELS n #OMMUNITY AND LOCAL NEWS PROGRAMMING
SHOULD BE ALSO BE OPENED TO ADVERTISING IMMEDIATELY 4HUS SMALL BUSINESSES WILL HAVE
ADDITIONAL ADVERTISING OPPORTUNITIES AND LOCAL BROADCASTS WILL HAVE ADDITIONAL RESOURCES TO
UPGRADE PROGRAMMING AND REDUCE THEIR DEPENDENCY ON THE CABLE AND SATELLITE COMPANIES
)MPLEMENTATION OF THESE RECOMMENDATIONS WILL STIMULATE VIGOROUS GROWTH IN A MARKET THAT
ESSENTIALLY HAS BEEN CONTROLLED BY A SMALL NUMBER OF ADVERTISERS AGENCIES AND BROADCASTERS
#OMPETITION AND ONLY COMPETITION IN TELEVISION ADVERTISING CAN BRING ABOUT FAIR TELEVISION
ACCESS PRICING AND OPPORTUNITY FOR OF THE BUSINESSES IN )SRAEL CABLE AND SATELLITE
FRANCHISEES OF )SRAELS ADVERTISING AGENCIES RETAILERS AND MILLION )SRAELI CONSUMERS
!FTER ALL FOR WHOSE BENElT DOES TELEVISION CABLE AND SATELLITE BROADCASTING EXIST IN )SRAEL
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(AARETZ *UNE (ALEVI $WECK !SSOC 3UPPORTING )SRAELI &ILMMAKING 4URNING THE !UTHORITY FROM A 0RODUCTION
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'OVERNMENT DECISIONS REGARDING DESIGNATED CHANNELS $ECISION NO OF DECISION NO
OF DECISION NO OF #OUNCIL FOR #ABLE 3ATELLITE "ROADCASTING
2EPORT FOR P HTTPWWWMOCGOVILNEWHEBREWINDEXHTML &EBRUARY #ARMELA 9ISRAELI )"! COMMISSIONER IN CHARGE OF IMPLEMENTATION OF THE &REEDOM OF )NFORMATION
,AW LETTER TO THE AUTHOR &EBRUARY (OT #ABLE COMPANY &EBRUARY PRICE LIST &IGURES IN 53$ ARE FROM HTTPWWWOANDACOM
CONVERTFXHISTORY MONTHLY AVERAGE FOR &EBRUARY #OMMUNICATION "EZEQ AND "ROADCASTING ,AW OF P CLAUSE E
0UBLIC #OMMISSION FOR %XAMINATION OF !DVERTISING ON 4ELEVISION AND #ABLES )SH(OROWITZ
#OMMITTEE 2EPORT 2ECOMMENDATIONS *ERUSALEM -INISTRY OF #OMMUNICATIONS *ULY [9]
#OMMITTEE FOR %XAMINATION OF )NTRODUCING #OMMERCIAL !DVERTISING IN 4ELEVISION AND #ABLE
3HECHTER #OMMITTEE 2EPORT 2ECOMMENDATIONS *ERUSALEM -INISTRY OF #OMMUNICATIONS !UGUST
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0 SUBMITTED BY -+ -EIR 3HEETRIT 0 SUBMITTED BY -+S %ITAN #ABLE AND 3HALOM
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'LOBES &EBRUARY 11
2EGISTRAR OF #OMPANIES HTTPWWWJUSTICEGOVIL-/*(EB2ASHAM(ACHVAROT3TATISTIKAHTM -ARCH 12
-EDIA lGURE WHO WISHES TO REMAIN ANONYMOUS TELEPHONE INTERVIEW
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'LOBES *ANUARY 14
9OSSI "EN4OV OF "EN4OV(ERMAN SOCIAL POLICY ADVERTISERS TELEPHONE INTERVIEW WITH THE AUTHOR
&EBRUARY 15
-AYA SYSTEM HTTPMAYATASECOILBURSAINDEXIMPTODAYHTM -ARCH 16
2UTH &RIDMAN v$IGEST OF $ATA &ILE 3MALL AND -EDIUMS 3IZED "USINESS IN )SRAELv )SRAEL 3MALL AND
-EDIUM %NTERPRISES !UTHORITY 3EPTEMBER HTTPWWWASAKIMORGILUPLOADFRIDMAN
NEWPDF -ARCH 17
"ASED ON SOFTWARE DATA OF )FAT !DVERTISING -ONITORING HTTPPIRSUM(OME0AGE
,OGINASP -ARCH 18
)BID
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)SRAEL !UDIENCE 2ESEARCH "OARD )!2" HTTPWWWMIDRUGTVORGILSCRIPTSPUBLICASP -ARCH
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#ALCULATIONS WERE PERFORMED ACCORDING TO THE 53$ 0OUND 3TERLING EXCHANGE RATE AT HTTPWWW
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-ARCH #ABLE PRICES IN THE 5+ FROM 5+S .4, #ABLE COMPANY HTTPWWWHOMENTL
COMICATTELEVISION -ARCH 21
"ASED ON #ABLETELEVISION !DVERTISING "UREAU 46 -ARKET 3HARE 2EPORTS HTTPWWWONETVWORLD
ORGMODULEDISPLAYSTORYSTORY?IDFORMATHTML &EBRUARY 22
"ASED ON 4ELEVISION ACROSS %UROPE 2EGULATION 0OLICY AND )NDEPENDENCE 5NITED +INGDOM HTTP
WWWEUMAPORGTOPICSMEDIATELEVISION?EUROPE -ARCH 23
"ASED ON )SRAEL !UDIENCE 2ESEARCH "OARD )!2" HTTPWWWMIDRUGTVORGILSCRIPTSPUBLICASP
-ARCH 24
HTTPMONEYCNNCOMNEWSFORTUNESUPERBOWL?ADS -ARCH 25
.IELSEN -EDIA 2ESEARCH 6.5S -EDIA -ARKETING 'UIDE FOR THE 3UPER "OWL HTTPWWW
EVERYONECOUNTSTVFACTSHEETDOCUMENTSCHARTS?SBPDF -ARCH 26
CTV PRICE LIST FOR COMMERCIALS HTTPWWWCTVTVRATECARDHTML -ARCH 27
HTTPWWWSPOTRUNNERCOM /62!7CABLETVADVERTISING/6+%9ADVERTISINGCA
BLETV/6-4#STANDARD -ARCH 28
HTTPWWWASAKIMORGILUPLOADFRIDMANNEWPDF July 2006)
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3EE # !NTHONY "USH /N THE 3UBSTITUTABILITY OF ,OCAL .EWSPAPER 2ADIO AND 4ELEVISION !DVERTISING
IN ,OCAL "USINESS 3ALES 7ASHINGTON $# &EDERAL #OMMUNICATIONS #OMMISSION 3EPTEMBER
[ 10 ]
FELLOWS Koret
PROGRAM Milken Institute
‫תוכנית עמיתי קורת — מכון מילקן‬
13 ‫ רחוב תל חי‬,‫בית מילקן‬
97102 ,‫ירושלים‬
[email protected]
www.kmifellows.org