The State Duma on Wednesday, July 25, generally adopted amendments to the advertising law, which, in particular, increase the limit on the length of advertising breaks on television channels from 9 to 12 minutes per hour. At the same time, the daily restriction remains – advertising still cannot allocate more than 15% of television broadcasting during the day.

The easing of restrictions on advertising breaks was sought by several large television holdings, which hope to increase their revenues through this, Vedomosti’s sources in media companies know.

TV and the Internet are the two largest media in Russia, and in some quarters the Internet has already overtaken TV channels in terms of advertising revenue. Advertisers spent 171 billion rubles on on-air promotion in 2017, which is 13% more than a year earlier, reported the Association of Communication Agencies of Russia (AKAR). The overwhelming majority of this amount goes through a single seller of TV advertising - the National Advertising Alliance (NRA), created by the largest Russian television holdings. The increase in advertising breaks is an initiative of this seller and its shareholders, a person close to the company confirmed to Vedomosti. The NRA does not comment on this.

For a seller, such a step looks like a 180-degree turn, employees of two advertising companies are surprised - before this, the NRA raised the cost of TV advertising for two years and convinced advertisers that airtime is an extremely valuable resource, the cost of which is constantly growing. Now, obviously, there will be more advertising time and its cost will decrease, they argue. In the fall of 2016, the NRA announced a new aggressive sales policy and a price increase of 15% in 2017; a year later, it announced an increase in the price of TV advertising by another 20%. This spring, NRA staff also talked about the next round of accommodation price increases in 2019.

Advertisers objected to the fact that Russian residents were starting to watch less TV and consumer demand was not growing, but in the end the majority agreed to pay more.

NRA raised prices because it responded to effective demand, explains the seller’s general director, Sergei Vasiliev. Price is just a tool, he reminds: “The seller’s task is to earn the channels as much money as possible. Obviously: the lower the price, the more accessible the product.” Slowing down inflation or even reducing the cost of TV advertising is beneficial to the entire market, Vasiliev is sure, especially since the economic situation remains difficult and TV channels need to strengthen their competitiveness compared to other promotion options, primarily points of sale. Vasiliev emphasizes that the NRA has not yet made a decision on the pricing policy for 2019.

Employees of TV channels and advertising groups interviewed by Vedomosti disagreed on whether channels could earn significantly more by increasing advertising breaks.

Skeptics point out that TV advertising already irritates viewers; even longer advertising breaks will only accelerate the decline in TV viewing, causing channel ratings and, accordingly, their revenues to decline. Additional time for advertising will not necessarily bring new budgets or new groups of advertisers to TV, say employees of two large television holdings. On the contrary, channels will begin to compete much more aggressively for monetization of the available inventory; individual companies may sharply reduce the cost of contacts, which will have a bad effect on the entire market, they fear.

TV channels will obviously begin to redistribute advertising inventory (the total number of possible contacts with viewers) from night time to day and especially in the evening, when the most viewers watch the broadcast and placement costs more, says OMD OM Vice President Olga Barskaya: this will bring 4 channels % of additional income. The ability to manage additional advertising minutes will improve the quality of placement on TV, agrees Vice President of Media Direction Group Ilya Gertsev, and it will be more difficult for the largest channels with their long-established broadcast network to adapt here than for small players. In general, he believes that the innovation is useful for both television companies and advertisers.

In many countries around the world, restrictions on the duration of advertising are higher than in Russia, says Olga Paskina, general director of the National Media Group, there is no direct connection between the limit and television viewing - most TV is watched in the United States, where up to 16 minutes per hour can be devoted to advertising. On the contrary, she is confident that increasing advertising time will allow channels to invest more in quality content, which should, in turn, attract a larger audience. TV in Russia is the most regulated media, Paskina points out, on the Internet there are no restrictions on displaying advertising, the number of online advertising is growing, but the Internet audience is not decreasing. Additional inventory on TV will not affect the growth of the online advertising market, Barskaya is sure.

TV channels will benefit from the availability of additional minutes for advertising, STS Media CEO Vyacheslav Murugov is confident: “We are ready to carefully experiment with the length of advertising breaks so that this does not irritate viewers and the advertising is effective.”

The representative of Channel One refused to comment, the representative of Gazprom Media was unable to promptly respond to the request, and it was not possible to contact the representative of VGTRK.

Advertising breaks will be a third longer