Advertising in foreign channels of domestic content on local Cable TV in Jamaica

Posted on June 8, 2008 by Rodger McKenzie

The latest developments in the market

Broadcasting Commission of Jamaica (BCJ) tells Flow it must cease all local adverts on foreign cable channels.

Earlier but similar concerns regarding cable operators and advertising

In 2006 regarding “Laws Coming to Allow Cable Operators to Advertise”, Mr. Whiteman pointed out that:

“although the Media Association of Jamaica (MAJ), which represents free-to-air television and radio stations, had been very concerned about giving this access to cable operators and independent programme producers, it was his view that they came to a point where “a decision had to be taken”.

The Caribbean Media Conference & Expo 2007

“Conversion: It changes everything. The term “paradigm shift” is overused, but conversion of technology fits the bill.”

“At the fundamental level of the legal and regulatory framework, convergence can be expected to change the rules of engagement between regulator and regulated, the market, and dynamics of relations between citizen, customer, consumer and service providers/vendors.”

“Products that are able to transcend national borders.”

“ability to by-pass conventional networks, standard systems of delivery and many regulatory controls.”

Above are just a few quotes from Presenter Cordel Green from the Caribbean Media Conference 10/11/2007 from his presentation titled “The Legal and Regulatory Framework for the New Media Environment”.

While sitting next to an aspiring entrepreneur at this expo I was totally unaware of who the presenter was and the content he had prepared and was presenting. The speaker’s name I discovered was a Mr. Cordel Green.

While listening to Mr. Green make is presentation and not knowing who he was or his profession prior to his speech, I told the young man sitting next to me that “When I go up to speak next, what I will say, will make much of what Mr. Green has said virtually obsolete”. Of course this young entrepreneur was rather surprised by my bold claims.

During my presentation entitled “How “Cutting Edge” Technology is supporting the growth of the Media & Entertainment Industries” I stated that local companies can affordably advertise a 30-second TV commercial on major U.S TV broadcast and cable networks.

Local advertisement on cable networks such as CNN, FOX, ABC, and NBC, to name a few, may be able to be seen in Jamaica, if the feed was the same as in the state these channels were being broadcast.

However, the primary objective was not to pay to simply have a local advertisement appear in a U.S cable feed in Jamaica, but to be able to target the Jamaican Diaspora or niche U.S market of interest for Jamaican advertisers.

Having completed my presentation there was a question and answer session. I raised the point again that local advertisers would be able to advertise their local TV commercials on major U.S cable networks and channels such as CNN, Travel channel, NBC, and ABC just to name a few.

Such advertisements may also appear on local cable TV with U.S content feed originating from the States. This form of advertisement would prove to be for less money than if they were to advertise on the traditional free to air stations over the same period of time.

Such an advertisement, depending on the price point, would allow up millions impressions while ad ran for 2 or 12 weeks depending of package of choice. Packages started as low as US$2,000 for a 2 week ad campaign and as high as US$80,000 for a 12 week campaign featuring anywhere from 700 to 2,000 ad spots and 2.5 million to 4.5 million impressions or more.

I then pointed out that if a Jamaican in the USA were to see a local ad on a CNN feed, and that same CNN feed were to be in Jamaica, then that local advertisement may also reach the local population as well.

After taking several questions from not only Mr. Green but others who were very skeptical. They could not see how that was possible. It was the first time anyone in the room to my knowledge had heard of such a service.

After the Caribbean Media Conference & Expo 2007, Mr. Green and myself spoke one on one and I accepted his business card. I was soon to discover that Mr. Green is an Executive Director at the BCJ.

Mr. Green holds a Bachelor of Arts Degree (Hons.), Bachelor of Laws Degree (Hons.) from the University of the West Indies. A Master of Laws Degree with distinction, from the University of Sheffield in England, and a Master of Business Administration (MBA) degree in Public Sector Management from the Mona School of Business.

I shall now take this opportunity to address Mr. Green’s presentation made during the Caribbean Media Conference & Expo 2007, and make any correlation and or parallels that may exist with the latest episode of the BCJ and Flow.

Slide 23/57

Key Media Policy Issues

CABLE INDUSTRY AND ADVERTISING

“Indeed, the development and rapid spread of cable and satellite television can be attributed at least in part to the market failures inherent in over-the-air, advertiser-supported television.

Economists have long debated how advertising should be treated in a rational-choice framework.”

It is amazing to see the speaker point out market failure from an economist perspective. Clearly stating that market failure helped in the development of cable and satellite television’s rapid spread via in part of the market failure of Free to Air TV broadcast.

However the very speaker Mr. Cordel Green, Executive Director at the BCJ, could not understand during the Q & A session of my presentation the same as it relates to market failure in options for businesses to advertise in foreign based content in a local cable company to maximize their advertising dollars in their attempts to reach their desired audience hence market of interest.

Though in slide 22/57 Mr. Green stated “Cable advertising is not intended to counter over the air tv advertising – the markets are different; we are targeting local content creators”

Slide 24/57

Key Media Policy Issues

CABLE INDUSTRY AND ADVERTISING

“To the extent that broadcasters cannot deliver the optimal type and amount of programming to viewers, other firms may develop innovations allowing viewers to purchase more preferred programming directly from providers.

Possibly because the broadcast networks forgo advertising unfriendly program content, the cable channel HBO responds with a deliberate counter-programming niche strategy, explicitly airing programming with “darker” and “more difficult” advertising unfriendly content.”

The speaker appears to be well aware of the role market failure contributed in the rapid spread of cable and satellite TV. He is also well informed and well aware that Free to Air TV broadcasters may not be able to deliver the optimal type and advertising options for local advertisers, and what role other firms may play in solving such a problem via market failure. Thus other firms may develop innovations to provide such a service where the market once failed in doing so.

It would be hard to imagine that an advertiser seeking to forgo advertising on the current model available and seeking to maximize his or her advertising dollar on a new model as in the case of Flow testing a new service and niche strategy advertising options.

The advertiser may very well want to take advantage of such an opportunity. The BCJ thus creates market failure, stifles innovation, and as a result promotes market inefficiency in not allowing Flow the ability to currently offer such a service.

Of course Free to Air stations would stand to gain on such a ruling. But anyone with a basic understanding of free market economics will point out to you that such actions will hurt competition in the market.

Slide 36/57

Key Media Policy Issues

POLICY-MEDIA OWNERSHIP

Consolidation of the media industry

“There is cross media ownership in Jamaica, as evidenced

by the RJR, Gleaner and CVM Groups. As with all

aggregated ‘vertically integrated’ media, there is a risk of

conflict of interest in cross promotional situations.

There are signs that the market will aggregate. Content

sharing, media ownership will become more open and the

influence of new operators in the marketplace is bound to

have an effect.”

The speaker did appear to have grave concerns on the topic of conflict of interest in respect to media ownership consolidation as he wrote the text in red. This is good information and is obvious to anyone in the industry.

However what is alarming is that if this is an important concern to the speaker at a regional conference, he must have also been aware of the content in slide 23/57 and the fact that he addressed the issue of advertising on cable TV and the dependence of Free to Air TV stations on advertising.

The speaker should, if not, be well aware that allowing Cable TV full freedom to advertise may lead to the demise of the current economic model that Free to Air TV stations are based on. Thus consolidation would more likely be an option for survival if such entities wish to remain in the game as new operators in the market were bound to have an effect.

Market Failure

The speaker clearly understands some aspect of economics as he stated in earlier slides within his presentation the impact market failure has in the rapid spread of cable TV and satellite TV.

Thus limiting Flow’s ability to offer local advertisement in foreign content results in protection of the Free to Air TV stations business model based on advertising. This goes counter to his point of the role of market failure and the positive spin offs being the rapid spread of cable TV, and satellite TV.

Using the same principle by not allowing Flow, but most importantly local advertiser’s the ability to target their advertisement to niche consumers within the market via foreign content, stifles competition and innovation and the natural evolution and efficiency of the market.

Confusion and or Contradiction

An earlier excerpt from the presenter and speaker’s presentation at the Caribbean Media Conference and Expo clearly states where the presenter pointed out that under the section entitled “Competition”

Slide 38/57:

Key Media Policy Issues

COMPETITION

“Research on ICT and other sectors indicates clearly that increased competition has the greatest positive impact on sectoral efficiency and innovation. The experience of much of East Asia suggests that government’s insistence on rigorous inter firm competition makes more difference than whether a firm is private, public, foreign, or domestic.”

Slide 40/57

Key Media Policy Issues

COMPETITION

“Can we have sustained competition without the ongoing regulatory intervention? How do we avoid inappropriate regulation, which would stifle innovative products and services. Threats to competition?

New threats 1.

Content Monopolisation

-Piracy (DRM)

New threats 2.

Platforms

-Abuse of market power

-Innocent and strategic barriers to entry

-Government and regulatory barriers to entry”

The presenter appears to understand the value of competition based on the ICT research cited, but also has reservations in pointing out whether sustained competition can take place without ongoing regulatory intervention.

He also appears to be grappling with the issue of how not to stifle innovation in products and services while enjoying the process of sustained competition without ongoing regulatory intervention.

Closer inspection shows that the latest move by the BCJ is stifling competition with regards to options available for local advertising in foreign content on Cable TV, such as the latest episode with Flow.

Mr. Cordel Green presentation and concerns raised as either questions or points, appears to reflect a different point of view as compared to the BCJ of which he is an Executive Director. The question that is left to be asked is: Is Mr. Green’s view on the subject at hand in accordance with the BCJ?

A Lack of Understanding of the Basic Fundamentals

Slide 42/57

Key Media Policy Issues

COMPETITION

“The non linear relationship between competition and quality (Put in diagram showing competition up and quality down)

There is a central concern currently for media regulators, at this time of massive increase in outlets, channels, media genres. It was the central theme of recent BCJ consultations. That concern is quality. As far as some people are concerned it is not the business of regulators and governments to concern themselves with quality in broadcasting in the first place. There are three reasons given for this view.

A first and, to large extent, American-influenced reason would be the sacredness of the first amendment to the US constitution guaranteeing freedom of expression.

Second, some right wing economists argue that regulators and governments should concern themselves merely with opening markets to true competition and from this quality will flow as night follows day. However, no market is ever perfect, especially given the fact of continuing spectrum scarcity in a country like the UK.”

Not wanting to appear to be taking the speakers content out of context all of slide 42/57 was quoted for the purpose of addressing a key topic of lack of understanding of the basic fundamentals in free market economics.

The speaker was also not clear of what constitutes quality. Quality can mean various things in such a topic. For starters quality can pertain to content from supplier to the end user. Quality may also mean options from supplier to end user. End user being the customer. This also raises the issue of: who and what makes up the end user as it relates to quality?

A small Jamaican business or company looking to maximize his or her advertisement may decide to air his or her commercial he or she paid top dollar for on a channel more frequented on cable TV than on a Free to Air TV station. Thus maximizing his or her audience reach and desired niche market based on user preference in content.

Success in doing so from the business man or woman airing their local commercial on a U.S program content and channel on local cable TV, may lead to a successful business and continued employment for his staff.

Regulatory and government interference in not allowing Flow to offer advertisement in content from U.S based channel programming, removes the options in choice for the type of demographic of viewers the advertiser would like to reach. Thus reducing the advertiser’s available options of quality.

As a result this leads to a further lack of ability to compete for future sales and thus contributes to lack of market growth for such a business. It is such a hypothetical situation that economists refer to as in regards to regulators and government not concerning themselves, thus not interfering in the market process of supply and demand, or provider and consumer.

Opening the market for true competition would see cable operators such as Flow and others being allowed to maximize their platform for whoever sees an opportunity to innovate and offer new products and services which in turn may lead to consumption thus economic growth within a particular sector and related sectors.

Slide 45/57

“Quality IS our business”

“Quality must be somebody’s business.”

“If industry has no credible quality control then the regulator must establish it – the absence of quality is chaos”

In my opinion, quality control in respect to the impression I was left with from the above statement, appears to be “Control is our business, Control must be somebody’s business, as without Control there is chaos.”

Conclusion

If the BCJ is no longer relevant in its current structure it should be revamped so as to best maximize the future direction of an industry where convergence is playing a critical and major role in job and wealth creation.

Using the options currently available through Jamaica Wireless consultant services, local advertisers will be allowed to advertise on foreign content and channels on local cable TV channels provided by local cable TV operators such as Flow. The BCJ and the Minister in charge of such issues would be powerless to stop this from happening as the U.S content feed is originating directly from the owners of the actual networks and or channels in question. Thus CNN, FOX, NBC, and or ABC to name a few.

It is a result of market failure, the alert entrepreneur spotting an opportunity and providing an alternate option and quality of service. As the market evolves this very service may be replaced by a more efficient service and product through innovation and the basic fundamentals of free market economics.

Advertising Quality in Options and Innovation = Increased Competition, & Market Efficiency

Full Deregulation = Increased Competition

Minimal Regulatory Market Interference = Increase Market Competition

Increased Competition = Better Quality to the Consumer

Existing laws and the current way of doing business or view on how business should be done in regards to this industry are outdated. As such this will only lead to further market inefficiency. Case in point Flow’s inability to offer advertising on foreign based programs.

NB:

You may read Mr. Green’s full presentation from the link posted;

http://www.broadcastingcommission.org/admin/documents/Caribbean%20Media%20Conference%202007%20-%20The%20Legal%20and%20Regulatory%20Framework%20for%20the%20New%20Media%20Environment.pdf

About the Author:

Mr. Roger McKenzie is the Manager of Jamaica Wireless. Mr. McKenzie participated as a panel expert on How “Cutting Edge” Technology is supporting the growth of the Media & Entertainment Industries at the 2007 Caribbean Media Conference and Expo. Mr. McKenzie specializes in research on Telecom, The Digital Home, IPTV, Internet TV, Web2.0, Search Engine Optimization (SEO), Hardware & Software, and Digital Media advertising. Mr. McKenzie holds a BA in Economics from California State University Hayward (USA).