Gustavson on infomercial deregulation

The convergence of measurable broadcast direct response marketing techniques and increasing audience fragmentation is fast propelling the Canadian tv advertising industry into a new era - one in which marketers will rely, increasingly, on narrowcast advertising, as opposed to broadcast advertising,...

The convergence of measurable broadcast direct response marketing techniques and increasing audience fragmentation is fast propelling the Canadian tv advertising industry into a new era – one in which marketers will rely, increasingly, on narrowcast advertising, as opposed to broadcast advertising, to reach potential customers.

Marketers have traditionally viewed the tv set as a passive communications medium.

But industry futurists predict that in a narrowcasting environment, the tv will increasingly be used as an interactive device for the purpose of direct response advertising.

The Canadian Radio-television Telecommunications Commission, the federal broadcast regulator, has acknowledged this fundamental shift by proposing to lift the regulations that, until now, have stifled the growth of home shopping and infomercials.

To get a better sense of what deregulation might mean for Canadian advertisers, ad agencies and production companies, Strategy approached John Gustavson, president and chief executive officer of the Canadian Direct Marketing Association.

The cdma has played a leading role in the marketing and broadcasting industries’ collective lobbying efforts to persuade the crtc to exempt broadcasters of home shopping and infomercial programming from the requirement to hold licences under the Broadcasting Act.

Gustavson argues his case on a number of fronts, beginning with the idea that as long as stifling regulations are kept in place, Canadian advertisers and their suppliers will miss out on a large potential revenue stream.

Does the crtc’s call for public comment on the proposed exemption of infomercials and home shopping from the Broadcasting Act represent a watershed moment for the direct marketing industry?

A: It represents a watershed moment both for our industry and for Canadian broadcasting. This is an immense revenue stream. Canadians bought $100 million worth of goods and services from American infomercial advertisers in 1992. All lost to Canada.

But it’s not just the loss of commercial activity. It’s the loss of a revenue stream to Canadian broadcasting, and the loss of a wonderful training ground for Canadian production houses and agencies and artists.

And, quite frankly, Canadians are going to have access to an American version of this whether the crtc likes it or not because of direct satellite broadcasting and access to American channels.

Beaming into Canada

You already have Loblaws broadcasting their infomercials on Buffalo television, and Ford, now, broadcasting into southern Ontario.

There’s an inevitability about it. It’s going to happen, and we just think it’s a terrible loss to Canada in terms of the potential economic activity, for both Canadian broadcasting and for marketers.

Q: What’s the current size of the Canadian broadcast direct marketing industry?

A: We know Canadians spend about $100 million on products advertised in American infomercials. But the industry is so fragmented, there are no accurate numbers of what is spent in Canada.

Q: How might it grow, if broadcasters were able to dedicate channels to home shopping and to infomercials?

A: Well, our economic model would indicate it could build into a $600-million-a-year industry in this country, over time.

That includes the production, the selling of the time by broadcasters, the money that would be spent in hiring talent, the whole generation of economic activity within the sphere.

Gradual growth

If you open up infomercials, they’re not going to be produced in Canada overnight, but, slowly, you’ll see the growth of production houses and Canadian talent, and so on.

Certainly, you’ll see the shifting of economic activity fairly quickly.

The Canadian Home Shopping Network is ready to move instantly into full-motion video. Clearly, there is an advantage in pursuading the customer when you can demonstrate the product in action, as opposed to showing it only in still pictures.

Q: Do the Canadian Association of Broadcasters and the cdma agree on a response to the crtc’s proposal to exempt home shopping and infomercial channels from the Broadcast Act’s licensing requirements?

A: Like the cdma, cab has proposed that infomercials be exempted from the 12-minute restriction. They have proposed, however, that infomercials be designated as those advertising spots that are 10 minutes and longer. We have proposed that it be those advertising spots that are two minutes and longer.

Q: That’s quite a difference.

A: Yes, but think about tv advertising for a moment. How many spots do you see that are over 15 seconds? Not many.

Rarely do you see a 30-second, and almost never a one-minute commercial. Because, at that point, you’re way beyond brand recognition. You’re really trying to sell something, and, often, there will be a direct response mechanism, a 1-800 number or something to respond to.

We believe infomercials are of a different nature than traditional commercials. They require sufficient time to persuade the consumer to make a buying decision, and they offer the chance to respond.

We think anything over 60 seconds will do that, but, certainly, anything over two minutes. Anything that’s two minutes in length is an infomercial.

Q: Is the cdma at loggerheads with the cab over this?

A: No. Quite the opposite. We’re all supportive of infomercials being allowed on the air at times other than between 12 midnight and 6 a.m. Broadcasters want the revenue stream. It’s just a technical thing. They want 10 minutes or more; we want two minutes or more. So, I wouldn’t describe it as loggerheads at all. Just a definitional issue.

Q: Why would it make a difference to them?

A: They want to protect the high rates that they can charge for 15-second and shorter spots within the 12-minute rule. I don’t think they’re so concerned about what happens on an infomercial channel. They’re more concerned about what happens on their own channel.

Q: Why is the crtc considering deregulation now, after so many years of restricting infomercials and home shopping?

A: There are two reasons. One is the Americans are coming, whether we like it or not. So, Canadian companies will have to be able to compete and Canadian broadcasting needs the revenue stream to promote a distinct, national, Canadian broadcasting culture.

If we assume, as I think we all do, that the government is not going to keep pouring more and more tax dollars into supporting a unique Canadian broadcasting system, then it will have to be supported commercially, and this is a revenue stream that can help do that.

Demographics

The second thing is the demographics that have driven the growth of direct marketing generally. The convenience of home shopping. Two parents working, single-parent families, an aging population, home shopping becoming more and more convenient.

And, also, the growing expectation by customers of being treated uniquely, or, as individuals, rather than as part of a mass market.

Combine those two, and there’s a great impetus for the crtc to do something now to open up this field.

Q: You mentioned deregulation would help the crtc carry out its mandate of protecting Canada’s broadcasting culture. Could you elaborate on that?

A: Well, the crtc has a mandate to promote Canadian culture, promote the employment of Canadian talent, and to ensure the economic viability of the Canadian broadcasting system.

The government has directed the crtc to do so as part of our overall attempts to create a unique society here on the northern half of the continent, different from our neighbor’s to the south. We think that allowing the deregulation of direct response television can carry out those objectives.

Revenue stream

First of all, it stimulates a lot of economic activity in Canada, money that’s currently flowing south of the border. And that’s not just healthy for Canadian businesses, but for the Canadian broadcast industry, because it’s a revenue stream for them. It allows them to remain economically viable and healthy.

Secondly, it promotes the use of Canadian production houses, agencies and Canadian talent. All these opportunities for young Canadians to hone their skills, appear on television, and that whole infrastructure that supports Canadian broadcasting.

Healthy industry

So our view is that the deregulation of direct response television goes a long way to carrying out the crtc’s mandate to ensure a healthy, economically viable, unique Canadian broadcasting industry.

Q: Are there restrictions to the activities of infomercial and home shopping broadcasters that the cdma would support?

A: Yes. It’s not like we believe the industry should be totally deregulated, that you can walk off and do whatever you want.

Q: And what would they involve?

A: Canadian content, minimum Canadian ownership, the prohibition of third-party advertising on home-shopping channels.

Q: What’s that last one?

A: You couldn’t have the Canadian Home Shopping Network all of a sudden stop its live production and run an ad for Heinz ketchup, or something, which would be in direct competition with the licensed broadcast channels. We’re not out to suck money away from the broadcast stations.

Q: Are there other examples?

A: Infomercials need to be clearly identified as such.

One of the concerns for the crtc is that advertising isn’t disguised as entertainment. We all accept that infomercials will be entertaining in their presentation of the product, but they would be clearly labelled as infomercials. We accept that as valid.

Q: How do you bet that the crtc will eventually rule?

A: I think the crtc recognizes that this is a tremendous opportunity for Canadian broadcasting, both for generating economic activity and for providing support to Canadian broadcasting and Canadian culture, and I think they’re going to open it up.

There’s just too much money being denied the Canadian broadcasting system for them to do anything else.