The future of television: What do they make out of it? 

26 December 2021 tbs.pm/74146

[PART 1] • [PART 2] • [PART 3] • [PART 4] • [PART 5] • [PART 6] • [PART 7] • [PART 8] • [PART 9] • [PART 10] • [PART 11]

 

Line drawing by John Farleigh

From the Daily Mirror Spotlight on the Future of Television, published in 1958

“What guarantee have we that this scheme will be commercially successful?”

— Lord Hailsham, House of Lords, November, 1953.

The Television Act that was to give the programme companies a ten-year mandate to operate television for profit was passed by legislators who had no idea what that profit was going to be.

They could not know. The programme companies did not know. The advertisers did not know. A year after the start of commercial television the Economist was predicting an advertising revenue of less than half the actual figure. Nobody knew.

Even the optimists, and even the expert optimists, were wide of the mark. A pamphlet put out by one of the advertising bodies was bandied widely about the House of Lords during the television debates. It said: “Advertisers and their advertising agents are convinced that competitive television on the right basis will prove to be a very powerful selling force, and therefore our considered opinion is that it will be possible to have between £5 million and £10 million [£141m – £281m today, allowing for inflation] a year made available to competitive television when it reaches, say, 75 per cent, of the population.” In fact the advertisers were spending their £10 million a year before commercial television was available for even half the population. Even before the 75 per cent, level was reached, at the beginning of this year, the gross advertising revenue coming into television was over £30 million. [£850m]

“We are handling today,” said Lord Samuel in one of the television debates, “a question with a total sum involved of between £50 and £100 million [£1.4bn – £2.8bn] over (the ten-year) period.” What Lord Samuel’s colleagues were in reality handling was a question involving a total sum of several times those hypothetical figures.

 

 

How will commercial television emerge from its third year in business?

No figures are yet available to the end of March or April, 1958, when the “big four” programme companies — A-R., A.T.V., A.B.C. and Granada – ended their financial year. But it seems likely that they will close their books with a combined gross income of around £35 million. [£865m]

This is a paper figure. The programme companies, besides allowing a 15 per cent, discount to the advertising agents who “place” television advertising, also make very big reductions for big buyers of television time, and make other very generous allowances. The actual figure received by the programme companies is probably nearer £25 million. [£620m]

 

 

How much of this will they keep for themselves?

The “big four” companies are between them responsible for putting on about 1,000 days of television a year. Television programmes cost a great deal of money. The B.B.C., never noted for lavish spending on its programmes, spends over £3,250 [£80k] an hour on television. If the big four programme companies were producing their own separate programmes all the time they were on the air it would cost them, even at the B.B.C.’s rate of spending, more than they were making on advertising revenue.

The saviour of the programme companies has been the networking system—the organisation of cable or radio links through which a programme can be seen on several stations at the same time. Obviously, if a programme is shown by, say, three contractors at once, it is going to cost all three of them very much less to put on than if they were all producing individual material exclusively for their own viewers.

The Television Authority was keen on the networking idea from the beginning. Failing the choice of two or more commercial programmes in each area, its statutory obligation to see that there was “competition to supply programme ” could be carried out only if there was an import and export trade between programme companies. Even so, the networking agreement was only reached after the most bitter arguments between the programme companies, during which they were all losing money heavily by producing expensive programmes for their own exclusive use. When the network system eventually got under way it provided, besides an interchange of programmes, a very great saving in staff, studio space and equipment. And so instead of costing at least £25 million it is doubtful whether the year’s television has cost the programme companies more than £15 million. [£370m]

What is left for the contractors, then, is a trading profit very likely to be somewhere in the region of £10 million [£250m] for the year. It is an astonishing figure, but no-one is more astonished than they.

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A pie chart of the share of advertising revenue for each company

 

Very roughly speaking, of every hundred pounds going into commercial television, twenty-two pounds each goes to Associated Television, Associated Rediffusion and Granada, seventeen goes to A.B.C., and seven pounds each goes to Scottish Television and T.W.W.

The seasoned campaigners are A.T.V., A.-R., A.B.C. and Granada. They have the battle scars. They suffered the first heavy losses. What, now that commercial television has won through, have they got in the way of medals?

 

 

 

Associated TeleVision started its London week-end programme in September 1955 and its Midland weekday programme in February 1956.

By April 1956 it had lost £602,000. [£16.2m] The company broke even in October 1956. In April 1957 it was able to report a profit for the year of £201,716 [£5.4m].

A.T.V. went into the current financial year less than half a million pounds [£12.5m] in the red. This year it may record a trading profit in excess of £3 million [£74.1m].

Associated-Rediffusion suffered the most alarming setbacks in its early career.

For five months it was alone in week-day television production, producing 30-odd hours of television a week exclusively for its own use and paying heavily for this pioneer work. A.-R. was overstaffed. It was overbuying on films and scripts. It was borrowing heavily from its shareholders. Efficiency experts moved in, the staff thinned out, equipment was put up for sale or into reserve. A.-R. went on the air in September 1955; by April 1956 it had lost its first two million pounds [£54m].

Associated-Rediffusion became revenue-producing after ten lean months. Last year it had begun to make substantial repayment of the £4,750,000 [£122m] it had borrowed from its shareholders. Its chairman, Mr. John Spencer Wills was able to report at last: “We are now operating at a satisfactory profit.”

A.R.’s losses have been phenomenal. By scattering them about the balance sheet it is able to show a loss of £1,500,000 [£40m], but the actual figure is over £3 million [£80m]. Last year, for instance, the value of film and script stocks which had been rashly bought was written down by £400,000 [£10m].

Even so, Mr. Harold Drayton was able to tell the shareholders of British Electric Traction last July: We are extremely satisfied with the progress of the company, and there is no doubt, provided there is no setback in the position of the country, that it will give us an adequate return for the risk we took.”

This year’s adequate return, gross, is likely to be between two and a half and three million pounds. Much of this will of course be swallowed up by existing losses and the need to build up reserves. However, the future is set fair for Associated-Rediffusion.

A.B.C. Television, having the advantage that it was putting out only two days television a week where the others were putting out five or seven, was the first programme company to carry forward a profit.

A.B.C. opened up in February 1956 and broke even after eight months on the air; the northern service not being fully operational at that time, A.B.C. was not even working on all cylinders. It carried forward less than £100,000 [£2.7m] as its loss on the first year, and last year had a trading profit of nearly £300,000 [£7.7m]. The company was able to wipe the slate clean and start the year with a modest £24,000 in hand [£620k].

Since then A.B.C. has doubled its advertising income. Being owned by a public company, A.B.C. is the only contractor in which it is possible for an outsider to buy a direct interest. Five shilling [25p in decimal, £6.20 now allowing for inflation] shares in its parent company. Associated British Pictures, have leapt up from nine shillings to between 18 and 19 shillings [90p and 95p in decimal, £22 and £23.50 after inflation] which — considering the sad state of the cinema business — can only be because stockbrokers are predicting a £2 million [£50m] trading profit for A.B.C. this year and £2,500,000 [£62m] next year.

Granada, although apparently in roughly the same advertising income bracket as Associated-Rediffusion and Associated Television, has been giving rather bigger discounts than the other big programme companies.

£50,000-worth [£1.3m] of advertising placed with Granada at favourable rates could cost as little as £38,250 [£1m] in actual cash, as against an outlay of £42,500 [£1.1m] in Associated Television or £41,650 [£1.02m] in Associated-Rediffusion.

Even so, Granada is making money. It went on the air in May 1956 and its first year’s trading loss was only about £40,000 [£1m]. Last year Granada carried forward a total loss of £177,000 [£4.6m]. Its trading profit this year is likely to be approaching the two million mark [£50m].

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As for the smaller programme companies, the pattern of profit and loss had completely changed by the time they came into the field.

 

 

 

Scottish Television Ltd., which started in August 1957, has been revenue-producing from its first day in business. Although, like the other smaller companies, it operates seven days a week, S.T.V. is obliged to originate only 15 per cent, of its own material. It can therefore cut its costs tremendously by relying on network programmes for 85 per cent, of its output.

The same applies to Television Wales and the West, which opened earlier this year and has also been revenue-producing from the start. T.W.W. has been having a rougher ride than Scottish Television in that it has been finding it difficult to crowd the B.B.C. out of the “Top Ten,” the programme-ratings by which advertisers judge the popularity of commercial television.

Southern Television and Tyne-Tees Television, and the East Anglia and Northern Ireland contractors when they are chosen, will also be able to start in business without the prospect of heavy losses. But what their profits are likely to be, it is too early to say.

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And the future?

At present about ten per cent. of the nation’s advertising revenue is going into television. When will saturation point be reached?

Comparisons between British and American television are usually snare-ridden and apt to be disastrous. However, it can be said that it took American television six years to reach this figure of ten per cent. It has been climbing ever since, and American television last year accounted for 12½ per cent. of total advertising revenue; in addition another six per cent. went on commercial radio. This of course is in a sponsorship system, where programme costs are included in the total.

If British television advertising continues to develop at the present rate it can expect a gross income this year of about £50 million [£1.3bn]. And, all other things being equal, it can hope for a future average income of between at least £50 and £55 million [£1.3bn – £1.4bn] a year.

Certainly by the end of 1958 the big programme companies will have put their losses comfortably behind them and will be making astronomical profits.

 

[PART 1] • [PART 2] • [PART 3] • [PART 4] • [PART 5] • [PART 6] • [PART 7] • [PART 8] • [PART 9] • [PART 10] • [PART 11]

 

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