I only stated that my view is a long held one where another poster seemed to be implying that view of the facts was based on that study. It is only a piece of evidence which I feel stands up to scrutiny of its methodology.
Where is the evidence that television advertising increases prices, overall?
So far we have loads of opinions that advertising,as a whole, increases prices not one shred of evidence that it has a net increase in prices.
It's an old article, but you get the idea...
"
The True Cost
By Richard G Elen
Brian Butterworth’s UK Free TV web site has a very interesting section.
It lists some of the channels available in the UK and how much they cost us, per person, per week. The list looks like this:
itv1 + GMTV 48.5p
BBC ONE 35p
Channel 4 18.7p
Sat and cable 16.8p
BBC TWO 12p
five 7.7p
BBC THREE 2.5p
BBC FOUR 1.3p
S4C 0.3p
(Figures based on advertising spend and BBC Annual report)
According to this list, itv1 is the most expensive television channel in the UK. But how can that be? It’s not like the BBC, where it’s funded by a licence fee that’s paid, in theory, by everyone with a television. It’s commercial television - it’s free… isn’t it? The answer is no - and here’s why.
Advertising is paid for by people who buy advertised products and/or via advertised outlets, and they pay whether or not they watch the channels on which the products are advertised - or even own a TV!
There is a strange and fundamentally erroneous idea that commercial broadcasting is ‘free’. There is no such thing as a free lunch. Commercial broadcasting is paid for by… commercials. Commercials are paid for by companies advertising their products.
Irrespective of the success (eg increased sales or market share) of broadcast advertising for a product, part of the cost of a product is covering the advertising budget. You’re paying for commercial TV - even if you don’t have a means of watching it. And anyway, a successful advertising campaign does not generally result in a lower selling price in any direct sense.
Let’s look at all this in a bit more detail. What does advertising actually do in economic terms?
Fundamentally, advertising makes consumers less price sensitive, increasing the ability of manufacturers to charge more than marginal cost. A product as a result of advertising may become more desirable, for example, and acquire increased perceived value.
How does this work? Everyone needs soap, for instance: they are going to buy it anyway. Advertising a brand of soap is going to tend to change brand market share, but is it going to increase the overall consumption of soap?
Well it might have done once, but it probably doesn’t today. Yet the cost of advertising has got to come from somewhere. Where? The answer is by being able to charge more for the product because it’s more desirable.
In fact, the increased selling price not only has to cover the cost of marketing, but also increase profitability, or it’s not worth doing, even if there are economies of scale resulting from increased sales.
The effect of advertising is not only to increase the product selling price because of the cost of advertising itself, but also because of the increased margin the advertising is intended to facilitate.
Successfully advertising, say, a brand of soap and thus raising the price you can charge, does not just affect that one brand. All brands are affected, as there is a resulting change in the perceived value of soap as a whole (it is made more desirable): thus the price the market will bear is increased.
Conversely, if prices as a whole do not rise, then we will find that advertised goods will be more expensive than non-advertised goods, still demonstrating that the consumer is paying for the advertising, albeit indirectly - although if that was the case you could then certainly argue that you do in fact have the choice to buy products whose prices you believe are not increased by advertising - the ‘generic’ or ‘simple’ products that you find in some parts of some supermarkets, for example. And yes, they are indeed cheaper, although there will be other factors reducing their price (such as lower desirability).
The ability to raise prices is only one of the functions of advertising. There is also the goal of acquiring market share, so that you make the margin rather than someone else, and move the market more towards a monopoly where you can control prices more effectively down the line.
Another function can be to keep competitors out of the market by setting a barrier in which newcomers have to spend money on advertising to compete, which they may not be able to do - again moving towards a monopoly or oligopoly where prices can be raised later.
And advertising can also be a useful tool if you are engaged in non-price competition, for example where a small dominant group of sellers wants to artificially keep prices high by giving an impression of fierce competition.
None of these factors bring prices down. What brings prices down is a truly competitive market where no supplier has an edge. This is, of course, imaginary. In fact the fundamental purpose of advertising is precisely to give the advertiser an edge and move the market away from true competition (which would be characterised by the lowest prices and all suppliers making the minimum profit required to stay in business, plus universally available unbiased information on all products) towards an oligopoly or monopoly in which upward price influence, and thus increased profits, are possible.
My strong suspicion is that if you accept that the population is going to pay for broadcasting one way or another, then transferring that money directly from the viewer to the broadcaster (ie a licence fee or equivalent) is considerably more efficient than going the roundabout commercial route where the funds go via a bunch of middlemen each taking their cut, and people have to pay irrespective of whether they use the service or not.
This is not to say I am against commercial broadcasting; I am not, though I dislike some of its compromises. And, having edited several magazines that are funded entirely by advertising revenue, I don’t think the quality of advertising-supported media is necessarily any lower than media with other methods of funding (though this is in fact often the case in mass-market examples such as broadcasting).
But I would like to squash the idea that commercial broadcasting has no end-user costs involved, along with the idea that you have a choice whether to pay those costs or not. You actually have less choice than you do with public broadcasting. You can’t go into a supermarket and say, “I don’t have a television, so I would like a discount on the price of this bar of soap.” Yes, you can buy a different bar of soap that isn’t TV advertised, but the price will likely be no different - because in the shops the price is also influenced by ‘what the market will bear’ and that is determined by the average prices in a product area - which will include those that are advertised.
And even if you could save by buying non-advertised goods, you would be limiting your choice (though you could then theoretically watch commercial TV without paying for it).
But to return to the list on UK Free TV. Is Butterworth’s analysis of the costs of commercial television channels to the UK population reasonable and accurate?
Well, there are obviously some oddities, like the vague ‘Sat and cable’, but in principle there should be nothing to stop you making this kind of analysis.
Putting an actual number on the cost to the populace of commercial television as a whole, let alone a single channel, however, appears more difficult. We’ve already considered the actual cost added to products to pay for advertising them, and how one might determine the cumulative effect of a number of variables on that cost.
These variables include whether selling more products as a result of advertising them on TV actually reduces their cost because of economies of scale; whether any such reductions are passed on (generally they are not: prices seldom go down); and whether advertising in fact allows manufacturers to elevate the price by having a more desirable product and more of a monopoly supply position in the market (which generally appears to be the case).
Having done this, how do you factor in the actual cost per viewer because of differing viewing figures for the channels? Well, arguably, you don’t - because the costs are spread over everyone who is a consumer of UK-advertised entities (just as the cost of the BBC is spread over everyone who is a licence payer), irrespective of whether or not they watch.
Butterworth takes an easy way out by using the advertising spend as his base figure, but arguably this is actually fine, because whatever the effect on pricing and margins, the fact is that the money for advertising comes from the purchasers of products one way or another.
Thus it makes no difference whether or not the prices would be different if advertising was not taking place, because it actually does; and there is thus an actual advertising spend that actually does come from the income from selling products and services.
But then what you divide that spend by to get a final result might be open to dispute. If you watch television in the UK, you are supposed to pay for it via the licence fee. This applies even in the supremely unlikely event that you never watch any BBC channels.
However, if you buy UK TV-advertised products, you are paying for UK commercial television, not only if you never watch any commercial TV programmes, but if you don’t even have a television receiver. The safest bet, then, is to use the entire population as the divisor, and this appears to be what Butterworth does.
So, are we paying for commercial television by going shopping? Yes, by definition. If the advertising didn’t work, then advertisers wouldn’t do it and commercial TV would fail. Does advertising increase the prices of goods? Yes, though they are not linked by a piece of string, rather by a complex web of factors.
But linked they are, nevertheless. There is, indeed, no such thing as a free lunch: your lunch is paying for commercial television"
Read my post about John Lewis. Do John Lewis pay that £4 Million out of their profits? Are they going to reduce their profit margin?
All businesses are in business to make money...to maximize profits. Advertising (at the moment) helps them to do that but we all pay for it indirectly...and in some cases, directly.
I have read your post about John Lewis a couple of times.
No evidence that advertising has the net effect of increasing prices in their store.
I think you maybe misunderstanding the net relationship between...'costs'.....'prices'....
and 'profit'.
But my position,was not that advertising increases/decreases the price of individual brands, John Lewis included.
My position is that across the whole market place across all brands advertising has the net effect of reducing prices.
I have read your post about John Lewis a couple of times.
No evidence that advertising has the net effect of increasing prices in their store.
I think you maybe misunderstanding the net relationship between...'costs'.....'prices'....
and 'profit'.
But my position,was not that advertising increases/decreases the price of individual brands, John Lewis included.
My position is that across the whole market place across all brands advertising has the net effect of reducing prices.
As Surferman highlights, £14 billion is spent on advertising a year. That cost is covered by you and me through the products we buy. Now...move on yeah.
As Surferman highlights, £14 billion is spent on advertising a year. That cost is covered by you and me through the products we buy. Now...move on yeah.
Move on yourself.....the cost of advertising has to be borne somewhere....but the net effect of advertising is not to increase prices. It reduces them.
So it could be said that independent broadcasting funded by advertiser/sponsor revenue is in fact 'Free Broadcasting'.
Move on yourself.....the cost of advertising has to be borne somewhere....but the net effect of advertising is not to increase prices. It reduces them.
So it could be said that independent broadcasting funded by advertiser/sponsor revenue is in fact 'Free Broadcasting'.
I'm sorry mate...you are factually wrong. All advertising is borne by you and me and the rest of the country by an increase in prices. Please stop trying to pretend otherwise.
The most the BBC can do is get the Court to impose a £1,000 fine. That's it. Nothing else.
If you don't pay the fine then the court (note not the BBC) can impose a custodial sentence. (As they can for any such fine.)
So VDUBuster was, as usual, absolutely correct.
I don't know if my blood pressure can take it, it was bad enough thinking £4 BILLION!!! >:( was pissed up the wall every year making reality shows to find karaoke singers, basically copying everything on ITV for some bizarre reason.
And if that's all they actually did you might have a point. But it isn't so you don't.
To think its many times that is too much a burden to cope with.
And it's not anywhere near "many times more" either.
It always confuses me why anyone would want to make themselves look stupid by posting something that can so easily be proved to be complete and utter nonsense.
I'm sorry mate...you are factually wrong. All advertising is borne by you and me and the rest of the country by an increase in prices. Please stop trying to pretend otherwise.
I am not......mate.....it is you who is factually wrong and pretending that your theory is fact.
Increased costs,advertising or otherwise, are not always reflected by increased prices. The cost can be borne elsewhere. Fact.
Many studies prove that advertising does not increase prices across the entirety of the whole consumer market. Fact.
Could I have some evidence for your theory..... which I do admit many others do seem to hold (mistaken) faith with? Obliged if you would.
I do love the idea that a company spends a fortune on advertising only to then lower their prices, thus losing a chunk of money to pay for the ad, then recouping less money per purchase thanks to the lower sale price...
The most the BBC can do is get the Court to impose a £1,000 fine. That's it. Nothing else.:
Thats a different point, i was talking about adverts on the BBC making out that the police with police dogs and helicopters will bust down your door. Using threat of jail to get TV Licence money thats what they've done for years.
Here is a BBC site article discussing the threat and indimitation tactics used to scare people into subscribing to the BBC Pay TV package...
I do love the idea that a company spends a fortune on advertising only to then lower their prices, thus losing a chunk of money to pay for the ad, then recouping less money per purchase thanks to the lower sale price...
I do love the idea that everytime a company spends a money on advertising its added to the cost of every product. With all the adverts every supermarket, even the lowest priced ones have on telly you'd think a bottle of milk would be £500 by now. Using your messed up logic.
But how come i've bought a 4 pint bottle of milk today from ASDA for 89p, cheaper than it was 12 months ago, same across most of my weekly shop.
Even if you can't understand it, or it can't be simplified enough for you to grasp, doesn't mean its not true and is actually proven FACT.
We're still waiting on your links to academic studies that back your point and we'll be waiting forever. But even though you've now been shown proof several times you still like to pretend otherwise.
You don't need any evidence, it's basic economics, basic business.
Ad revenue is on the slide. Explain why this might be the case.
No evidence required to back up a fact......omg
Perhaps I expect too much from you and other posters. Sorry. But if you what a loose "emotional' not based on facts dialogue, pick on someone else.
That prices rise as a result of advertising is not a fact of either basic economics or basic business. No way no. (please excuse my emotion ;-) )
Advertising revenue falling? You maybe helping to prove my point if this is true!
Maybe there is less spend because advertisers are realising that advertising has the net effect of reducing prices! Shame for society if there is less advertising because prices will rise!
Can anyone tell me how much it takes to run the BBC each year? I know using the threat of Jail they force nearly £4 Billion out of us. But also how many Billions do they get from BBC Worldwide for selling BBC products commercially all over the world?
Thanks.
Very simply the licence fee income is £3.5 billion. Sales and BBC Worldwide add about £1.5 billion turnover, of which a couple of hundred million is profit, which ends up back at the BBC.
So about £3.7 billion at a rough estimate.
For comparison Sky has an income of about £7 billion, yet apart from sport produces a fraction of the amount of original content. Most "Sky" channels are owned by other people, like the Dave/Gold/Watch channels which are half owned by the BBC and air mostly old BBC shows. They get no licence fee money but rely on advertising and have to pay the BBC fair market price for the shows, or in the case of shows like QI, HIGNFY, Mock The Week etc which are made by indie producers they pay those producers since they own the rights.
While you may suggest I read the thread I suggest......mate..... you read and try and understand my post before stating I am wrong.
The cost, net, of advertising is NOT passed onto the consumer because overall advertising reduces prices and the viewer does NOT bear either the initial costs or the running costs of the service.
I was referring to the funding of free to air channels.
It is not the foundation of my argument, but those of you who believe the costs of advertising is borne by you....you can make the choice not to buy goods and services that do advertise. Another win win for consumer choice.
Please point to me a study that supports you claim that advertising increases overall consumer prices?
Then how come the brands with the biggest advertising spends, Coke, Nike, McDonalds etc are usually the most expensive? Pizza Hut spend millions advertising yet my local kebab/pizza place makes much better pizzas for half the price! Two twelve inch pizzas for £10! And he's never advertised on TV....
I only stated that my view is a long held one where another poster seemed to be implying that view of the facts was based on that study. It is only a piece of evidence which I feel stands up to scrutiny of its methodology.
Where is the evidence that television advertising increases prices, overall?
So far we have loads of opinions that advertising,as a whole, increases prices not one shred of evidence that it has a net increase in prices.
Apart from the fact that the brands with the biggest ad spends then to be the most expensive brands.
Pizza Hut, bif ad budget, expensive pizzas.
Local kebab/pizza place, small ad spend, much cheaper pizzas.
Coke, huge ad spend, most expensive colas.
Own/budget brand cola, not advertised, fraction of the price.
Persil etc, huge ad spend, most expensive.
Budget brand powder, no advertising, much cheaper powder.
If advertising is meant to bring down prices why isn't Coca Cola the cheapest soft drink?
Then how come the brands with the biggest advertising spends, Coke, Nike, McDonalds etc are usually the most expensive?.
As a point of fact, are they more expensive because of advertising costs being passed on to the consumer by way of higher prices? A perception by you is not a fact.
Feel free to prove me wrong.
So,please take any of the brands you mention above....just one will do....and demonstrate to me how over a given period of time their prices would fall if they stopped advertising? And remember lower costs does not directly relate to a lower price paid by the consumer. And neither does the converse.
By the way I am not saying, and have not claimed in this thread that the price of an individual brand or prices in a particular sector of the market fall because of advertising. My assertion,is the fact that taken across a whole consumer market, society as a whole, advertising produces lower net prices for the consumer.
As a point of fact, are they more expensive because of advertising costs being passed on to the consumer by way of higher prices? A perception by you is not a fact.
Feel free to prove me wrong.
So,please take any of the brands you mention above....just one will do....and demonstrate to me how over a given period of time their prices would fall if they stopped advertising? And remember lower costs does not directly relate to a lower price paid by the consumer. And neither does the converse.
By the way I am not saying, and have not claimed in this thread that the price of an individual brand or prices in a particular sector of the market fall because of advertising. My assertion,is the fact that taken across a whole consumer market, society as a whole, advertising produces lower net prices for the consumer.
So the prices of individual brands would not fall but the prices overall would?
For that to happen the brands that didn't advertise would have to lower their prices even more. If they had the margin to lower their prices even more why haven't they already?
If advertising persuades us to buy Coke over Brand X, then since Coke is far more expensive then clearly we are paying more. So how can you argue that we are somehow not paying anything to fund ITV etc? We've been persuaded into buying expensive brands when cheaper brands would have been just as good.
So we clearly are paying for ITV. We're paying for it by buying the expensive brands instead of the cheaper brands.
Then how come the brands with the biggest advertising spends, Coke, Nike, McDonalds etc are usually the most expensive? Pizza Hut spend millions advertising yet my local kebab/pizza place makes much better pizzas for half the price! Two twelve inch pizzas for £10! And he's never advertised on TV....
Those products cost the most because they are the best products, and people are willing to pay more for them. In the case of Coke and Pepsi, they taste better than the alternatives. I have tried plenty of stores' own-brand colas over the years, I am aware of their existence, I am aware they are generally less expensive than Coke, yet I would rather pay more for a product I prefer.
And I would almost certainly enjoy a slice of Pizza Hut pizza more than what your local shop offers, because it tastes better and probably hasn't been sitting on a heated shelf for the past week.
Those products cost the most because they are the best products, and people are willing to pay more for them. In the case of Coke and Pepsi, they taste better than the alternatives. I have tried plenty of stores' own-brand colas over the years, I am aware of their existence, I am aware they are generally less expensive than Coke, yet I would rather pay more for a product I prefer.
And I would almost certainly enjoy a slice of Pizza Hut pizza more than what your local shop offers, because it tastes better and probably hasn't been sitting on a heated shelf for the past week.
And the reason why they are perceived to be the best products? Branding!
Costs money to build a big brand.
Can i remind you that, in blind taste tests, that Americans usually pick Pepsi?
And the reason why they are perceived to be the best products? Branding!
Costs money to build a big brand.
Can i remind you that, in blind taste tests, that Americans usually pick Pepsi?
No, they are perceived to be the best because they taste the best. People try other colas, they know they cost less, yet they keep buying Coke and Pepsi because they prefer them.
As for the side-by-side Coke v Pepsi taste tests, for starters those tests are run by Pepsi so who knows how accurate they actually are. And even if more people actually do pick Pepsi, that may be because when compared side-by-side to Coke in small sips, Pepsi tastes slightly sweeter. But given the choice of drinking a whole can, more people prefer the taste of Coke. I certainly do.
I know, I know, it's because I'm a brainwashed rube who doesn't understand how things really work like the experts on the Broadcasting forum.......
Except, it doesn't always, the more a brand costs to advertise the more expensive to costs usually.
I posted the text from a rather interesting article a few posts ago. Yes, it's old, but it's written by an expert and he DOES see the link.
Ergo, you can't dismiss it totally with certainty like you are trying to do....
On what is Richard G Elen an expert? Most of his articles seem to be about television, with a mix of radio and print, with a heavy emphasis on the BBC - not economics. The piece you posted is mainly speculation, there is zero empirical data to support his conclusion.
I'm a brainwashed rube who doesn't understand how things really work like the experts on the Broadcasting forum.......
Finally the truth.
Meanwhile Rona Fairhead is due to announce something that will no doubt shock you, it will be interesting to see if you start a thread on the matter or give it a wide berth as brainwashed to do.
Comments
It's an old article, but you get the idea...
"
The True Cost
By Richard G Elen
Brian Butterworth’s UK Free TV web site has a very interesting section.
It lists some of the channels available in the UK and how much they cost us, per person, per week. The list looks like this:
itv1 + GMTV 48.5p
BBC ONE 35p
Channel 4 18.7p
Sat and cable 16.8p
BBC TWO 12p
five 7.7p
BBC THREE 2.5p
BBC FOUR 1.3p
S4C 0.3p
(Figures based on advertising spend and BBC Annual report)
According to this list, itv1 is the most expensive television channel in the UK. But how can that be? It’s not like the BBC, where it’s funded by a licence fee that’s paid, in theory, by everyone with a television. It’s commercial television - it’s free… isn’t it? The answer is no - and here’s why.
Advertising is paid for by people who buy advertised products and/or via advertised outlets, and they pay whether or not they watch the channels on which the products are advertised - or even own a TV!
There is a strange and fundamentally erroneous idea that commercial broadcasting is ‘free’. There is no such thing as a free lunch. Commercial broadcasting is paid for by… commercials. Commercials are paid for by companies advertising their products.
Irrespective of the success (eg increased sales or market share) of broadcast advertising for a product, part of the cost of a product is covering the advertising budget. You’re paying for commercial TV - even if you don’t have a means of watching it. And anyway, a successful advertising campaign does not generally result in a lower selling price in any direct sense.
Let’s look at all this in a bit more detail. What does advertising actually do in economic terms?
Fundamentally, advertising makes consumers less price sensitive, increasing the ability of manufacturers to charge more than marginal cost. A product as a result of advertising may become more desirable, for example, and acquire increased perceived value.
How does this work? Everyone needs soap, for instance: they are going to buy it anyway. Advertising a brand of soap is going to tend to change brand market share, but is it going to increase the overall consumption of soap?
Well it might have done once, but it probably doesn’t today. Yet the cost of advertising has got to come from somewhere. Where? The answer is by being able to charge more for the product because it’s more desirable.
In fact, the increased selling price not only has to cover the cost of marketing, but also increase profitability, or it’s not worth doing, even if there are economies of scale resulting from increased sales.
The effect of advertising is not only to increase the product selling price because of the cost of advertising itself, but also because of the increased margin the advertising is intended to facilitate.
Successfully advertising, say, a brand of soap and thus raising the price you can charge, does not just affect that one brand. All brands are affected, as there is a resulting change in the perceived value of soap as a whole (it is made more desirable): thus the price the market will bear is increased.
Conversely, if prices as a whole do not rise, then we will find that advertised goods will be more expensive than non-advertised goods, still demonstrating that the consumer is paying for the advertising, albeit indirectly - although if that was the case you could then certainly argue that you do in fact have the choice to buy products whose prices you believe are not increased by advertising - the ‘generic’ or ‘simple’ products that you find in some parts of some supermarkets, for example. And yes, they are indeed cheaper, although there will be other factors reducing their price (such as lower desirability).
The ability to raise prices is only one of the functions of advertising. There is also the goal of acquiring market share, so that you make the margin rather than someone else, and move the market more towards a monopoly where you can control prices more effectively down the line.
Another function can be to keep competitors out of the market by setting a barrier in which newcomers have to spend money on advertising to compete, which they may not be able to do - again moving towards a monopoly or oligopoly where prices can be raised later.
And advertising can also be a useful tool if you are engaged in non-price competition, for example where a small dominant group of sellers wants to artificially keep prices high by giving an impression of fierce competition.
None of these factors bring prices down. What brings prices down is a truly competitive market where no supplier has an edge. This is, of course, imaginary. In fact the fundamental purpose of advertising is precisely to give the advertiser an edge and move the market away from true competition (which would be characterised by the lowest prices and all suppliers making the minimum profit required to stay in business, plus universally available unbiased information on all products) towards an oligopoly or monopoly in which upward price influence, and thus increased profits, are possible.
My strong suspicion is that if you accept that the population is going to pay for broadcasting one way or another, then transferring that money directly from the viewer to the broadcaster (ie a licence fee or equivalent) is considerably more efficient than going the roundabout commercial route where the funds go via a bunch of middlemen each taking their cut, and people have to pay irrespective of whether they use the service or not.
This is not to say I am against commercial broadcasting; I am not, though I dislike some of its compromises. And, having edited several magazines that are funded entirely by advertising revenue, I don’t think the quality of advertising-supported media is necessarily any lower than media with other methods of funding (though this is in fact often the case in mass-market examples such as broadcasting).
But I would like to squash the idea that commercial broadcasting has no end-user costs involved, along with the idea that you have a choice whether to pay those costs or not. You actually have less choice than you do with public broadcasting. You can’t go into a supermarket and say, “I don’t have a television, so I would like a discount on the price of this bar of soap.” Yes, you can buy a different bar of soap that isn’t TV advertised, but the price will likely be no different - because in the shops the price is also influenced by ‘what the market will bear’ and that is determined by the average prices in a product area - which will include those that are advertised.
And even if you could save by buying non-advertised goods, you would be limiting your choice (though you could then theoretically watch commercial TV without paying for it).
But to return to the list on UK Free TV. Is Butterworth’s analysis of the costs of commercial television channels to the UK population reasonable and accurate?
Well, there are obviously some oddities, like the vague ‘Sat and cable’, but in principle there should be nothing to stop you making this kind of analysis.
Putting an actual number on the cost to the populace of commercial television as a whole, let alone a single channel, however, appears more difficult. We’ve already considered the actual cost added to products to pay for advertising them, and how one might determine the cumulative effect of a number of variables on that cost.
These variables include whether selling more products as a result of advertising them on TV actually reduces their cost because of economies of scale; whether any such reductions are passed on (generally they are not: prices seldom go down); and whether advertising in fact allows manufacturers to elevate the price by having a more desirable product and more of a monopoly supply position in the market (which generally appears to be the case).
Having done this, how do you factor in the actual cost per viewer because of differing viewing figures for the channels? Well, arguably, you don’t - because the costs are spread over everyone who is a consumer of UK-advertised entities (just as the cost of the BBC is spread over everyone who is a licence payer), irrespective of whether or not they watch.
Butterworth takes an easy way out by using the advertising spend as his base figure, but arguably this is actually fine, because whatever the effect on pricing and margins, the fact is that the money for advertising comes from the purchasers of products one way or another.
Thus it makes no difference whether or not the prices would be different if advertising was not taking place, because it actually does; and there is thus an actual advertising spend that actually does come from the income from selling products and services.
But then what you divide that spend by to get a final result might be open to dispute. If you watch television in the UK, you are supposed to pay for it via the licence fee. This applies even in the supremely unlikely event that you never watch any BBC channels.
However, if you buy UK TV-advertised products, you are paying for UK commercial television, not only if you never watch any commercial TV programmes, but if you don’t even have a television receiver. The safest bet, then, is to use the entire population as the divisor, and this appears to be what Butterworth does.
So, are we paying for commercial television by going shopping? Yes, by definition. If the advertising didn’t work, then advertisers wouldn’t do it and commercial TV would fail. Does advertising increase the prices of goods? Yes, though they are not linked by a piece of string, rather by a complex web of factors.
But linked they are, nevertheless. There is, indeed, no such thing as a free lunch: your lunch is paying for commercial television"
I have read your post about John Lewis a couple of times.
No evidence that advertising has the net effect of increasing prices in their store.
I think you maybe misunderstanding the net relationship between...'costs'.....'prices'....
and 'profit'.
But my position,was not that advertising increases/decreases the price of individual brands, John Lewis included.
My position is that across the whole market place across all brands advertising has the net effect of reducing prices.
Not to those who want the BBC to make the same kind of show.
As Surferman highlights, £14 billion is spent on advertising a year. That cost is covered by you and me through the products we buy. Now...move on yeah.
Move on yourself.....the cost of advertising has to be borne somewhere....but the net effect of advertising is not to increase prices. It reduces them.
So it could be said that independent broadcasting funded by advertiser/sponsor revenue is in fact 'Free Broadcasting'.
I'm sorry mate...you are factually wrong. All advertising is borne by you and me and the rest of the country by an increase in prices. Please stop trying to pretend otherwise.
If you don't pay the fine then the court (note not the BBC) can impose a custodial sentence. (As they can for any such fine.)
So VDUBuster was, as usual, absolutely correct.
And if that's all they actually did you might have a point. But it isn't so you don't.
And it's not anywhere near "many times more" either.
It always confuses me why anyone would want to make themselves look stupid by posting something that can so easily be proved to be complete and utter nonsense.
I am not......mate.....it is you who is factually wrong and pretending that your theory is fact.
Increased costs,advertising or otherwise, are not always reflected by increased prices. The cost can be borne elsewhere. Fact.
Many studies prove that advertising does not increase prices across the entirety of the whole consumer market. Fact.
Could I have some evidence for your theory..... which I do admit many others do seem to hold (mistaken) faith with? Obliged if you would.
You don't need any evidence, it's basic economics, basic business.
Ad revenue is on the slide. Explain why this might be the case.
Thats a different point, i was talking about adverts on the BBC making out that the police with police dogs and helicopters will bust down your door. Using threat of jail to get TV Licence money thats what they've done for years.
Here is a BBC site article discussing the threat and indimitation tactics used to scare people into subscribing to the BBC Pay TV package...
http://news.bbc.co.uk/1/hi/uk/7603258.stm
But how come i've bought a 4 pint bottle of milk today from ASDA for 89p, cheaper than it was 12 months ago, same across most of my weekly shop.
Even if you can't understand it, or it can't be simplified enough for you to grasp, doesn't mean its not true and is actually proven FACT.
We're still waiting on your links to academic studies that back your point and we'll be waiting forever. But even though you've now been shown proof several times you still like to pretend otherwise.
No evidence required to back up a fact......omg
Perhaps I expect too much from you and other posters. Sorry. But if you what a loose "emotional' not based on facts dialogue, pick on someone else.
That prices rise as a result of advertising is not a fact of either basic economics or basic business. No way no.
Advertising revenue falling? You maybe helping to prove my point if this is true!
Maybe there is less spend because advertisers are realising that advertising has the net effect of reducing prices! Shame for society if there is less advertising because prices will rise!
Thanks, :)appears that way.
Time will tell. ;-)
Very simply the licence fee income is £3.5 billion. Sales and BBC Worldwide add about £1.5 billion turnover, of which a couple of hundred million is profit, which ends up back at the BBC.
So about £3.7 billion at a rough estimate.
For comparison Sky has an income of about £7 billion, yet apart from sport produces a fraction of the amount of original content. Most "Sky" channels are owned by other people, like the Dave/Gold/Watch channels which are half owned by the BBC and air mostly old BBC shows. They get no licence fee money but rely on advertising and have to pay the BBC fair market price for the shows, or in the case of shows like QI, HIGNFY, Mock The Week etc which are made by indie producers they pay those producers since they own the rights.
Then how come the brands with the biggest advertising spends, Coke, Nike, McDonalds etc are usually the most expensive? Pizza Hut spend millions advertising yet my local kebab/pizza place makes much better pizzas for half the price! Two twelve inch pizzas for £10! And he's never advertised on TV....
Apart from the fact that the brands with the biggest ad spends then to be the most expensive brands.
Pizza Hut, bif ad budget, expensive pizzas.
Local kebab/pizza place, small ad spend, much cheaper pizzas.
Coke, huge ad spend, most expensive colas.
Own/budget brand cola, not advertised, fraction of the price.
Persil etc, huge ad spend, most expensive.
Budget brand powder, no advertising, much cheaper powder.
If advertising is meant to bring down prices why isn't Coca Cola the cheapest soft drink?
As a point of fact, are they more expensive because of advertising costs being passed on to the consumer by way of higher prices? A perception by you is not a fact.
Feel free to prove me wrong.
So,please take any of the brands you mention above....just one will do....and demonstrate to me how over a given period of time their prices would fall if they stopped advertising? And remember lower costs does not directly relate to a lower price paid by the consumer. And neither does the converse.
By the way I am not saying, and have not claimed in this thread that the price of an individual brand or prices in a particular sector of the market fall because of advertising. My assertion,is the fact that taken across a whole consumer market, society as a whole, advertising produces lower net prices for the consumer.
So the prices of individual brands would not fall but the prices overall would?
For that to happen the brands that didn't advertise would have to lower their prices even more. If they had the margin to lower their prices even more why haven't they already?
If advertising persuades us to buy Coke over Brand X, then since Coke is far more expensive then clearly we are paying more. So how can you argue that we are somehow not paying anything to fund ITV etc? We've been persuaded into buying expensive brands when cheaper brands would have been just as good.
So we clearly are paying for ITV. We're paying for it by buying the expensive brands instead of the cheaper brands.
Those products cost the most because they are the best products, and people are willing to pay more for them. In the case of Coke and Pepsi, they taste better than the alternatives. I have tried plenty of stores' own-brand colas over the years, I am aware of their existence, I am aware they are generally less expensive than Coke, yet I would rather pay more for a product I prefer.
And I would almost certainly enjoy a slice of Pizza Hut pizza more than what your local shop offers, because it tastes better and probably hasn't been sitting on a heated shelf for the past week.
And the reason why they are perceived to be the best products? Branding!
Costs money to build a big brand.
Can i remind you that, in blind taste tests, that Americans usually pick Pepsi?
Except, it doesn't always, the more a brand costs to advertise the more expensive to costs usually.
I posted the text from a rather interesting article a few posts ago. Yes, it's old, but it's written by an expert and he DOES see the link.
Ergo, you can't dismiss it totally with certainty like you are trying to do....
No, they are perceived to be the best because they taste the best. People try other colas, they know they cost less, yet they keep buying Coke and Pepsi because they prefer them.
As for the side-by-side Coke v Pepsi taste tests, for starters those tests are run by Pepsi so who knows how accurate they actually are. And even if more people actually do pick Pepsi, that may be because when compared side-by-side to Coke in small sips, Pepsi tastes slightly sweeter. But given the choice of drinking a whole can, more people prefer the taste of Coke. I certainly do.
I know, I know, it's because I'm a brainwashed rube who doesn't understand how things really work like the experts on the Broadcasting forum.......
On what is Richard G Elen an expert? Most of his articles seem to be about television, with a mix of radio and print, with a heavy emphasis on the BBC - not economics. The piece you posted is mainly speculation, there is zero empirical data to support his conclusion.
Other than that, I'm completely convinced.
Finally the truth.
Meanwhile Rona Fairhead is due to announce something that will no doubt shock you, it will be interesting to see if you start a thread on the matter or give it a wide berth as brainwashed to do.