The true cost of premium calls

Commercial broadcasters could be forgiven for breathing a sigh of relief last week when the BBC's Blue Peter - widely perceived as the bastion of all that is good and pure in children's television - became embroiled in the escalating phone-line controversy.

The incident - 14,000 viewers called in to a competition only for the prize to go to a child visiting the studio because there was a fault with the phones - led to headlines in the vein of 'Blue Cheater'. The story is just the latest in a growing list of damning revelations about viewer participation in high-profile commercial shows such as ITV's I'm a Celebrity and The X Factor, and Channel 4's Richard & Judy.

Premium-rate lines are big business for broadcasters; giving evidence to MPs last week, C4 chief executive Andy Duncan revealed that the channel will net £8m-£9m in revenue from calls this year; Five chief Jane Lighting similarly expects an £8m boost to her coffers.

The UK premium-rate market has grown to an £1bn industry, according to Harvest Media, as broadcasters facing declining ad revenue look to interaction to make up the shortfall. With papers such as The Sun declaring these phone lines a rip-off, is the cost too high?

'There is a complete loss of consumer confidence in the shows and a genuine feeling that viewers have been taken advantage of,' says Mark Borkowski, head of Borkowski PR. 'But the broadcasters have done the right thing in immediately halting the shows and pulling down the systems at great cost to themselves.'

Nina Cooper, senior consultant at branding agency Dragon, says the shows that will suffer the most damage are those for which interactivity is an add-on rather than integral. 'Broadcasters must develop a more even-handed approach and not see interactivity as simply an extra revenue stream,' she says.

In the short term, media insiders expect to see a fall in the numbers of viewers entering competitions and voting on shows. Anecdotal evidence suggests this is already happening; Roy Ellyatt, chairman of the NOC - the trade body for the premium-call industry - says media coverage of the problems will have a 'devastating impact on consumer confidence'; and Sir Alistair Graham, chairman of the premium-rate phone service regulator Icstis, believes that a consumer backlash against phone-in votes and competitions is a real possibility. 'There has been sloppy behaviour in the supply chain, but ultimately the broadcasters' reputations will suffer if consumers feel they have been exploited,' he says.

Industry insiders say the allegations should act as a warning to broadcasters to reappraise their strategy. At its peak, ITV netted more money from viewers calling in to enter Who Wants to be a Millionaire? than from the show's ad breaks. This earning potential led it to launch dedicated gaming channel ITV Play - which it recently pulled (Marketing, 14 March) - despite observers questioning why a mainstream broadcaster would want to be associated with gambling channels with no editorial value.

All the broadcasters have sought to distance themselves from the controversy, piling the blame on production companies and phone-service providers such as Eckoh. However, Chris Pressley, chief executive of Siren, which provides SMS and phone services for broadcasters including MTV, Sky, Channel 4 and ITV, claims the problems are the result of pressure on margins. 'Ultimately, the broadcaster is promoting the service, so the buck stops with them,' he says.

This is not the first time transactional TV has come under the spotlight: Big Brother came under fire when Icstis received 2700 complaints after contestants were allowed back into the house after being voted out last year. In October, the watchdog ruled that the show misled viewers; the firms that provided the voting services, Minick and iTouch, had to pay almost £50,000. ITV has admitted that its flagship reality talent show The X Factor overcharged interactive voters by £200,000, but denied reports that David Gest was voted off I'm a Celebrity in error after 30,000 votes were lost.

Edward Boddington, chief executive of Harvest Media Group, insists that the premium-rate industry is here to stay, despite such incidents. 'The past few weeks have been a wake-up call and we have to review the whole supply chain,' he says. 'I would welcome some form of licensing - we all want a fair system.'

Industry insiders feel that the latest set of incidents to come to light could spur the greater use of local-rate calls. 'The use of premium-rate lines for voting is not the norm in other countries. There is no doubt that broadcasters have been taking advantage of viewers to boost profits,' admits one senior producer.

Borkowski warns that broadcasters should not bring back the interactive services too quickly. 'While accountants are masters of the universe, there is a danger the broadcasters will look for a quick fix and the problems will come up again and again,' he says.

Interactivity has been a key strategy for broadcasters seeking to connect with consumers, yet the proliferation of add-on viewer polls and competitions simply to drive revenues may devalue the medium. It remains to be seen whether consumers are willing to continue paying a premium to make their voices heard.

This article was first published on Marketing