Friday, 22 June 2007

The Shake-Out? Multi-channel in the UK

There's always lots of media coverage when a new channel is launched, but that's less true when a service shuts down - no boastful press releases then. The economics of running a TV business are tough, no matter if you are a big player or running a station off a laptop with a staff of 2 interns (literally, I've visited those stations ).

Many TV businesses were launched on business plans that looked at breaking even in 2 to 5 years. Many were there as 'placeholders' to gain market share, to vainly help with ratings slides, through to simple 'squatting' holding onto valuable EPG slots in the entertainment section looking for a buyer.

The market is being squeezed and in many cases broadcasters and bumping along either side of break-even. Investors and parent companies are now getting itchy feet.

The squeeze on channels and their revenues has been getting much more intense: The rise of Freeview; the massive squeeze on subscription revenues (if you've managed to get them at all); the rise in Sky EPG costs; the collapse of participation revenues; getting shunted to EPG dead zones; attracting advertising; costs of running a subscription service on Sky being uneconomic for pretty much any player (Film 4 included) at a price the public are willing to pay; negotiating your way onto cable; a glut of pitifully bad competition drowning out mid-size quality players; the rise of the internet and social networks; the rise of Joost, BT Vision and other new distribution platforms; the rise of the long tail VoD business model; rights issues and costs; technology changes and free content (does anyone pay for ring-tone specific downloads anymore?), the list just goes on and on.

We are beginning to see the changes, but like the UK housing market will there be a collapse (say prompted by a Sky rule change) or a gentle slide?

I don't think this in the end of multi-channel but I do see 2 things happening. A greater polarisation between 2 distinct business groups. One, well funded, with multiple, well marketed 'brands' featuring 'expensive' content and run by large, funded businesses on all major platforms who are either a top 5 player in one market (eg: Virgin Media's, ITV's or Five's bouquet of channels who all have a Freeview window), or a significant player in multiple markets (MTV, Discovery, Turner). Mass market with one shared back office infrastructure and able to attract advertising, sponsorship and of course audiences. In here you'll also have the businesses who use TV as some kind of shop window, from gambling and bingo,through to shopping channels and pure advertiser strands like Audi TV.

Secondly I see a big mass of properly niche players featuring targeted content, distributed via 'secondary' methods where distribution costs are lower, where capabilities of charging subscriptions, 'accounts', one off payments and targeted advertising are within realistic reach. These will be the entrepreneurial businesses, the niche content players, distribution and production companies. Already Ten Alps is becoming a major player in this emerging market and expect Joost, BT Vision, You Tube and others to be names to look out for as well as 'new' broadcasters like the National Union of Students and the like.

So is this pointless musing, or is the middle market really being squeezed?

In recent weeks both Optimistic and Life TV have essentially disappeared having sold their valuable entertainment EPG slots. We've had channel's like London TV move over to broadband, the Simply group change focus as they become a broadband distributor, DITG/YooMedia moved away from being broadcasters. A whole swathe of adult, shopping and participation and gaming services shutting down or imploding. There are rumours of Channel 4 taking over one or more of EMAP's music channels - perhaps no surprise as those channels revenue streams of a £1 a pop to request a video on a channels that plays out the ostensibly the same music on a 2 hour loop. Channels like Extreme Sports moved from a 'bespoke' service to be put under the wings of Zone Media who specialise in buy-by-the-100-hours library programming with minimal brand building and marketing, surviving on low risk, low cost, lower return models with little ambition.

Looking at comments by Jonny Webb and Malcolm Wall I'd expect a rejig (and loss of?) channels in the Virgin Media stable, Turner had a re-jig recently and how much longer will NBC Universal keep backing Sci-Fi UK as a stand alone brand when any break out hit it has gets pinched by the competition (Heroes). This mass market is going to have more 'strong' players as Virgin 1 and MTV's General Entertainment services launch and squeeze the value in multi-channel and dig their claws deep into the emerging platforms.

I of course, could be wrong and your comments are appreciated as always.


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