Why are we so in love with (linear) TV Channels?

Recently Sky announced that it was now was calling a halt to new channel launches on its platform as older digiboxes wouldn’t be able to handle the extra EPG info.

What really surprised me was just quite how many channels were on the ‘stack’ to launch – 2 a week for as far ahead as the eye could see.

My first reaction was who are all these people launching channels – and how do they expect to make any money?

Having been involved in many a channel launch in the UK and in multiple other countries I’m well aware of the cost bases, and the kind of money one can expect to make. Now I’ve touched on this subject several months ago when I questioned whether the ‘Great Channel Shake-out’ was coming. It seems that shake out time is coming.

So my point today is, why do so many new players try and launch channels on Sky with the aim of making money (as opposed to be a marketing cost of a wider business)– and my answer is these are often ill thought out vanity products with no chance of cutting through and little chance of even breaking even. The old maxim was ‘the best marketing for your channel is the EPG’, but that just doesn’t cut it why an EPG, which with radio stations, has about a thousand channels names on it. Many of these players are ‘squatters’ hoping not to lose too much money before they sell their one escalating asset – the EPG slot.

Only the big boys and legacy channels can seriously expect to make any money from ‘subs’ (money the platforms pay the channels to have quality content on their platform, that they then can charge customers for a ‘package’). There is still money to be made from advertising, but that’s getting increasingly hard even if you do make a blip on the frankly Dickensian rating’s system that is BARB. Personalised advertising from the likes of Google will shake up the market no doubt, but I don’t see it bringing masses of new money into the general marketplace. The other money is direct revenues via phone lines, shopping and premium services.

Niche business owners need to work out what they want to achieve with their business, work out who they want to reach, how to market to them, how to build a market presence and then work out if being on the Sky platform is worth it – or if even being a linear channel is worth it. My view is concept, revenue streams and brand first- then work out if you’re a linear channel (either now, later, or ever) and what markets you can and should work in; new ‘TV ’businesses will flourish, but what constitutes a TV business has changed. There’s a multiple of platforms out there – but the real crux of the matter isn’t the platform, it’s how you go about gaining and keeping an audience which you can monetise. The platform of choice should flow from that question first. That's why wiser players like Simply Media, and others like London TV have moved off the platform and onto the web -it's right for their business.

Sky obviously think (and I agree) that there is too much ‘junk’ cluttering up the finite EPG resources as they up the amount of original content needed to maintain an EPG slot, dissuading those who block up the EPG with channels existing on a few hours of looped lo-res content shot in a suburban living room.

I do believe a TV platform like Sky and linear channels have a future in the medium to long term. I’m intrigued to see how FreeSat (Freeview equivalent on satellite) will affect the market. However, what I’m most intrigued about are new forms of EPG which are more than channel guides, but include programme search facilities, especially ones based on tagged content.

What I’d really like to see are ‘open source’ digiboxes where I could chose to download new, perhaps even personalised forms of EPGs, together with widgets and robots that turn my TV into a more connected experience - and that allow (linear) channels to exist in harmony with limited content niche brands.

If the platforms don’t do it, someone else will as TV’s move towards being another monitor on a household network as people decide they want to combine their Sky with their Joost , Babelgum and/or (video) iTunes

What 's the futureshape for Production companies?

There's been a lot of chatter recently about how Broadcasters and the broadcasting landscape is being disrupted and changing, but the Production Businesses who are making programming are changing too.

In the UK, there are 3 distinct trends at work, two of which are having a major impact on the fundamentals of the industry.

Firstly, Broadcasters are increasingly choosing to narrow down the field of 'indies' they work with, instead of working with whoever has an idea, they have at least a 'preferred list' - people they believe deliver to their multiple internal businesses targets. Therefore one/two man 'lifestyle' indies are finding life increasingly tough. However, I think the broader industry trends, discussed next, are having as much an influence on these small operations. As the industry becomes more sophisticated, working harder to exploits assets, it is moving further from the traditional model of work being commissioned and paid for by one client.

A recent government report highlighted that the UK Creative Industry is now 2nd to The City in terms of its size and importance. City money, either from IPOs, VCs, Private Equity or just High Net Worth Individuals has flooded into the 'visual media' industry. Combined with the improved terms of trade between broadcasters and producers, and freed from the overt reliance on broadcasters the businesses have been better able to exploit their Intellectual Property, as well as hold onto residual value. But the flipside of this, is the pressure to fully exploit these properties on multiple platforms. There is the pressure for the business to expand, to increase revenues and profits year-on-year, to increase the value on the balance sheet through hit formats. There is also the pressure put on you by the hard-arsed 'suits' who expect (well, secretly hope) 10x (return of 10 times investment) on their money. Their lives and jobs are based on putting the pressure on you to do that.

Thirdly, the landscape for Production Companies is changing; they pretty much just used to make TV for TV Broadcasters. Now at the very least, they are content producers and brand builders for distribution companies. The Production business is now increasingly a varied, multi-platform, multi-client task.

We are in a world where TV production companies are increasingly turning into the kind of 'integrated' businesses most comparable to old style Hollywood studios. At the base level Producers sell their stuff to the commissioner, to TV stations abroad, to other platforms like DVD houses and do revenue shares with broadband TV outfits like Babelgum and Joost. Cranking up a level of sophistication you have the likes of RDF who represent artists (people who add value to content) but more importantly are looking at having their own TV internet distribution platforms, taking the middle man of broadcasters out of the loop. Look at Fremantle who do something similar by giving their game shows brands life as web games. I'm currently impressed by Ten Alps who look at a niche and decide to own it with content and distribution delivered via magazines as well as the web and web TV.

The long and the short of it is from Universal Studios working globally, to Two Four in Plymouth, what it is to be a production company is changing.

That's great for the big boys with the teams, finance and infrastructure to explore business opportunities, who can afford risks and have the scale of production to back a move into a new area. There is no right or correct answer for what a producer should be. Serious businesses need to grow and change, and that will be affected by content fashions, by the strengths of current managements, by the wider markets in whatever territories you are big in.

The more interesting question today is, what if you aren't one of the big boys. What if you're not yet big enough, or don't chose to have outside investors with their baggage of golden eggs and golden handcuffs.

To smaller people I'd say you cannot be an island; you can't ignore and not compete in this wider marketplace. Equally I'd say concentrate on what you're good at, where your skills are, and what is the best use of your time. If you can create a great narrative, don't stress if you don't have the killer boardroom tiger inside waiting to be unleashed. Equally the boardroom toughie can't do a lot if he has no successful product to work with. It's a co-dependent relationship.

I would hope that 2 models will grow and flourish to help 'small' and 'super-small' outfits:

1. Take social networking as your example; create a 'web' of related businesses and individuals who have the strength, resources, knowledge and skills you could with. You will need put ego aside and 'be safe' by getting a clear working methodology/agreement on paper early on if its anything deeper than friendly advice. But network and find people you can trust, don't be afraid to talk about your issues, and listen to other people experiences and advice. But it's not just advice I'm talking about, its operational and practical help too: There are always web companies looking to expand their portfolio and contacts; find an old successful business hand who can afford to give time, advice and contacts or a Mum who used to be a killer businesswoman and wants to ease back into 'the game'.

2. More formally I see the emergence of 'hubs' or 'super-agencies'. Essentially, a half way house to selling out, I'd see a business that contains back office operations, high level business, finance and strategy skills, commercial skills and operational, cross platform capabilities. I can also see these businesses having a more formalised version of the 'mutual help network' mentioned above. These agencies would probably work for a fee, but more likely for a 'cut of the cake' through profit share or an equity stake.

I wouldn't say these 'agencies' are about giving away your business. I'd say they would not only allow people to concentrate what you're good at, it would give you better capabilities to 'play at the big table' with the Endemols and RDFs in terms of apparent size whilst looking for commissions. On the business side you'd be aided in growth and profitability for example by having a hard-arsed MBA type negotiating your contracts and financing, or increased capabilities in selling your format to other countries or developing the show brand into other areas. That's a lot of potential added stability, growth, profit and commissions, all whilst still retaining ultimate ownership and ownership benefits of your business.

Follow Me Entertainment

I’ve been gazing into my navel recently contemplating how media, entertainment and entertainment formats will develop and change over the coming years.

The thing that struck me today was the concept of ‘Follow Me’ media, which is inferred to a certain extent by cross platform propositions. Now don’t get me wrong, I’m not going all soothsayer and saying all TV/entertainment will be like this, what I’m saying is this is a strand that will grow, develop and become a bigger element in the mix.

By now you’re going, what does he mean ‘Follow Me’? Well increasingly entertainment portals or ‘channel brands’ are becoming ‘Follow Me’; in short the brand you like is available wherever you are. Today that means you get BBC News on TV, Net, PDA, Radio; it means Channel 4 is on terrestrial, on digital, Video on Demand, Online, Radio; it means you get your Facebook, flickr or You Tube on your phone as well as on your computer; it even means you have Fame as a TV show, a theatre musical, a music album or that you have Gala Bingo on the high street, on interactive TV and on the net.

This reflects the fact that brands need to be able to cut through a lot of media clutter and chatter to connect with consumers and ‘get value’, but also that we the audience also multi-task our entertainment. Tell me you’ve never read a paper or magazine in the living room whilst half following a TV show or listening to the radio?

Pushing the analogy further, commercial brands are becoming ‘Follow Me’ too. Look at Orange, Virgin or o2 that are your broadband, your phone, your TV but also bring you music at festivals or venues, give you tickets to see a movie and sell you non-core add-ons that bring you the brand lifestyle . It’s all becoming ‘experiential’: The brand interacting with your life on multiple levels throughout the day, making sometimes material differences to your life beyond their core product.

The next logical step for me within TV and multi-media is an expansion of not the ‘distribution brands’ like ITV being fully ‘Follow Me’, it’s the ‘show’ - the format as well as the format brand becoming ‘Follow Me’ too. This could apply to dramas, quizzes, reality even documentaries.

The best recent example for me right now is the Glastonbury Festival. It’s a real-life event, but you can also ‘interact’ with it by watching it on TV, listening on the radio, coverage in newspapers and the web, chatter on social networks and message boards.. you are even bought extras by sponsors like Orange and The Guardian.

In drama there have been experiments with ‘mobisodes’ of 24 and Doctor Who expanding the show experience. It’s interesting how LonelyGirl15 creators, which played on You Tube have created a new drama KateModern that doesn’t just get ‘premiered’ on social networking site Bebo, it’s actually fully integrated with the site. It’s not that hard to imagine adding another distribution platform or element into the mix so you get it on your phone, or watch a catch-up show on say Trouble or Sky One.

Even X Factor or Big Brother have elements of ‘Follow Me’ as auditions hit your local town and local papers, you watch the show and you interact and influence the show through voting, or chatting on message boards (social networking). You carry on by seeing the X Factor live music show or in BB’s case, it’s a case of Panto and Heat covers. The fact that you see these shows played at pubs just reinforces how people want these formats and brands to be available as they carry on with the rest of their lives.

I’ve already previously posted about ARG (Alternative Reality Games: What is the next Big Brother? post) in the which take this ‘cross-platform’ format to the ultimate extreme where you’re in fact better off to interact with the quiz/game show/drama/reality format on multiple platforms if you want to, say, win a million.

If you can take control over more parts of these various format value chains, you are in a win-win situation. Advertisers and sponsors love the idea of experiential marketing that really connects a consumer with their brand, which builds loyalty and on-going opportunities. Audiences love a format that they can get involved with, that engrosses them and gives them opportunities to get more (look at ‘spin offs like Doctor Who Confidential or the Xtra Factor, or calling in to get onto Who Wants to Be a Millionaire).

The question for me is do we get there by creeping increments as show brands and formats develop onto multiple platforms over multiple seasons, or if we get that big break out hit that launches a new section within the media industry.

Gosh, after all that pondering I’m off to switch my brain off in front of a non-challenging, sit back, non-interactive and totally linear piece of TV.

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.

What IS the next Big Brother??

So anyone working in TV wants to have the ‘big idea’ that will become a global hit, make them a fortune and earn them the adulation of their peers.

But the stakes are much higher if you’re a big wig at say CBS, ITV or even Sky One as multi-channel competition, the web, VoD, Xbox, Facebook, PVRs et al all slowly take their toll on audiences and advertiser’s fat wallets. We must never forget that TV’s competitive market place also includes people choosing to go down the pub, talk on phone or reading Heat (or even Dostoyevsky) rather than sitting down in front of the goggle box.

Now one of the many beauties about Big Brother is that it truly operates in this wider market place. People do chose to come home from the pub to watch the show. In fact some pubs, knowing their competitive market place advertise that their places are the venues of choice to watch BB, where you experience the whole communal experience of the show to the max.

Right now the TV industry is busy looking ahead at the internet and the new distribution methods it brings, at looking at enriching programming from UGC, at making money through personalised ads. That’s all great and very positive.

Now what TV isn’t doing enough of is looking at what it’s actually delivering, the format, the show and ultimately the schedule which is in the process of being if not written off, then written down.

Look at my life (if you don’t mind) for a minute: I’ve got a bunch of inappropriately young friends for a 40 year old, so I’m there social networking, chatting and sharing files on MSN, uploading onto flickr, chatting via Xbox Live, Bit Torrenting the latest shows and catching up on juicy clips via You Tube. As a TV & Media Exec, what I don’t get is why does this world need to be separate from the world of linear channels, formats and real time schedules? Shouldn’t we be embracing this into our world.

I’ve spent the last while looking around trying to get my head around what directions the business might head in, if there is a profitable business to be had at all. iTV bods always said the industry will take off when that one ‘killer format’ gets off the ground. But it never did, it was technology over usability, and more importantly what the user even wanted to do. I’d rather not see TV fade away.

So looking around, what do people want like to do in their ‘relax’ time? It’s suspenseful drama like 24, its answering quizzes like ‘… Millionaire’, it’s working out the procedures and thought processes on CSI, enjoying fantasy like Ugly Betty, brain teasers like Sudoku, it’s chatting to friends on the phone and via facebook, it’s doing something mad like flash mobbing or just going to the park to watch a free show.

But what if we could combine all this into one show: Even better, one show where a bit of viewer loyalty to the linear channel, and the idea of watching stuff live could give you a bit on an edge if you fancied beating your friends to an answer, or winning £50, or even winning a million. Now wouldn’t that be worth looking at?

Out there in the world of geekdom; the world of Second Life, World of Warcraft and even Dungeon and Dragons, a new ‘format’ has been brewing away gently waiting for technology, systems and a mass market to be ready for it. It’s called Alternative Reality Gaming and the best way to describe it, is like the world around you becomes a big game of Cluedo, an episode of CSI that you live in, and play in.

The best known examples are Nokia Game, and the well funded Perplex City which, I’m sure the clever people in charge of them would tell you, are still on a learning curve for mass market penetration. The issue I see is that whilst technology moves fast, people don’t – you still have web people doing web, TV people doing TV – and us media professionals need to be in place where our brightest creative minds and executives can travel from one world to the other, seeing the potential there and adding their knowledge.

I’ve decided to hook up with a man who helped a major UK channel dominate on a Saturday night to see if we can crack this conundrum. It’s an eye opening journey with some spectacular possibilities, but it’s interesting to see how some TV Exec’s ‘get it’ and others just glaze over in boredom. We might fail but you could never call us complacent. Hopefully we’ll be screening your calls from our yacht very soon.

Vlad Lodzinski is currently working on creating Alternative Reality Game formats for a TV audience.