MEDIA FORUM: Is there room for niche TV channels in recession? - Carlton has pulled the plug on its Taste venture with Sainsbury's Is this the beginning of a cull of niche programming? Ian Darby investigates

It seemed like a bad omen when the Taste Network, the joint venture

between Carlton Communications and Sainsbury's, chose Anthea Turner to

be the face to launch the initiative.



After her chocolate bar wedding, Turner turned from media darling to

villain and even the appearances in Hello and OK! dried up. So maybe

it's not surprising that her cosy appearances on the Carlton Food

Network channel, and the taste.co.uk website that made up the Taste

Network, failed to ignite audiences.



From 1 September, Carlton and Sainsbury's are ending the Taste alliance

into which they have invested £10 million. The website will close

down and Carlton is reviewing the future of the television channel. In

its statement on the closure of Taste, Carlton blamed "weaker than

expected growth in advertising and e-commerce revenues in a generally

difficult market for niche channels". If this is the case we can expect

other cable and digital channels to start feeling the pinch and falling

by the wayside.



However, the picture may be more complex than this. While it is true

that many of the niche channels, and there are more than 200 out there,

are struggling due to bad market conditions there are some notable

success stories. Figures also suggest that there is room for growth in

multi-channel audiences (for instance, in the past year more than one

million extra women tuned in to multi-channel options, an increase of 25

per cent). The key area of debate seems to rest on whether a traditional

advertising revenue based model, such as that employed by Carlton with

Taste, will work with niche programming.



Simon Mathews, the managing director of Optimedia, thinks that the

television industry needs to change the way it develops niche channels.

He says: "If you look at revenues in magazines, radio and outdoor, you

can see that there is still growth despite the downturn. The TV industry

has to admit mea culpa and re-examine its own practices. There is

evidence in these other mediums that people are able to sell niche media

and create highly profitable businesses. This is not a challenge

television is responding to."



Mathews argues that cable and digital channels need to overhaul the

practice of using ITV station prices as a sales benchmark. He also

argues that some broadcasters need to look beyond the advertising

revenue model. He says: "It isn't a busted flush as long as you stick to

one of three business models.



If a narrowcast channel, you need to create a unique and valuable

proposition and leverage this to create a high-value audience and then

look for additional revenue streams."



The three business models referred to by Mathews are: advertising driven

by this high-value audience; subscription; and charges for other

services such as telephony. There are certainly examples of this -

FilmFour, for instance, works on a subscription-based model for its

200,000 viewers and Emap's music channel The Box relies on revenues

derived from peak rate phone calls from viewers.



David Stubley, the managing director of Outrider, says: "There can be no

doubt that unless a channel secures carriage fees then it will die.

FilmFour works because it is a) distinctive enough to add value to the

Sky/ITV/cable package to help generically drive digital subscriptions;

b) from the consumer's point of view is worth paying a premium for

because the films are excellent and will not be shown on other channels;

c) Channel 4 can cross-promote from the main terrestrial channel."



He adds: "Other channels will definitely fold. All of the Granada niche

channels, Carlton Cinema, UK Plus - anyone competing just for

advertising will have problems unless the programming costs are next to

nothing or can be amortised across markets as in the case of Discovery,

Eurosport, Cartoon Network, Nickleodeon and MTV."



David Cuff, the commercial director of Flextech Television, agrees that

times are tough and points out that the advertising crash has hit

stations.



He also says: "In the digital market the platform owner subscription pot

has not increased in the same proportion as the number of channels that

want distribution. The main reason for this is that the digital

platforms have given proportionately more channels to the consumer for

the same price. Therefore, there is downward pressure on sub revenue for

channels."



Michael Winkler, the European media director at Gillette, seems to back

the argument that niche channels will struggle if they rely solely on

advertising revenue. He says: "The problem with niche channels is

twofold.



On the one hand, if you want reach you chose the big stations and then,

even though the smaller channels offer good prices, it is difficult to

measure audience and in many cases you are just attracting a smaller

part of the mass audience."



Winkler says that Gillette as an advertiser is not convinced by the

argument that it can target specific products to the more tightly

defined audience of niche channels. "With something like Carlton Food I

can get most of the reach already because the audience is not very

different."



So what will Carlton's future approach to niche programming be? Matthew

Kearney, its director of business development, says: "Specialist

channels are struggling to meet their advertising targets in the climate

of advertising cutbacks. At the same time their subscription revenues

are also vulnerable as TV platform owners are seeking to reduce their

own cost base."



Kearney says that Carlton Cinema is performing well and will continue to

operate. He adds: "We are focusing on the launch of a family of

ITV-branded channels with mass appeal such as ITV Sport, which was

launched last week."



Rival content providers are also considering alternative avenues. Cuff

says: "To prosper I believe digital television channels need to

supplement ad and sub income with interactive revenues, be they eTV or

games. The fact of a return path and the direct consumer access and

feedback this provides gives cause for optimism that more or new

advertisers will want to exploit this powerful marketing channel. As

interactive innovations add value to the consumer and the advertising

proposition I'd say that niche channels have a very good future."



Stubley is clear on what niche channels need to do. He says: "The trick

is to work out how you make money from engaging with ten to 100,000

people rather than two to ten million and what it is they will pay you

for. Look at Teamtalk.com: only 9 per cent of its revenue comes from

advertising."