Media Forum: Should C4 bank on Freeview?

Channel 4 is abandoning pay-TV with E4 and More4 launches.

It seems to arrive earlier and earlier each year, doesn't it? Don't worry, we're not about to launch into a baleful piece about frogspawn, cuckoo spit and the notion that these days the first green shoots of spring can be seen during the fortnight after Christmas.

No, we're talking about the considerably less-than-natural phenomenon that is Big Brother and its seemingly premature arrival on our screens later this month - as worrying in its own way as other manifestations of the end of civilisation as we know it.

Usually, the advent of the sex and squabbling exploitation show is used by critics as evidence of Channel 4's decline as an innovative creative force and serves as a compelling argument that it has lost its way strategically.

This year, however, could well be different. Because later this month, the debut of Big Brother 2005 coincides with Channel 4's wholehearted embrace of the Freeview free-to-air digital terrestrial platform.

The focus of this strategy shift is E4, which will become free-to-air on the digital terrestrial platform, thus disqualifying it from receiving subscription revenues from Sky, although it will remain on Sky Digital subscription tiers. Underlying this move is a belief that the stunning recent growth of Freeview could deliver better prospects for multichannel ad revenues.

With the launch of More4 later this year, Channel 4's digital strategy looks increasingly like that of ITV - a core premium brand flanked by two sub-brands, one youth-oriented, the other aimed at an older audience.

All free-to-air, of course.

So, does it all add up? Andrew Stephens, a partner at Goodstuff, says it depends on a number of factors. He comments: "Developing a segmented channel strategy makes sense, but the true test will be how Channel 4 establishes three distinct, yet complementary, brands in a fragmented market.

"Much of the content will be shared across the three channels and to be a success, E4 and More4 can't simply rely on being spoon-fed from Channel 4, notably Big Brother plus repeats. Channel 4 will have to invest in original and innovative programming across all three channels, which is expensive."

Some critics say Channel 4 may regret pinning its hopes on ad revenue growth via Freeview, the platform of choice of an older and less economically active demographic compared with the younger families with children who tend to plump for Sky.

But Andy Jones, the joint managing director of Universal McCann, doesn't buy that. He states: "Channel 4 and ITV have become fed up being dictated to by Sky and you could argue that strategically they can't allow themselves to become beholden to their biggest competitor. Sky may continue to argue that the pay-TV platform will be the long- term winner - based on the history of the US market. The weakness in that argument is that the US doesn't have Freeview - in fact, Channel 4's decision to back Freeview only strengthens it. Freeview is increasingly more likely to be the dominant multichannel platform. The boxes will soon be so cheap that people will have them in every room - even if they also have Sky."

David Walker, the media director at Kellogg, says the equation is simple - the greater the potential universe a channel commands, the greater its chances of delivering commercial audiences for advertisers. So this is a good move for E4 and he's looking forward to the launch of More4. "We have some initial indications of what More4's content will be - Channel 4 has a back catalogue of great programming that will undoubtedly work for them," he says.

Andy Zonfrillo, the broadcast buying director of MindShare, can't disagree with any of that. He states: "I know the recent results from Sky were decent (it put on 95,000 new subscribers in the first quarter of 2005) but I think the feeling is that growth in digital satellite has continued to slow, while the growth in Freeview is set to continue. Channel 4 has been talking up its public service broadcasting credentials and in that context it probably makes sense for it to step back from pay-TV."

He concludes: "The Channel 4 move strengthens Freeview. If you take Sky Sports and Sky One out of the equation, all of the top-rated multichannel brands are now on it, so it represents great value. The most significant gap in the Freeview line-up is the 16- to 34-year-old age group, so E4 will have a great opportunity to target that."

YES - Andrew Stephens, partner, Goodstuff

"E4 has done well, but not well enough to stand on its own two feet in a pay-TV world. Its release on to Freeview will help Channel 4 broaden its audience share, increase commercial impacts and bring in more revenue for programming."

YES - Andy Jones, joint managing director, Universal McCann

"There are several takes on the prospects of Sky and Freeview and their attractiveness where ads are concerned but from Channel 4's point of view, it's vital it finds ways to stop Sky dictating the terms." In many ways it's as simple as that."

YES - David Walker, media director, Kellogg

"It's a positive move. It gives a successful channel every opportunity to talk to a broader audience. I'd expect it to deliver more commercial impacts. That has to be good news. There's every indication that More4 will work too."

YES - Andy Zonfrillo, broadcast buying director, MindShare

"In Freeview homes the share of viewing of ITV1 and Channel 4 stays higher than it does in digital satellite homes. Obviously, Channel 4 is taking a calculated risk but it can go back to a part-pay-TV, model if the revenues don't flow as they expect."

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