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
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
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
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
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