SUPPLEMENT: CABLE AND SATELLITE; The choice explosion

Nick Milligan, Sales Director UK Gold

Nick Milligan, Sales Director UK Gold



Forty years ago, there was one commercial television channel available

in the UK. Fourteen years ago, there were three. By the end of this year

there will be around 50. But don’t be fooled by the dizzy array of

choice - the TV revolution we were promised when Sky Television launched

its four channels in 1989 has been a slow and painful process - and it’s

not over yet.



Cable and satellite homes don’t watch any more TV than those with just

four channels; in fact, recent figures suggest that they watch slightly

less. More than 80 per cent of UK households still say ‘no’ to this

extra choice, and the launch of a new satellite channel now has about as

much novelty value as another Tory sleaze scandal.



Yet BSkyB - which recently announced an increase in pre-tax profits of

67 per cent to pounds 155 million - has never been the sort of company

to rest on its wallet, and has continued to pump millions of pounds into

an increasingly heady mix of exploding channel choice, slick advertising

and marketing, and attractive programming packages.



Demand for satellite dishes has recently slowed to around 60,000 a month

despite this marketing confection, yet this still means around 2,000 new

homes sign up every day. Some believe that what the medium really needs

is a major new programming coup that rips the heart out of terrestrial

TV, hence recent speculation that Sky is trying to poach Coronation

Street from ITV.



At the same time, many of the new Sky channels that are being paraded

this autumn to encourage more dish sales are hardly channels at all. How

many hours constitute a channel rather than a programme strand? For the

autumn launch of the sci-fi and history channels on Sky, a few hours a

day seems enough to warrant the channel label.



And we can look forward to yet more channels. There are now five Astra

satellites in operation, with Astra 1F due to be launched in 1996,

followed by Astra 1G in 1997. By the end of this year there will be 33

channels transmitting from the Astra satellites, offering a diet of

programming from movies and sport through to home shopping, education,

documentaries and music.



Yet despite this glut of choice, more than half of satellite viewing is

accounted for by just five channels: Sky One, Sky Sports, Sky Movies, UK

Gold and the Movie Channel. But the Astra channels do not equal

mainstream. Many of its channels, including those operated by United

Artists Programming and UK Gold, are carving out healthy niches of their

own with full-blown specialist propositions.



While media buyers continue to be concerned about the role that

advertising will play in a medium increasingly driven by subscription

revenue, the smaller channels are excelling at servicing agencies with a

slickly presented offering. Both UAP and UK Gold have quickly come to

set the standards for well-packaged programming, but the key, as far as

advertisers are concerned, is knowing how to market themselves to the

advertising industry.



In a recent Campaign survey, the UK Gold/UK Living sales team, headed by

Nick Milligan, the former Thames sales boss, was singled out as the gold

standard among all of the TV sales operations. Milligan, now UK Gold’s

sales director, firmly believes that the value of smaller satellite

channels, such as UK Gold, is now widely recognised among advertisers

and agencies because of the tight audiences they deliver. The secret in

converting these figures into revenue is a full understanding of the

audience and the channels’ role in the wider TV picture.



UAP, whose portfolio includes the Discovery, Learning, Bravo and TCC

channels, is another favourite among media buyers because of their sales

style. After years of screaming down the phone negotiating with an ITV

monopoly, it’s refreshing to find sales teams that actually sell their

stations, and do it with flair, buyers say. Because they’re not as big

as ITV, Channel 4 or Sky, the UAP sales teams have to work harder, and

that, Richard Burdett, the group sales director, says, means becoming

‘sound-bite marketers. You can’t afford to waste a moment’s

communication’.



The messages aren’t lost on most TV buyers today. Paul Van Barthold, the

head of TV buying at the Media Business Group, says that some of the

satellite sales teams are exemplary. ‘They’re very polished in the way

they represent their channels to us and our clients.’



It’s enough to put the cable boys to shame. When it comes to selling

airtime on cable, the cable operators are a shower. ‘Some of the cable-

only channels make a good effort with a poor product,’ Van Barthold

says, but the cable industry has made little impact among media buyers,

although the proposed new Cable Advertising Bureau should make buying

advertising airtime on the medium an easier process.



Still, you’d have thought cable would have learned by now. It’s a long

time since the cable operators were the poor relations of the satellite

big boys. The cable industry is increasingly dominated by a handful of

major US players, with big plans and pockets deep enough to rival those

of Rupert Murdoch.



The latest figures from the Independent Television Commission show that

cable subscriptions and the take up of cable operators’ trump card -

telephony services - are now running neck and neck, with more than a

million homes connected. Yet cable penetration has stagnated at about 21

per cent over the past couple of years.



Considering the medium took years to get off the ground and still

doesn’t seem to have found its feet as a generic industry, a report from

Goldman Sachs forecasts a healthy future by predicting that cable

penetration rates could double over the next eight years. Hardly an

overnight success - but the cable industry is playing a long-term game.



According to Goldman Sachs, the combination of naturally declining churn

rates (people who terminate their subscriptions), generic marketing

(possible because there is little competition between cable operators as

each has a monopoly in its own area) and the telephony carrot, will

speed up the rate of penetration.



Yet, as one major cable player admits, the industry is still refusing to

develop a concerted plan for the future to capitalise on these

opportunities. ‘It’s still a bit like a child with a computer - you push

all the buttons and eventually something will happen, but there’s no

method in it,’ he says.



The industry has begun to make noises about a coherent marketing effort.

The cable operators, through the Cable Communications Association, have

finally come together to launch a generic marketing push. Some question

how realistic the proposed pounds 15 million advertising spend is, and

others in the industry suggest, privately, that the advertising

initiative is merely an ego trip for the cable operators and is unlikely

to be based on sound marketing sense.



Better late than never, though, and if J. Walter Thompson’s enthusiasm

for its Cable Communications Association ad account is anything to go

by, the push could really launch cable skyward.



And, slowly, very slowly, the cable industry is beginning to have its

own wares to advertise. The launch over the past 12 months of a number

of cable-only channels, albeit of dubious quality, can only help cable’s

cause, particularly when several of those channels come with the backing

of powerful newspaper groups ready and able to make full use of their

publications to promote their cable output.



Among the new channels are Channel One, from Associated Newspapers, and

Live TV, from Mirror Group. In addition, SelecTV has launched a channel

of repeats of its programmes such as Birds of a Feather. Rocketscience,

run by the former Initiative media buying team of Adam Stanhope and

Robert Ditcham, is joining forces with the production company, Kudos, to

launch a cable-only channel targeting young people next spring. The

channel is already being hailed as a valuable element in driving forward

the cable proposition.



But if these channels are to survive, they’ll need all the support they

can get from the cable operators themselves, though one cable channel

manager suggests ‘it’s an uphill struggle’. Some from within the cable

industry are concerned that the American management teams dispatched to

the UK may even be holding back the development of the industry. ‘Many

Americans have been posted over here because this is where they can do

least damage,’ one major cable player suggests. Another laments:



‘There’s just nobody in the cable industry to match [Sky chief

executive] Sam Chisholm.’



Just as the cable industry is beginning to drive forward, another

revolution is looming - digital. Sky is understood to be preparing for

digital transmissions as early as next year, and the cable operators

need only exchange the receiver boxes rented to cable households in

order to deliver digital via cable.



But all parties will have to move quickly if they want to capitalise on

the very real advantages open to them before the terrestrial

broadcasters get a sniff at digital frequencies. If the past few years

are anything to go by, moving quickly is a concept some of the major

players in these markets really just don’t understand.



------------------------------------------------------------------------

Satellite Penetration (at year end)

------------------------------------------------------------------------

                    Total dish/SMATV            Total cable/SMATV

                   Dish      Satellite       Homes           Connect

                   homes     per month       connected       as per cent

                   ’000                      ’000            of passed

1995               3,284     32              1,354           21.8

1997               3,704     15              2,327           25.1

1999               3,920     8               4,120           34.5

*SMATV based on ITC returns from some SMATV operators now exempt from

licensing

Source: Zenith Media

------------------------------------------------------------------------



------------------------------------------------------------------------

Net Advertising Revenue In Current Prices

------------------------------------------------------------------------

          ITV      Ch4      GMTV      S4C     Satellite   Ch5     Total

Year     pounds   pounds    pounds    pounds   pounds    pounds

1995     1,605     450       81        9        125      -        2,270

1996     1,715     491       89        9        145      -        2,449

1997     1,783     493       92        8        204      115      2,695

1998     1,919     521       98        7        263      137      2,945

1999     2,073     551       104       8        361      167      3,264

2000     2,173     575       110       9        497      199      3,563

2001     2,152     587       113       9        625      225      3,711

2002     2,148     590       118       9        675      253      3,790

2003     2,265     627       122       10       752      300      4,076

Source: Zenith Media

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