What are the commercial issues facing digital TV? And will any of it
add up to profit? We asked five leading industry figures.
One thing’s for sure at least: digital technology will change the face
of television in the UK. The capacity to transmit a wide range of
channels will be dramatically increased. But while the potential to
extend viewers’ choice is taken as a goal worth pursuing, what of the
commercial issues? How many new stations can the UK support, and how
desirable would a broadcasting environment with hundreds of channels be?
For media buyers, the appeal is obvious. More choice means more
fragmentation of viewing. That will dilute the power - and so the cost -
of commercial terrestrial contractors. It will also make tightly defined
audiences easier to reach. Not that conventional broadcasters are going
down without a fight. At Channel 4, at least, the future for digital is
seen as a long, hard road.
For advertisers, multi-channel TV may be a highly valued route to
market. Time Warner Enterprises has built a global business in two
years, selling music through DRTV, by exploiting the explosion of
specialised, cost-effective channels. It will certainly welcome a
broader choice of channels. But such advertising revenues will be spread
ever more thinly across each station. Given consumers’ resistance to
paying for more choice, the real problem for digital TV is, who will pay
for it?
Michael Grade, chief executive, Channel 4
‘It is unlikely to spell the end of conventional broadcasting. If new,
minority service providers are to have any realistic expectation of
profit from much smaller audiences in a fragmenting market, the public
would need to pay hugely more for that opportunity of greater choice.
Willingness to pay will have a ceiling and I don’t think it will be
remotely high enough in the foreseeable future to provide secure,
reliable income for entrepreneurs to take the risk of starting hundreds
of expensive high-quality niche services.
‘There is already evidence of price resistance in subscriptions to the
popular film, sport and entertainment channels. So what price, say, a
subscription-funded angling channel? How many hours a day would even the
most dedicated angler give to it? And would that fraction of attention
by a fraction of the public be enough to generate the programming and
support a business? With high costs and fixed viewing time, new methods
of distribution are more of a challenge than a solution.’
Clive Reed, group director, Optimedia
‘Anything can happen next year with digital. In 1985, there were three
stations, then 20 in 1990, and now 53 as of Tuesday. They will keep
multiplying.
‘Digital has to be good news, because it breaks up monopolies. But it
will be difficult to monitor and to justify where to put advertising.’
Chris Kirby, managing director, Time Warner Enterprises
‘I don’t see us having hundreds of channels like the US, because the
markets are not big enough. The UK likes to think it is the leader in
TV, but some of Germany’s major channels are already number one in
Poland because these signals don’t have national boundaries. There is a
war for language control, so it would be a huge benefit to have a
significant number of English language channels broadcasting across
Europe.’
Simon Cox, broadcast director, CIA Medianetwork
‘A lot of American companies are looking to move into the UK market via
cable and satellite and will want to extend that foothold. Like Sky,
they have the resources and backing. The companies involved are big
enough to afford the investment and the wait for a profit.
‘A lot of satellite channels have created new income streams. That
educates agencies to think outside of spot and space. A lot more clients
will be using a call to action, direct marketing, sponsorship and
promotions. There will also be more joint programme funding.
‘I’m a big supporter of consolidation of sales houses for cable and
satellite. I can’t talk to hundreds, but I can talk to five, each
selling 20 channels. The more channels there are, the more spots run,
the more administration there is for buyers. It is of paramount
importance to crack that. Only the bigger players will have the
resources to do that. At the moment, size is an advantage for volume.
But it will be more important to understand clients’ business.’
Alison Jones, director, The Network Europe
‘Digital will result in a high number of channels like the US - that is
desirable and useful. It will give the consumer more power to edit their
own consumption. The problem is finding the inventory to fill the
channels. Viewers are conservative, so there will be a lot of re-runs of
old formats and the tried and tested.
‘There is a huge problem for advertisers and for us in terms of advising
how and where to spend their money. Media is not now the business of
discussing in isolation cost, reach, number of GRPs, flight - all of the
jargon we use. It is understanding media as a vehicle for the brand,
understanding the brand’s relationship with consumers, and reflecting
that in the media selection. It pushes media way up the agenda.’
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