There is every indication that 2009 will the FTA TV’s annus horribilis. A perfect storm of lower revenues, enormous debt burdens and the rising costs of programming are converging with the cost of digital migration and undisclosed new standard definition (SD) channel costs. If this wasn’t enough, the three major commercial networks in particular, face major challenges from non-traditional competitors – even their clients. At a time when strong leadership is required the industry seems unsure how to proceed in the face of so many challenges.
The FTA industry remains tight lipped over its future strategies to cope with the next 2-3 years. The launch of Freeview in November last year promised “television like you’ve never experienced it before” and invited us to “reserve the best seat in the house…and get ready to enjoy an entirely new way to watch the television you love”. So far, only Channel 10 has released any detail on what this new experience might include with the launch of One, a specialised sports channel. Channel 10 should be applauded for its leadership given the tough trading conditions the company is facing. It is understood that the confirmed foundation sponsorships amount to additional revenues of $5-
8 million. While this is unlikely to cover the costs of One, it is a reasonable effort for a channel that is untested and a pricing model that is foreign to the FTA networks and their media agency partners.
Despite questioning the value of these additional channels, and David Gyngell has on numerous occasions, the launch of Freeview has made a set of promises to loyal viewers. To remain silent and still carry the advertising for Freeview may do more damage than good. Subscription TV competitors have been quick to take advantage of the situation by confirming they will launch a further 20 channels in 2009. This is on top of 9 channels launched in 2008. Regardless of what you think of the content on many STV channels, you have to admit that their communication and strategy seems clearer and more viewer centric than their FTA colleagues.
At the heart of the problem is content. Media analyst, Steve Allen of Media Fusion, was right in questioning the existence of more high quality content at a reasonable price that the networks could access for additional SD channels (www.watoday.com.au; 24/12/08). Channel Ten’s resurrection of the 10 year old format of Masterchef is a testament to how difficult and expensive new content is to source, even for FTA’s primary channels. Added to this, there are only a limited number of content genres that attract the advertising revenues required to fund the channels.
Channel 7 appears to be in the best shape for 2009 but it is important to note their high proportion of locally produced content. The relative cost compared to international content sourcing is significant. The network’s ability to increase exposure to these costs for secondary channels is limited. As with Channel 9, Seven is still keeping quiet over its plans under Freeview, with much of their continued effort centering on Tivo.
So where to from here? The networks have increasing costs they cannot avoid, the scope for more staff and budget cuts is limited, the advertising cycle is working against them and there is persistent pressure from competitors and new technologies.
Part of the answer is in harnessing the content initiatives and aspirations of its clients. Major corporations and governments are investigating their ability to produce and distribute content as a way of extending their brand values, key messages or their brand franchise in the minds of their audiences. This has become possible as a result of falling production costs and the ability to distribute content efficiently via broadband. Admittedly, the Australian branded content industry is in its infancy and much of the content produced to date is dreadful, unsophisticated and non-repeatable. There are exceptions however. In 2008, the Victorian Government (TAC) sponsored “Sudden Impact” debuted nationally on Channel Nine winning its timeslot with over a million viewers in primetime. This represents free content for the networks – in fact most companies will pay for distribution. Provided advertisers meet the same quality and selection criteria as other content producers, is there really a problem? There appears to be no system where commercial content of this type can be easily evaluated by the FTA networks. This may be one solution to accessing quality content for secondary channels. The alternative is that clients will find alternate ways to distribute quality content, further eroding the FTA franchise in Australia.
While this may not seem like a threat, consider Nintendo’s announcement to launch its own TV channel and programming through the Wii. It will be available in 40 Million Japanese households this year. Who do you know that has a Wii?
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