|
|
|
|
|
|
|
|
|
|||||
|
Pay-TV Business Planning |
||
|
Introduction
Overview Free Samples Table of Contents Who Should Buy? The Author Reviews 
|
Toby Scott
Informa Bob Marich Deal Memo Richard Wray Guardian Unlimited Chris Forrester SatComs Insider Socer Investor Socer Investor Ashley Faull Managing Director, bid-up.tv Joyce Taylor former Managing Director, Discovery Europe Dr Gillian Doyle Head of Film & Media, University of Stirling Russell Barash Business Development Director, UPCtv |
|
Print copy: |
||
 |
||||||||
|
Review 1 |
|
Toby Scott - Informa |
 |
|||||
|
||||||||
|
Number of channels expected to fall as niches are filled, money losers fold July 18, 2003 (..) How many channels? As detailed in TVI (Mar. 28, 2003), there is an argument to be made that adding channels helps drive subscriber growth. According to data from Euroconsult, the world's 21 leading DTH platforms had 40 million subscribers and 4,152 channels in 2000. By end- 2002, the same 21 had 52.6 million subscribers and 6,079 channels. DirecTV, the world's biggest DTH platform - and the one with the highest ARPU - has the most channels. There is a simple argument to support this. Any new pay TV platform has to start with premium movies and sports, as well as specialist services, such as 24-hour news and children's. Such services are among the most expensive to launch, and in the early years the subscriber base will be too small to cover costs. Adding channels enables costs to be spread among more outlets and attracts more subscribers, who are impressed not by the number of channels but by the idea that there is one that is made for them. So, according to this theory, we should be in for more channels. But according to the report Pay TV Business Planning by International Marketing Reports the game has changed since the boom years. While the cost of launching a channel has fallen in most areas - technology is cheaper, while the cost of content is falling after years of rising rapidly - the funds available to launch are also lower. After so many failures, the backers of would-be new channels are looking for far more watertight business plans than they were eight years ago (see fig. 1).  Those looking to launch new channels have to employ one of two basic strategies when it comes to providing sort of channel the market will bear. A new channel can either ape the most successful existing ones and hope to gain by association or it can try to seek out an underserved niche. The popular types are already very well served. There are 143 movie channels, 92 sports channels and 78 children's channels in Europe. Add in 81 documentary channels, 75 music offerings and 52 news services and there doesn't seem to be a lot of room left. But there are areas that might seem underserved. Older viewers, though catered to with programming on other channels, lack dedicated outlets of their own. There is also room for an increase in religious channels and ethnic outlets. A look at recent UK channel launches and closures doesn't reveal any particular pattern. Channels with big brand names, clear identities or good backing have all shut. All they really have in common is that they did not produce the hoped-for profits. Channel launches show the strong presence of established broadcasters or thematic-channel providers. But there are still some small operations that have spotted a gap and filled it, such as The Dating Channel. One way out Constellation Media claims to have found one way out of the cycle for smaller channel operators. By pooling resources to cut overhead and offer advertisers a guaranteed audience share split among 25 or more channels, the company might be able to cut costs and boost revenues enough to turn well-run but unprofitable channels into cash generators. But even Constellation can only work with channels that are already doing well but cannot overcome their fixed costs. For those still struggling, there is no magic wand. Dominant UK pay TV operator BSkyB is using its size to drive down its costs, including the amount it pays for both content on its own channels and the price of third-party channels. For example, it has renegotiated its carriage fees with leading UK channel provider Flextech and has come away paying about 17% less per subscriber than it did before Sky has renegotiated about 20% of its third-party channel contracts and will have completed nearly half by year-end. Big players yet to come face-to-face with the News Corp.-backed giant include MTV, Cartoon Network and Nickelodeon. Morgan Stanley estimates that Sky can achieved a total content cost reduction per customer of 2-5%. Sky can afford to do this because it is the leading UK pay TV platform and no channel can afford to not be carried on it. Even so, Sky has not been striking deals as tough as it theoretically could. According to Morgan Stanley, Sky recognizes that there is no benefit to it if third-party channel providers go bankrupt because it has struck an unfair deal. Instead, the company, while seeking to trim costs, is also trying to provide its partners with a platform for new channel launches when the conditions are right. This might provide a model for how things will play out in some of the newly merged pay TV operators elsewhere in Europe. The smart ones will use the opportunity to cut costs, including channels. They will also recognize that they have an interest in keeping a strong and varied channel lineup going. The good news is that the European pay TV universe is still expanding, though not as fast as most operators would like. Pay TV is still skewed to largely urban, younger viewers with reasonable disposable income. As pay TV spreads, and even more so as free-to-air digital terrestrial services spread, there will be more opportunity for channel launches. The era of FTA DTT has already had a noticeable effect in the UK. Because it emphatically is not pay TV, the rights available are different. And because it is attracting an older viewership than pay TV, the interest from advertisers is different. If, as looks increasingly likely, the Freeview model is copied across Europe, there could be a chance for new, low-cost channels. These could be FTA versions of pay TV channels produced by the same companies or similar but not linked ones created quickly by smaller, faster-moving companies. But according to Sarah Simon of Morgan Stanley, the balance of power between content owners and distributors is swinging in favor of the latter. While content might have been king while pay TV operators were desperate to attract customers, the pipe owners now have more power. Many pay TV platforms are either emerging from restructuring, merging with rivals or, as with Sky, surveying the field from a dominant position. In all three cases, boosting profits is the key. And with customers proving resistant to spending a lot more on TV, cutting costs has become the main strategy. Although reducing premium movie and sports content costs has grabbed more of the headlines - not least because many operators overpaid for sports in the last round of bidding - cutting the cost of thematic channels is also part of the equation. Toby Scott © Informa |
|
||||||||
|
Review 1 |
|
Bob Marich - Deal Memo |
|
|||||
|
||||||||
|
European TV channels pour out despite dim survival prospects July 28, 2003 WESTERN EUROPEAN TV channels are simultaneously folding, being launched and expected to change hands, as upheaval grips the region's €20 billion ($22.4 billion)-revenue multichannel sector. New channels continue to sprout up - even though economics remain unfavourable - because digital cable and digital satellite DTH have high channel capacities, resulting in available carriage slots. In Germany, the Premiere DTH platform prepares to launch the Universal Studios-owned Sci Fi Channel Sept. 1, and in the UK, private-equity firm agreed a week ago to fund a startup TV-channel consolidator, Constellation Media Group. The private-equity outfit is West Private Equity, which operates an established €400 million fund and is new to the media/entertainment sector. The field narrowed because of DTH mergers earlier this year in Spain - where Canal Satellite Digital and Via Digital combined to create Digital Plus - and Italy - where Telepiu and Stream merged into Sky Italia - creating pay TV platform monopolies in those territories. Further, the trend is for channel platforms to reduce or eliminate carriage-fee payments to channels.  All eyes are on the UK, which is Europe's most robust multichannel territory, with about 250 full-service, unduplicated TV channels and a hefty 44% penetrate rate for highcapacity digital DTH and cable. "The UK is the most developed, and Continental Europe [is] coming up behind, following the UK example" says Leonard Fertig, the veteran eastern Europe broadcasting executive who is behind Constellation, which is aiming to acquire UK channels. Last year, some 15 satellite/cable channels launched in the UK (see fig. 1) and 32 rolled out in Spain(see fig. 2), though channel launches slowed to just a handful in major territories elsewhere in western Europe.  Euroconsult estimates that the world's 21 leading DTH platforms grew from 4,152 channels at end- 2000 to 6,079 by end-2002. Fertig notes that UK regulators essentially force BSkyB to add any licensed channel that is satellite transmitted - costing the channel operator less than £1 million ($1.6 million) per year, on top of the £75,000 yearly fee to be added to the BSkyB electronic program guide. |
| Because of falling costs for transmission and operations, a typical UK satellite/cable channel can be operated for £7.2 million a year, assuming a £4 million expenditure on programming, which is the biggest variable. For niche channels, program costs can range from £3.25 million to £10 million a year see fig. 3), estimates Pay-TV Business Planning : An Analysis of Pay- TV Business Planning, Channel Operation and Economics, a report by London-based International Marketing Reports. |
|
|
|
Though technical and regulatory barriers are surmountable, economics can be the killer. The IMR report counts the closure of 30 significant TV channels in the UK since 1997, resulting in £300-450 million in losses, including Carlton Cinema and pay-per-view platform u>directfilms. On the growth side, Turner Broadcasting is known to be considering a new film channel. Across Europe, Pay-TV Business Planning estimated that satellite/cable channels that have closed since the mid-1990s have run up €2.25- 3.5 billion in losses. In Continental Europe, Canal+-backed Multithematics was a loser, as its Cineclassics apparently failed to get carriage on merged platforms in Spain and Italy. Size does help: Hollywood-studio-backed basic film channels did get picked up by Spain's Digital Plus, while other locally owned channels did not. For advertising-supported channels in the UK, Fertig said a TVchannel platform needs to aggregate viewing of 5% in multichannel homes to be taken seriously by advertisers. Consolidation is being driven by the necessity to achieve economies of mass scale for selling ad revenue (multiple channels offered in a single ad buy), spreading overhead costs and clout to gain carriage. An increasingly bloody battleground for TV channels is the negotiation of carriage fees paid by cable and satellite platforms. It's believed that the most that BSkyB is paying to carry third-party, ad-supported basic channels is £0.08 per subscriber per month, compared to a £0.15 peak previously. Pay-TV Business Planning figures a good deal these days is a £0.05 carriage fee. That rate adds up to £6 million per year in total DTH and cable carriage fees in the UK. By comparison in the U.S., top basic sports channel ESPN - which is owned by Walt Disney - reportedly averages about $1.75 per sub, or 11 times more than the top UK carriage fee. The only silver lining in the UK is a growing subscriber base. "Even when widespread distribution is achieved, carriage fees are now much lower than in the past, and competition from the hundreds of digital channels makes it harder and harder to achieve high enough ratings for decent advertising revenue," notes the Pay-TV Business Planning report. A successful ad-supported UK channel - garnering 0.5% of audience - takes in £5-10 million in advertising, though only the top 25 channels fall into that category. A channel would be "doing well" to generate £1 million in ad revenue, according to the report. "In the present very tough climate, adsales agencies are not generally very interested in a new independent channel," the report states. For premium channels, BskyB reportedly receives about £1.50 per sub per month for conditional access and subscriber management. FilmFour, the premium movie service launched in 1998 by a UK public broadcaster, has 450,000 subs but needs about 800,000 subs to reach operating breakeven, Pay-TV Business Planning estimates. Film- Four, which recently folded two of the four channels in its multiplex, is priced to consumers at £6 per month. With 143 movie channels already transmitted in Europe, the opening for additional pure film channels is considered narrow. DTH platforms such as BSkyB have well-developed premium film channels they directly own (VDM, 16 Jun, 2003), and new launches tend to be niche channels from independent channel operators. V Bob Marich © Deal Memo |
||
|
||||||||
|
Review 1 |
|
RICHARD WRAY - Guardian Unlimited |
|
|||||
|
||||||||
|
Digital TV failures 'cost billions' Wednesday July 9, 2003 The collapse of digital television channels has cost European investors upwards of £2bn during the past six years, according to research published today. But the 150 channels that have closed could have been saved if their managers had obeyed a few basic rules of business - with failed British channels wasting up to £450m. The rise of digital TV platforms and the drive among some European governments to switch viewers away from analogue has led to a rapid expansion of digital channels since the late 1990s. But "the basic mistakes made in planning pay-TV operations have been staggering", according to David Brown, the author of Pay TV Business Planning, a study published by International Marketing Reports. "In a lot of cases their chances would have been improved considerably if they had [done basic things such as] kept a tighter control of their costs." Some managers in the TV industry have a tendency to get carried away, he believes, burning through cash but failing to secure an audience that will bring in advertisers. "You have to look at business plans with the cold calculations of the accountant or business manager," Mr Brown added. Recent closures in Britain include the Money Channel, which spent the tens of millions of pounds it raised on plush studios before going bust in a move that forced one of its backers, the former pop singer Adam Faith, into bankruptcy. "You can't just throw money at it in the way some people did," Mr Brown said. "There are rewards in the long term but you need to build up your audience share over time." While the advertising recession - which has gripped the industry for more than a year - is in part to blame for some of the recent closures, the report points out that "many of these closures have been the result of poor business propositions and bad planning". Richard Wray © Guardian Unlimited 
|
|
||||||||
|
Review 2 |
|
Chris Forrester - SatComs Insider |
|
|||||
|
||||||||
|
Huge losses on failed channels Pay-television is an important and growing market already worth more than 20 billion in Western Europe, and it will more than double this figure by 2008. If T-commerce revenues are included the figure will triple by 2008 to over 75 billion, according to a recent report. However, there is also a growing cost associated with channels that fail. Pay-TV channels are failing because they have not produced professional business plans. The study (Pay-TV Business Planning, published by International Marketing Reports, www.im-reports.com $745) states that dozens of Pay-TV channels have failed because the business models have not been properly researched and implemented. Report author David Brown says that in the past six years there have been more than 150 failed channels across Europe that have cost investors more than $3 billion. Most of the lost money could have been saved had a proper business plan been formulated, says Brown. "Obviously economic conditions in this industry are tough at the moment, but in many cases, channel operators are not giving themselves a chance because their costs are too high for the business models that they are following." |
|
|
|
Some channel failures in Britain recorded losses of over £30 million, says the report. But even on the basis of an average loss of £10 million to £15 million (new venture Attheraces, for example, lost £11.1m in the 12 months to 31 December 2002) this means that £300m to £450m has been poured down the drain. Taking European as a whole the wastage adds up to Euros 2.25 billion to Euros 3.5bn. | ||
|
The report highlights and analysis the structure of a potential broadcaster's business plan, along with the various revenue options open to niche broadcasters, as well as giving guidance to sensibly forecasting what the different income strands might be. Detailed costs on getting a signal to viewers are also tabled. Chris Forrester © SatComs Insider |
|
|
|
||||||||
|
Review 4 |
|
Ashley Faull |
|
|||||
|
||||||||
|
"Essential reading for anyone running pay-TV operations, as well as for those advising them.' Ashley Faull Managing Director, bid-up.tv |
|
||||||||
|
Review 5 |
|
Joyce Taylor |
|
|||||
|
||||||||
|
"A very useful report for anyone planning or running a pay-TV channel.. " Russell Barash, Business Development Director, UPCtv |
|
