'TV industry faces perfect storm', Sky News Online

Wednesday, November 12, 2008

Send to a friend
Recession Could Reduce TV Choice, by James Silver, media reporter

As media agency Zenith Optimedia warns that prices for TV advertising are set to fall to their lowest level since 1987, a leading media analyst told Sky News Online the advertising-dependent commercial TV sector faces "a perfect storm" in 2009.

"It's not a very pretty sight right now," said Mathew Horsman, joint managing director of Mediatique."There has been a fundamental drop in advertising expenditure and it is affecting TV quite badly.

"It actually wasn't too bad in the first half of this year, but it has started to accelerate."

He continued: "2008 will be at least 5% down, which for an industry which until quite recently expected 3-4% annual growth is pretty bad.

"And that's nothing compared with what's going to happen in 2009, in which commercial TV will probably see another 5 to 10% fall in terms of their advertising revenues."

What is more, argued Mr Horsman, the sector enters the recession while simultaneously undergoing profound structural upheaval.

"Like newspapers, commercial TV is going through a series of structural changes at the very time that the drop in advertising is compounding their problems," he explained.

"While the growth in online advertising has been massively destructive of the regional press, to a degree radio and national newspapers, up until now TV has been relatively immune.

"But there are signs that that may change, particularly as online is getting more and more dominated by video, and that's starting to take viewers away from traditional broadcasters."

Meanwhile, he said he also expected Sky's subscription-funded business model to be tested in the recession.

"This is the first proper consumer recession we've had in the UK when the alternative to Sky is relatively decent.

"If you go back to the early 1990s, if you can cancelled your Sky subscription or your cable, you would have gone back to just four channels. Now you could still get 45 services on Freeview."

He added: "However, I think we'll see 'spin-down' rather than cancellation. In other words, customers might downgrade their Sky subscription package to save money, but I don't think they'll cancel, not least because in a recession, people tend to spend more time at home.

"Also, frankly, 45 channels on Freeview still doesn't look much against even a low-to-medium package on Sky."

He says he is even more confident in making another prediction - namely, that Sky will meet its target of having 10 million subscribers by 2010.

"If (BSkyB Chairman) James Murdoch has to get up on a ladder and stick the satellite dishes up himself, they will not miss that target," he laughed.

Emerging from the recession, Mr Horsman expected the commercial TV landscape to have changed dramatically - mostly because of the way the industry is having to evolve to reach consumers.

"As online grows, in terms of video-on-demand services, the broadcasters are going to have to tap those sources to offset losses in the mainstream.

"The world we look at after the recession will increasingly be one in which broadcasters are having to look at multiple revenue streams and use content to drive revenue as much as advertising," he said.

Does he expect there to be casualties along the way?

"There will certainly be some channel failures, but we're talking about channels which populate the outer-reaches of the Sky EPG (Electronic Programme Guide), channels you may not have heard of."

Of the main commercial broadcasters, he argued that Channel Five is in the most precarious position.

"I think there will also be a serious question mark over the medium-term viability of Channel Five. It's too small - and has only barely gone into profit - and now we're entering a recession. So there must be serious doubts about whether it has an independent future."

However, the BBC, buoyed by its licence fee income, will fare rather better than its commercial rivals, he said.

"If you were sitting here looking at, say, two years of pretty muddy growth, would you rather be fighting for every penny of advertising and cutting costs to weather the storm, or would you rather have the prospect of a guaranteed, growing income which is what the BBC has?"

He paused before adding: "I know which position I'd rather be in."

www.jamessilver.net

Posted by James Silver - On Wednesday, November 12, 2008

Send to a friend

SITE MAP