Innovative & Strategic Challenges for European Commercial Broadcasters

Strasbourg, 1 March 2010

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“Incremental Change or Permanent Revolution?”

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1. Nature of Change in the European B’cast Business

a) Pace of Change Accelerating (speed at which new technologies come to market);

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1950 1960 1970 1980 1990 2000 2010

CINEMA

TELEVISION

VHS

ANALOGUE CABLE

ANALOGUE SATELLITEDIGITAL SATELLITE

DIGITAL CABLE

DVD

WEB

PODCAST

SVOD3G

Mobile

Broadcast TV

XXIth century

XXth century

DTT

TVoDSL

VOD

The accelerating pace of new technologiesWays to distribute electronic media content

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a) What is “broadcasting”?

i. “Linear/Non-linear” debates at EU level 2006-07

ii. Extension of broadcasters’ business activities

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2. Structural Shift of the entire industry

“Not a business sector like any other”…

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Assumptions underpinning the (public and commercial) TV sector 1950-2000:

i. “Dual System”

ii. Culture or Commerce?

iii. Qualitative measurement;

iv. Close strategic relationship with cinema industry

v. Vertical integration the default model (commission-production-transmission)

vi. Relatively simple “virtuous circle” in commercial television;

vii.Content-driven business strategies – distribution not an issue in many markets

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Changes brought about by :

i. Entry of commercial players in mid-80s, with only limited impact on the integrated model;

ii. Launch of pay-TV platforms (1990-2003);

iii. Multiplication of broadcast channels (with obvious impact on market share of leaders) ;

iv. New market entrants (ICT) – particularly profound impact on the assumptions above

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Shift in Assumptions :

i. Beyond the Dual System;

ii. Private sector unambiguously commercial;

iii. Quantitative measurement and tools adopted from “normal” business – e.g., ARPU;

iv. Shifts in relationships among genres : cinema, sport, original production;

v. Publisher-broadcaster model and rise of independent producers – a sector undergoing its own structural shifts;

vi. Driving revenues increasingly complex (see below);

vii. Distribution as important as content ownership

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3) Impact across the value chain

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Simplified media value chain : Revenue → Investment in Content →Distribution →… in competition with → produces ROI → Revenue

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a) Revenue : Diversify !

i. Commercial Imperative;

ii. Four Stages of Revenue Diversification :

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(a) Beyond the 30-second spot : new advertising techniques, product placement, online advertising, etc;

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(b) Auxiliary revenues from programmes : CD, DVD, call TV, gambling;

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(c) The Senderfamilie concept

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(d) Accessing pay TV revenues

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b) Investment in Content

i. Rights Market : Incumbency and New Entrants, Creation of New Rights/Windows

ii. The Exclusivity Premium

iii. Impact of Regulation

iv. Reinvention of Key Genres

v. Impact on Corporate Decision-Making

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Evolution in Decision-Making

• Traditional career path of programme-makers to CEO challenged by (a) increasing demands of role and (b) other opportunities for programme-makers

• Evolution of television towards a “normal business” has led to complex but devolved structures

• Distinguish between strategic management and operational autonomy

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“We take a local approach, with each business at arm´s length from the others. Very often we work with local partners. In

Germany, we are German, in France we are French and in the UK we are British”

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c) Distribution

i. New Issue for “first phase” commercial broadcasters;

ii. Cross-platform strategy;

iii. Access to spectrum

iv. Digital forces historic competitors into compete/collaborate model (e.g., multiplexing)

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d) Competition

i. Competition intra-sector : relevant markets for advertising, content, audience;

ii. Legacy : public broadcasters

iii. New Entrants: newspapers, telcos, internet players – role of content owners?

iv. Consolidation in the sector?

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e) ROI

i. Protection against piracy/unauthorised redistribution : what level, against whom?

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Conclusions/Open Questions

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It is uncontroversial to state that

• The industry is changing faster than ever before;

• The commercial FTA model in particular will need to continue to adapt its revenue models to anticipate and respond to these changes;

• Content remains central to the business plan of any successful broadcaster

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Perhaps more debatable :

i. That the fundamentals, in both revenue and content, remain sound;

ii. That the core business of mass audience commercial television will not only endure but will prosper;

iii. That the media regulatory framework, including the appropriate role of state intervention, needs to be completely overhauled to cope with the new world;

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Contact: ACTAssociation of Commercial Television in EuropeRue Joseph II, 9-13, BE - 1000 BrusselsTel: + 32 2 736 00 52 - Fax: + 32 2 735 41 72www.acte.be

Ross BiggamDirector Generalrb@acte.be

Thank you! Questions?