Traditional linear TV broadcasters are suffering under the combined pressures of falling advertising revenues, shrinking audience share and declining numbers of viewers per channel. Broadcasters are therefore having to substantially rethink many aspects of their strategies in order to survive. In this, the third of our articles on the future of TV, we explore how those market changes are affecting linear TV broadcasters’ strategies.
The global financial crisis and the fragmentation of audiences have meant that revenues from advertising have fallen by 10–15% in most markets, with some falling by 25–30%. Individual TV channels are attracting a smaller share of the audience than ever before and actual viewing figures per channel are also decreasing. Large generalist broadcasters are under great pressure, but even more so are smaller generalist broadcasters who are finding it extremely difficult to achieve sufficient scale to survive. In this context, thematic channels are proliferating, mainly as part of a wider group but some positioning themselves as niche providers. For example, in France the 8–10 niche DTT thematic channels have grown their collective revenues from EUR73 million in 2005 to EUR924 million in 2009, with around 100% annual growth over the period. However, this seems to be an exception, with many niche DTT channels in other countries struggling to reach a critical mass and break even in a market flooded with content.
But there is some good news. Despite the exponential growth of non-linear TV and new distribution platforms, there are still signs that absolute average linear TV consumption in minutes is growing. In this environment, generalist broadcasters, producers, sales houses, aggregators and platforms are all trying to identify the best ways to adapt. TV channels are already trying a number of strategies: expanding their thematic channels and range of services, optimising their revenue from existing sources, diversifying sources of revenue, lowering costs, enhancing measurement systems, and branding and cross promotions.
1. Thematic channels expansion: New thematic TV channels are designed for particular audiences and offer niche programming, commercialised with targeted advertising. Many are part of larger broadcasters’ family of channels and help to compensate for losses on the main TV channel.
2. Service expansion: Broadcasters are focused on multi-platform delivery, which is essential to maximise reach. Streaming is becoming feasible: 58% of broadcasters in Europe claim to have already launched a streamed service, and over 80% have already launched online catch-up services.
3. Optimising advertising: Players are focused on their advertising sales processes, including how to better aggregate and sell inventory. Top advertisers seem to be more carefully considering TV spending, focusing on finding the right context, content and performance indicators compared to alternative distribution mechanisms (e.g. Internet, DTT).
4. Enhanced measuring systems: Both traditional and new broadcasters are trying to develop new measuring tools and systems that will assist them in attracting top advertisers. However, this is costly and it is not clear yet who will bear the additional cost of measuring performance with a growing number of platforms and channels.
5. Diversifying revenue streams: Falling revenues from advertising and the likely slow recovery (e.g. advertising 2007 levels could be attained in 2012 or 2013) means that most broadcasters are trying to diversify their revenue streams. For example, in Italy 15–20% of Mediaset’s total revenues are from pay-TV and traditional TV channels, and in Germany commercial broadcasters have announced that they are likely to introduce pay-TV options.
6. Lowering costs: Traditional broadcasters are reviewing programming strategies (and structures) to adjust costs, focus on live programmes (e.g. news or live sports) to maximise audience share whilst lowering the break-even point for audiences, and examining costs for other programmes. This is already having a knock-effect for producers too, who need to adapt their strategies accordingly.
7. Branding and cross promotion: For traditional broadcasters, cross-promotion between their core TV channels, new channels and between distribution platforms is essential. New broadcasters are looking for brands or alternative mechanisms that allow them to cross-promote channels.
Despite the advent of non-linear TV and TV content via the Internet, traditional linear TV still has a major role to play. But in order to take full advantage of the opportunities available, broadcasters need to adapt their strategies intelligently.
Analysys Mason is very experienced in formulating and reviewing strategies for broadcasters, producers and other media players worldwide. If you would like to discuss further the issues raised in this article and how they may impact your business, please contact Lluís Borrell, Partner, Analysys Mason at lluis.borrell@analysysmason.com.