The UK TV market will become more, rather than less competitive, the chairman of Channel 4 told equity research company, Lehman Brothers.
During the meeting, Luke Johnson said that he expects Freeview to become more attractive as more people find out about it. He also gave a pat on the back to the BBC, the brains behind Freeview. He said: “This is a massive success and a major achievement on the part of the BBC.”
However, he was more skeptical about the success of BSkyB over the coming years. He said that it could struggle to reach its self-set target of 8 million direct to home subscribers by 2005, but this could be remedied by Sky buying more attractive TV content.
UK Advertising Market
Johnson was slightly more upbeat when commenting on current market conditions. He told Lehman Brothers that the UK TV advertising market is performing well for 2004, with a growth rate of over GDP expected. He does, however, feel that it could perform materially better and that the current good advertising environment is masking some structural problems for TV companies that rely on this revenue.
Commenting on advertising funded TV companies, Johnson said: “Major FMCG advertisers are continuing to question the value for money they get from TV and continue to shift to radio, outdoor, direct marketing and increasingly online.”
Johnson said he thinks that TV is starting to sell itself better as a medium and hopes that forming a TV Advertising Bureau will allow TV to focus the on qualitative benefits as well as quantitative, like radio has been doing for many years via the Radio Advertising Bureau.
Issues Facing Channel 4
The biggest challenge faced by Channel 4, along with other advertising revenue funded TV stations, is the effect of personal video recorders (PVRs). Audiences will become fragmented with the introduction of PVRs and time-shifted viewing will become common.
A recent Mindshare report says, PVRs won’t destroy TV advertising but they will upset the status quo and force advertisers to look at more innovative ways of getting their messages across (see PVRs Wont Destroy TV Advertising Says Mindshare). Johnson’s concern is that no major game plan has yet been developed for handling the knock on effect of PVR penetration, even though it is expected that 27.6 million units will have been shipped worldwide by 2008 (see Global Integrated DVR Sales To Hit 28m By 2008).
Another obstacle faced by Channel 4 is to find replacements for hit shows Friends and Frasier, which have both finished production.
Looking ahead, Johnson said there are a number of options open to the channel, such as buying up parts of the BBC e.g. radio, if put up for tender, as well as bidding for some of the licence fee if it becomes available to non-BBC broadcasters after the Public Service Broadcasting review. A tie up with Five may also be on the card’s to help bolster revenues and audience viewing figures for both channels.
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