Private TV On the occasion of Screen-up 2004, Werbewoche asked the heads of German private TV stations about the importance of ancillary business and the impact of new technologies on the business model.
1. ancillary business is becoming increasingly important for broadcasters. How high is the share at your broadcaster today? How will the share develop in the future? 2 What does future digitization mean for broadcasters?
3. do digital hard disk recorders with time-shift function and ad blockers pose a threat to broadcasters?
4 What will the television business model look like in ten years' time?
Josef Andorfer, Managing Director of RTL 2The share is already over seven percent today. Our goal is to increase this share to 20 percent in the medium term. But the market is constantly changing. Three years ago, income from CD sales was very important, today it is income from merchandising and mobile value-added services. We want to expand this area in the future.
Mobile value-added services will be the growth market for television. Fortunately, we also have the mainstay of children's programming, where there is a great deal of merchandising potential. In programming, we will pay more attention to ensuring that additional income is possible.
The cake will be divided among more and more providers. That's why we need to broaden our offering and provide more digital services. In-house productions that we own the rights to and can therefore sell on two or three times are particularly important.
I don't think the danger is as great as originally assumed. Experience in the USA has shown that both broadcasters and advertisers are adapting to this.
For example, advertising is produced in such a way that it is also perceived in fast-forward mode. Advertising is also increasingly being integrated into programs. Split screens are one possibility. However, there is also a growing need for viewers to watch a particular program at the same time as thousands of other viewers.
You have to constantly face up to all challenges, whether they are of a technical nature or relate to the variety of products on offer, only then can you be successful. That's the case in any business.
Anke Schäferkordt, Managing Director of VoxThe share at Vox is still below ten percent. This is primarily due to the fact that we do not have any music formats. Ancillary revenues are considerably higher when a station has strong music programs and can therefore enter the music business.
At Vox you will find the entire range of ancillary business, from classic merchandising to competitions, teletext and our Internet offering, which is enjoying ever-increasing popularity.
The proportion of ancillary business will also continue to increase for us. However, I do not believe that it will be possible for a station like Vox with its current positioning to compensate for strong fluctuations in the advertising market with ancillary business alone. Although ancillary income will be an important pillar in the future, the advertising market will remain the most important source of revenue for us.
The first important aspect is the expansion of channels. I personally don't believe that there will be 300 channels, but we can expect a significant increase. There will not be many additional full program providers - who is going to finance them! - but there will certainly be many new special-interest channels that can only achieve very low market shares due to their target group-specific approach.
In the course of this further fragmentation of the market, it is particularly important for a broadcaster,
to be a strong brand in order not to get lost in the flood of offers. We are on the right track with Vox.
We are following this development closely and there are many answers to it. We have been hearing for years that the development will be so rapid that advertising-financed channels will have major problems in three or four years' time. I personally don't believe that.
Distribution-specific forecasts by technicians are always too optimistic. Those who have been dealing with this for a long time will remember the forecasts that were made about video recorders back then. They said that soon nobody would be watching television at actual broadcasting time.
The reality is different. Many viewers remember their programs and watch them at the time they are broadcast. That will remain the case. Nevertheless, we take this development very seriously. We are therefore calling for further deregulation of the advertising market throughout Europe. Many things are not allowed today. New forms of advertising will certainly be one of the answers to the challenges of technology, especially time-shift functions.
It will look similar to today. The classic 30-second commercial will no longer have the share it has today, because there will be more innovative forms of advertising. Nevertheless, I believe that many free TV channels will be around 80 percent ad-financed.
Ingrid M. Haas, Secretary General, RTL
In 2003, it was around 15 percent. That is already quite good, but we want to increase this share further. RTL Group's French family member M6 is the pioneer in this area. The aim is to market RTL content on all platforms: On teletext, mobile, online, DVD and video. Not forgetting shopping. Value-added telephone services are working well, as are the SMS chats.
The diversification business is a growth driver, although traditional TV advertising will remain the number one source of revenue.
We support the digitization of all three distribution channels. DVB-T was launched in Berlin at the beginning of 2002 and is making good progress in Germany. In cable, much depends on the outcome of the ongoing cartel proceedings at the beginning of October. Digitization will certainly bring viewers many new channels, which will at the same time drastically increase the need for viewer orientation. Strong channel brands will be the winners here. We are well positioned and will take advantage of the opportunities offered by digitization.
We have various studies from the USA and other markets. The results vary and hardly allow us to draw direct conclusions for the German TV market. We are therefore monitoring developments very closely, but do not expect any major changes in viewer behavior in the short term. And the medium-term effect also remains to be seen, as there are cult and must-see programs. I watch GZSZ at a certain time because, as a 15-year-old girl, I phone my girlfriend afterwards to talk to her about the latest show. I also don't switch on "Who wants to be a millionaire" fifteen minutes later. The counter-strategy is relevant television. Television that people want to watch at a certain time. So you need
Live and event programs.
But that alone is not enough. Something also needs to happen when it comes to regulation. The current restrictions on individual commercials should be lifted as far as possible. Politicians should have more faith in the common sense of television producers and in the maturity of viewers, because in our highly competitive market, no broadcaster is going to interrupt its program every five minutes with advertising. There will certainly be new forms of television advertising in the future. We can only speculate about exactly what they will be. But one thing is certain, it has to be intelligent and funny advertising.
In my opinion, a ten-year forecast is not serious, as only the next five years can be reasonably predicted. There will always be free TV financed by advertising. However, digitalization will mean that many
niche channels will be added. Strong channel brands and television families in particular will continue to be successful.
Dejan Jocic, Managing Director ProSiebenThe share is currently around seven percent in relation to the Group as a whole. We will grow in this area. To this end, we have created a diversification area within the Group that encompasses all non-TV revenues. We are seeing a strong upturn in online, televoting and call-in. Thanks to our in-house produced formats, we have intensive convergent integration with all non-TV media. In the medium term, we want to increase the share of ancillary income to 15 percent.
The additional hundreds of digital channels that are coming our way will certainly fragment the market further. I compare it to a large video store. Most customers are initially unsettled by the wide range on offer. Where do they turn? First they go to the shelf with "new releases" or "highlights". ProSieben, Sat1 and RTL are in this corner.
The major broadcasters have the task of guiding viewers through the entire television landscape by setting innovations and trends and doing so with as many in-house productions as possible. If you look at the exploitation chain - whether it is pay-per-view, pay TV or DVD - it is important to have an original program, i.e. a program that has not been exploited anywhere else before.
In other words, in-house productions in the areas of fiction, comedy or shows. That is one of our strategic goals.
Of course there will be, but you mustn't forget one thing: If you've been watching Premiere or Teleclub for two hours, you always get the feeling that you're missing something.
This primarily has to do with the topicality of the program, and viewers have long since become accustomed to commercial breaks. That's why I have little fear of these technologies.
A healthy mix between traditional advertising revenues and a smart integration of interactive revenues such as IP-based video revenues from Internet and mobile, pay-per-view and revenues from
Micropayment through direct to consumer business.
Roger Schawinski, Managing Director Sat 1We want to significantly increase the share of non-commercial revenues. This is the declared goal of the entire AG.
The competition is growing and so is the challenge. Sat 1 plays in the premier league of German television. We are relevant and modern. I don't see any threat if we do our job well.
No. The past has shown two things: firstly, not every device is successful on the market, and secondly, despite all the recording options, people prefer to watch television "live", so to speak.
In ten years' time, it will still be based primarily on traditional advertising, but the share of other areas will be 20 to 30 percent.
Peter Kölbel, Project Manager U-1 GroupI can't quantify this because we don't have an analysis for Switzerland. In our group, for example, the proportion at the Kosava station in Belgrade is 50 percent.
In Germany, it is still much lower, but with a strong upward trend. Both today and in the future, such income is much more important for a small broadcaster than for the large broadcasters.
Firstly, production costs will fall dramatically. This is the only way to make 300 channels a reality. The focus on specific target groups is becoming increasingly narrow. In the USA, for example, there is no channel for fishermen, but there is one for fly fishermen and one for deep-sea fishermen. With the new production techniques, you can work with small teams.
Television will become more intimate and reality formats will gain in importance because they are cheaper and quicker to produce. With simple technology, we will return to formats as we did at the beginning of television. For example, live soaps produced on a daily basis.
The demand for image content will increase in the future. It is therefore important to be a player that has content and can produce it at a reasonable price.
The trend in advertising is towards product integration. In the USA, efforts are now being made to integrate the advertising message into the soaps. This way, viewers cannot escape the advertising.
It will be more complex for the advertising industry; it will no longer be possible to simply book spots, but ideas will have to be developed together with the content producer.
The large broadcasters will lose market share of perhaps seven percent to many small broadcasters. However, this will not put them under as much pressure. The opportunities lie with the small broadcasters.
Andreas Bartl, Managing Director Kabel 1The share is currently around five percent and is expected to grow to over ten percent in the medium term.
More choice means more competition, but also more opportunities for a broadcaster like Kabel 1, for example with a digital Kabel 1 bouquet.
Not an essential threat - only a small percentage of viewers will use it.
Advertising-financed free TV will still be at the center, although strong free TV brands will have diversified their offering to such an extent that they generate over 30 percent of their revenues outside of traditional advertising.
Claude Schmit, Managing Director of Super RTLWe already generate around 20 percent of our revenue from "television-related ancillary businesses" such as merchandising, licensing or paid content offerings on the Internet, and the share of profit is even significantly higher.
I think we are well positioned in this area and can expand it even further. Our colleagues at M6 in France, who generate more than half of their sales outside of the traditional TV business, are a role model.
The future will be digital or not at all. And we are also facing up to this new technical challenge, for example in our commitment to DVB-T.
As a children's channel, we occupy a special position: children like to watch advertising and don't switch it off. That's why I'm relaxed about this development.
What's more, the stronger the brand, the lower the risk of being shut down. We are very popular with children, and our children's brand TOGGO was one of the three finalists in this year's Markenaward 2004 alongside BMW and Germanwings.
I believe in television. It is possible that TV and the Internet will continue to converge and new forms of advertising will enable new revenues. But ten years ago, many predicted that interactivity would change the television landscape. That has not happened. I don't think we will be living in a fundamentally different TV world in ten years' time.
Interviews: Pierre C. Meier