The 2013 Media Battlefields

It’s only mid-January but, as Aegis’s Jim Marshall marvels, there have been a number of high-profile media spats already. Let’s hope there are many more in 2013, he says – and that the Goliaths of the industry continue to find the going tough…

Some years ago a very young and junior TV buying assistant was heard in the corner of the office shouting down a telephone at some hapless TV salesman:

“No I’m not buying your f***ing airtime. It’s sh*t and the best thing you can do with it is stick it up your ****.”

He then slammed the phone down. Rather perturbed, his boss asked him who he was talking to. The assistant’s response was:

“No, I wasn’t talking to anybody, I was just practising.”

“Very good – and well done,” his boss commented.

Of course that sort of behaviour wouldn’t happen today: the industry has become far more civilised. And increasingly we like to talk about wanting to operate on a much more inclusive and partnership basis with our media owner colleagues.

That’s all very well but, maybe because I’m a bit ‘old school’, I think a decent spat between agency and media owner is no bad thing from time to time. In fact I’m always encouraged by passionate competition between competing organisations i.e. ‘healthy spats’. So I’ve enjoyed the start of 2013 because there are already a number battles taking place in the media.

Firstly, Group M fell out with Channel 4. It looked set for a potentially long running feud but then got settled reasonably quickly. Group M are the biggest TV buyers by some margin, whereas Channel 4 is small in comparison.

Of course neither side is publicly claiming to have won, but at least Channel 4 doesn’t look like the nerdy kid who has just been duffed up by the biggest kid in the school. This might suggest that being big isn’t necessarily such an advantage, particularly if you pick a fight with an organisation that is publicly owned, so doesn’t have to worry about nervous shareholders – and is also sitting on substantial cash reserves…

Secondly, there looks like there is going to be an escalation in hostilities between BT and BSkyB over the purchase of sports rights. BT has already made its intentions clear by securing 38 live Premier League games from next season.

It has also secured rights to domestic rugby and women’s tennis. All of this is in anticipation of the launch of two new sports channels from July this year and clearly its intention is to compete head to head with BSkyB in the increasingly lucrative pay TV market.

To date BSkyB has seen off all the potential opposition with consummate ease: Setanta Sports was never rich enough to mount a genuine challenge and more recently ESPN, even with Disney’s backing, doesn’t have the depth of resources to take on BSkyB, which is now arguably the UK’s most powerful broadcaster.

However, BT may be a different proposition. BSkyB of course is a ‘triple play business’, offering TV, telephony and broadband services. Consequently, its commercial model is fundamentally different to all other UK commercial broadcasters – it’s an ARPU (average revenue per user) business, which creates a far greater number of revenue streams.

Because of this and because it is not reliant on advertising revenues, BSkyB can monetise hugely expensive content deals far more effectively than traditional broadcasters. BT can operate the same model, particularly through its BT Vision and YouView products and it has (as they used to say in the pre-digital world) ‘thrown down the gauntlet’.

Should BSkyB be fearful? Interestingly, while BT has the financial resources and the corporate structure to mount a genuine challenge, sheer size and power are not enough.

BSkyB has built a successful subscription business not just on the basis of hoovering up the rights to major UK sporting events (and particularly Premier League Football), but by also being consistently innovative and providing far superior quality of coverage for those events – a classic challenger brand approach.

If BT is going to compete it is going to have to not only match BSkyB’s quality of coverage but also arguably further ‘up the game’ – if you can excuse the pun. This is a tough call, but clearly BT is committed to the challenge for the long haul.

Ironically, if BT is successful in the longer term, it may not be BSkyB that proves the eventual loser, because it could increasingly marginalise ITV.

It may just be that BT’s entry into the market will change the commercial dynamics of the entire sector to the point where it will be nigh on impossible for traditional broadcasters to compete with the subscription/pay-per-view based services on an overall basis (and not just in securing sports rights).

Finally, there is the ongoing spat between the EU’s Competition Commission and Google. Mr Joaquín Almunia, the EU’s competition chief, has been extremely forthright in his criticism of Google, saying:

“We are still investigating, but my conviction is that they are diverting traffic to their own services.”

So he’s not holding back in his opinions and he also hasn’t held back in asserting that the US antitrust authorities, who gave Google a clean bill of health on the same issue in the US, were not correct. He said:

“Google people know very well that they need to provide results and real remedies, not arguments or comparisons with what happened on the other side of the Atlantic.”

What does this all mean? The EU is looking for Google to make legally binding commitments on its future behaviour. Failing that, it could be charged with abusing its dominant position and face a hefty fine and sanctions.

I can’t pretend to be an expert in the workings of Google (can anybody?) but at the heart of this issue is the fact that Google controls 90%+ of the search market in the EU and this is making the market feel ever more uncomfortable. (In the US its share is just around a paltry two thirds of the market!).

So, in spite of the judgement in the US and in spite of its protestations to the EU, it looks like Google is going to have to concede on this one.

So a number of spats already, and let’s hope there are many more in 2013. And also let’s hope that the Goliaths of the industry continue to find the going tough…