Jeremy Hunt and the case for local TV

In his latest monthly column, Jim Marshall questions the commercial viability of local TV – unless, of course, the government is willing to cough up…

Jeremy Hunt, the new minister in charge of the DCMS, made some interesting comments in his recent speech at the Royal Television Society conference, particularly with regard to his desire to see the launch of local TV.

Quite clearly he believes that there is viewer demand for it, that it can offer local programmes including news not currently available from other channels… that because it works successfully in the US and other parts of Europe there is no reason why it shouldn’t work in the UK and that it should be available on standard TV screens through digital terrestrial technology. In short he wants it to happen.

So far so good, but what about the funding? To be honest his pronouncements are a bit ‘sketchy’ on this issue, which is not surprising because if he is going to rely on advertising revenues he is going to have a problem.

He already knows this because he stated: “The truth is that the sector must face up to the impact of the internet, and make sure that their business models are not overly reliant on advertising revenues.”

He’s right, if he does rely on advertising revenues, the whole project will sink like a stone almost immediately. Why? Because on a ‘micro basis’, it faces a bunch of challenges – from its ability to compete with existing commercial TV and attract advertising revenues from current national/regional advertisers to the cost of providing marketing, sales and audience research.

And the local advertiser is never going to prove a particularly lucrative or consistent source of revenue.

On a ‘macro basis’ there is a huge and arguably insurmountable challenge it faces with regard to funding through advertising revenues – there is now more supply of commercial TV airtime than demand.

In the 1980’s and 1990’s, when TV-am, Channel 4, Sky and Channel 5 launched, advertisers appeared to have an insatiable appetite for ever more advertising minutes.

Now we inhabit a very different world. Both Channel 4 and Five are finding it increasingly tough to eak out a living from advertising; Sky makes most of its money from subscriptions and a separate breakfast-time TV channel no longer exists, having been rolled into ITV.

Furthermore, if commercial TV companies are finding it tough-going, the print media are having an even more miserable time, particularly the regional and local press.

So what’s the answer?

Well, it depends a bit on the question because, in spite of Mr Hunt’s confident belief that the UK both wants and needs local TV, I’m not convinced – he may be confusing what he wants to believe, with what is really true. But let’s assume he is right and local TV will get viewers, he is going to have to be pretty creative in his approach to funding.

Advertising will generate some revenue and particularly if it includes sponsorship, advertiser funded programmes, product placement and local advertiser messaging along with traditional forms of advertising.

Subscription could be an interesting concept but so far it has only worked for Sky on the basis of entertainment and exclusive sports programming – this will be about local news, information which doesn’t strike me as having the same attraction!

So very quickly you have to start considering other commercial models, which will at least supplement relatively meagre amounts of advertising and/or subscription revenues – for example, the plan to relax local media ownership rules and thereby allow local newspapers, radio, internet and TV to combine. But, even in these circumstances, it becomes just as quickly apparent that the BBC, with its free TV, radio and internet, represents a further huge hurdle.

So, in my view, the answer to the funding question is highly complex and multi dimensional – it has to involve advertising revenues, ideally some subscription monies, will require restructuring the local media ownership rules, will require a review/probable revamping of the BBC’s services and funding and will also need Ofcom to review/rewrite the airtime sales regulations. And even then it would be far from guaranteed commercial viability! Will it be worth it?

There is one potentially instant alternative solution. That is to restore some of the government’s own TV advertising budget and then allocate the necessary amount to the new local TV service. Just a thought!