How do you solve a problem like network TV?
Opinion
Commercial TV operators could explore mergers, changing their business model or expanding into other activities, but diversifying core capabilities might be the best answer yet.
The strong post-Covid-19 bounceback in TV advertising in 2021 may have helped owners of commercial TV networks (from ITV to CBS to RTL) to temporarily ignore the prospect of long-term decline. The current deep recession in TV advertising in many markets may make some think the much-predicted end to their business model is at hand.
Neither of these thoughts is probably correct, but the commercial free-to-air network business model definitely faces some serious challenges.
Recent Oliver & Ohlbaum Associates research suggests that the assumption that fickle, web-savvy viewers in their twenties would grow up to be lean-back, couch-dwelling linear viewers in their thirties and forties as family and job responsibilities bite is no longer true.
In fact, evidence suggests 40- to 60-year-olds are becoming almost as web-savvy and fickle as those in their twenties, as so much of their lives move online.
This means the threat to free network TV’s audience reach and advertising premium is accelerating, not flattening out.
There are four main — and not mutually exclusive — go-it-alone response options to this existential challenge from national commercial network TV operators:
1. Merge with other free-to-air networks
2. Change the airtime business model
3. Expand into adjacent activities
4. Diversify through core capabilities, audience and intellectual property resonance or brand values
Growth areas
Significant national mergers in Europe seem to be blocked for now, given RTL’s recent experience with Groupe M6 and RTL Nederland. Cross-border mergers will offer few synergies so long as TV ad markets remain largely national and content rights are sold by market. That leaves the other three response options as a basis for a growth strategy.
In terms of making more of the free-to-air business model, call-ins and airtime-for-equity schemes were once the answer, but no more. Call-ins are now more heavily regulated given some high-profile abuses. Airtime for equity — where broadcasters end up with small stakes in emerging, highly ad-dependent businesses — has proven less than popular with shareholders who see venture capital investment and mature media industry investment as two different things.
Addressable advertising, the current great hope, might not actually bring any more money into TV — and it could even take money out. Shoppable TV’s growth is likely to be incremental. And with both shoppable TV and addressability, free-to-air networks will be competing with ecommerce giants, tech platforms, connected TV set manufactures and even retailers. Running to stand still is probably the best that can be hoped for.
Pay-TV and global production are usually the next answers for growth — but commercial free-to-air networks don’t seem to have the mindset to create pay-TV of scale on their own. These groups have spent 40-plus years trying to protect their large audiences from erosion; it’s not in their DNA to cut off a large slice of that audience voluntarily.
TV production is a lower-margin business with no clear synergies with broadcasting. Now the golden age of content is probably over, shareholders are starting to think if it might be better to spin off such activities.
Partnering with rivals or outsiders
That leaves the more difficult but interesting area of diversification, either through applying core capabilities to new areas or stretching audience and/or brand resonance to new activities.
The problem with the latter is that mass-audience-reach networks often lack the deep attachment of more niche publishing or web services. It’s hard to stretch more general levels of brand trust to new activities — Sky’s recent move into insurance and the BBC’s move into PCs 40 years ago are the exceptions and neither is a commercial free-to-air broadcaster. Moves into dating sites and live event management have all been tried; none had been particularly successful.
That just leaves taking core capabilities into new areas — ad sales, ad campaign targeting and tracking, content commissioning and targeting and on-screen talent management could all be scaled up within TV or into adjacent sectors. And beyond traditional TV, there might be more synergies between content and audience distribution when developing in areas such as social media content creation and monetisation.
But each of these is likely to involve partnering with formal rivals or companies outside the current orbit of commercial broadcasters in order to gain scale and some adjacent skills.
Developing the ability to establish and structure effective partnerships — within and beyond the current TV sector — and then to manage them well might be the best guarantee of growth for free-to-air networks in the next decade.
Mark Oliver is chairman and co-founder of Oliver & Ohlbaum Associates