The Future of Channel 4.
Call me simple, but I just don’t get it.
Channel 4 in the UK is predicted to be insolvent/bankrupt or otherwise financial unable to continue within the next few years.
There has been some talk of merging it with one of the other UK broadcasters – the benefit would be synergies could be realised that reduced the cost.
Ch4 is owned by the government but is funded solely through advertising. It has a Public Service obligation that has meant it has not adopted the “me too” (Strictly Come Dancing –BBC begat Dancing On Ice) strategy of ITV or stick with tried and trusted popular formats (I’m a celebrity…) also a strategy of ITV.
Ch4 has a very credible record in producing innovative, challenging programming over its life. Not having to provide a return to shareholders should mean that more of its revenues can go into continuing this innovation. Merging with a commercial broadcaster ITV or Ch5 may give operational cost synergies but it will also add the cost of servicing shareholders.
When the Chairman of Ch4 says he favours privatisation over merger that doesn’t seem to make sense either – there are not operational cost synergies but the burden of servicing shareholders would arrive. This will inevitably be followed by the finance people that understand nothing about creativity (as demonstrated in ITV (Charles Alan) and simply drive cost out and stick to tried and trusted formats that eventually become stayed and boring.
Privatising Ch4 could mean that Luke Johnson (the Chairman) gets some kudos and a pay rise, for chairing a private company. This is the only driver I can see for suggesting it. I can’t see that if Ch4 is destined to become financially insolvent, as it is,why (unless there are costs that they already know can be cut) its future would be any more secure if privatised
While there might be some other genuine reason I am sceptical. Following the £600k p.a. pension payments to the failed head of RBS I am fed up with individuals benefiting from stripping the country’s assets and cultural heritage or screwing the tax payer.
Here is a thought…maybe not good for Ch4, but BT is struggling with BT Vision and could derive some synergies from acquiring Ch4. It would also be less challenging to maintaining the plurality of UK broadcasters.
Friday, 27 February 2009
Tuesday, 17 February 2009
What Media Business Are You In?
Wachovia has, not surprisingly, forecast that Radio (or is that wireless?) is not the place to invest if you want to get a return before the new millennium.
This news has awakened an old bug of mine. Do these various, so called, media companies know what business they are in? We have Cinema, Radio, Press, TV (terrestrial, Cable, IP VoD and Satellite) as the principle media industries. But have they asked themselves the question, “What business are we in?”
I was once told that the head of Black & Decker had said “I am not in the business of selling drills, but of selling holes”.
When the aeroplane was developing as a passenger transport technology did the railways recognise that they where in the mass transport business or did they see themselves as train operators. The answer is plain to see (pun intended).
The Cinema industry failed to see themselves in the entertainment business otherwise they would have been in radio. Having failed to make that leap TV was the next obvious leap to miss.
Like most, in all areas of media, they have ring fenced themselves by the technology, instead of being in the entertainment business. In the early days of TV (et al) it is easy to fall into this trap as understanding and using the technology is /was the biggest barrier to entry. One you understand the business the biggest barreir should be that understanding the market and not technology.
Why did ITV, in the UK, buy Friends Reunited? I’d love to see that business case. What were supposed to be the synergies?
News Corp is one of the few companies that has a spread itself across the technology delivery options and also vertically integrated for content production. But these are by no stretch of the imagination truly integrated. They just share the same owner.
If I ran ITV I would: -
• Concentrate on getting exclusive innovative content (deliberately left out quality). Making it in-house would mean I could reap the value from the IPR too.
• Changing the name to something less Television orientated - Granada is one that is easily out of the bag. To develop an international brand then something that described the business/organisation like GBE (pronounce Geebee – Great British Entertainment).
• Launch a radio channel
• Launch expatriate channels in Spain, US etc
• Look at developing a Live Events arm (broadening the entertainment remit and provide a source of content for TV and Radio)
• A coordinated pan GBE website with merchandise sales, streaming, downloads, recommendations etc.
• Develop home grown (low cost) talent pipeline.
• Investigate developing IPR into computer games.
Become an entertainment company ….
This news has awakened an old bug of mine. Do these various, so called, media companies know what business they are in? We have Cinema, Radio, Press, TV (terrestrial, Cable, IP VoD and Satellite) as the principle media industries. But have they asked themselves the question, “What business are we in?”
I was once told that the head of Black & Decker had said “I am not in the business of selling drills, but of selling holes”.
When the aeroplane was developing as a passenger transport technology did the railways recognise that they where in the mass transport business or did they see themselves as train operators. The answer is plain to see (pun intended).
The Cinema industry failed to see themselves in the entertainment business otherwise they would have been in radio. Having failed to make that leap TV was the next obvious leap to miss.
Like most, in all areas of media, they have ring fenced themselves by the technology, instead of being in the entertainment business. In the early days of TV (et al) it is easy to fall into this trap as understanding and using the technology is /was the biggest barrier to entry. One you understand the business the biggest barreir should be that understanding the market and not technology.
Why did ITV, in the UK, buy Friends Reunited? I’d love to see that business case. What were supposed to be the synergies?
News Corp is one of the few companies that has a spread itself across the technology delivery options and also vertically integrated for content production. But these are by no stretch of the imagination truly integrated. They just share the same owner.
If I ran ITV I would: -
• Concentrate on getting exclusive innovative content (deliberately left out quality). Making it in-house would mean I could reap the value from the IPR too.
• Changing the name to something less Television orientated - Granada is one that is easily out of the bag. To develop an international brand then something that described the business/organisation like GBE (pronounce Geebee – Great British Entertainment).
• Launch a radio channel
• Launch expatriate channels in Spain, US etc
• Look at developing a Live Events arm (broadening the entertainment remit and provide a source of content for TV and Radio)
• A coordinated pan GBE website with merchandise sales, streaming, downloads, recommendations etc.
• Develop home grown (low cost) talent pipeline.
• Investigate developing IPR into computer games.
Become an entertainment company ….
Monday, 16 February 2009
What we need is more credit !!
The politicians and financers are all saying that we need to prop up the banks so that they can loan more money. Their logic is, if we can borrow money we can buy cars, houses holiday’s furniture etc.
My logic is: - If I want to buy a car for 10,000 (pounds, dollars, euro or whatever). I can save 400 a month so in 25 months time I can buy the car outright. Or I can buy it now – get a loan and pay off with my 400 so in around 35 months (19% APR) I can own my car.
Its cost me an extra 4,000 and taken me 10 months longer. When I make the final payment its value is a fraction of its original value.
If I save and buy then I can afford (given everything stays the same) to buy a new car every 25 months. Using a loan I can only afford it every 35 months. Given that the residual value is higher after 25 months I can probably use it as a larger deposit and get a better car.
If I chose to keep the car for 35 months I now have an extra 4,000 to spend on furniture, house, holiday etc.
The encouragement to borrow is the same madness that got us into this mess.
It is better to have a penny in your pocket and owe nothing rather than have a pound (dollar, euro) in your pocket and owe a penny
My logic is: - If I want to buy a car for 10,000 (pounds, dollars, euro or whatever). I can save 400 a month so in 25 months time I can buy the car outright. Or I can buy it now – get a loan and pay off with my 400 so in around 35 months (19% APR) I can own my car.
Its cost me an extra 4,000 and taken me 10 months longer. When I make the final payment its value is a fraction of its original value.
If I save and buy then I can afford (given everything stays the same) to buy a new car every 25 months. Using a loan I can only afford it every 35 months. Given that the residual value is higher after 25 months I can probably use it as a larger deposit and get a better car.
If I chose to keep the car for 35 months I now have an extra 4,000 to spend on furniture, house, holiday etc.
The encouragement to borrow is the same madness that got us into this mess.
It is better to have a penny in your pocket and owe nothing rather than have a pound (dollar, euro) in your pocket and owe a penny
Friday, 6 February 2009
BskyB unhappy with Ofcom's suggestion
Here are some key phrases used by BskyB in its response to Ofcom’s consultation on the UK Pay TV Market
“…it [Ofcom] is proposing the imposition of radical and highly interventionist regulation of a sort unseen in any developed market economy.”
“…the damaging effects on investment incentives that would result
from the confiscatory nature of Ofcom’s proposals,…”
“…- compulsory supply - would require Sky to license the intellectual property in its channels to third party retailers. This is one of the most Draconian remedies available to a competition authority. Moreover, this proposal is accompanied by proposals for detailed ex ante regulation, including price control,…”
“…Ofcom’s proposed intervention seeks effectively to impose on Sky an obligation to subsidise other market players, by forcing Sky to reduce its wholesale prices to “support entry into the market by new retailers”.”
“…to eliminate any risk of excess profitability in Sky’s premium sports and movies channel supply business, it would impose cost-plus based price controls.”
“Ofcom’s proposed intervention could, for example, reduce incentives to invest on the part of Sky and other operators, and diminish innovation levels,…”
“It is noteworthy that the European Commission’s intervention in the sale of
rights to broadcast Premier League football resulted in consumers who wish to view all live matches broadcast having to pay more than they were prior to the intervention.”
BskyB’s response is 140 pages long and it goes on in a consistent vain. I have a lot of sympathy with Sky’s argument. However, when BT was forced to open up the local access to Sky I didn’t hear any objections. BT is forced to sell its Broadband services to BskyB (and others) at wholesale prices that are then marked up and sell on to consumers.
This was imposed by the same regulator and the difference was that sky benefited from similar measures imposed in one area but cries “Fowl” when pointed at them.
Their argument holds some truths such as …BT is now reluctant to invest in fibre to the home as BT would probably have to allow competitors to have access and would not make the return on the investment that balanced the risk.
“…it [Ofcom] is proposing the imposition of radical and highly interventionist regulation of a sort unseen in any developed market economy.”
“…the damaging effects on investment incentives that would result
from the confiscatory nature of Ofcom’s proposals,…”
“…- compulsory supply - would require Sky to license the intellectual property in its channels to third party retailers. This is one of the most Draconian remedies available to a competition authority. Moreover, this proposal is accompanied by proposals for detailed ex ante regulation, including price control,…”
“…Ofcom’s proposed intervention seeks effectively to impose on Sky an obligation to subsidise other market players, by forcing Sky to reduce its wholesale prices to “support entry into the market by new retailers”.”
“…to eliminate any risk of excess profitability in Sky’s premium sports and movies channel supply business, it would impose cost-plus based price controls.”
“Ofcom’s proposed intervention could, for example, reduce incentives to invest on the part of Sky and other operators, and diminish innovation levels,…”
“It is noteworthy that the European Commission’s intervention in the sale of
rights to broadcast Premier League football resulted in consumers who wish to view all live matches broadcast having to pay more than they were prior to the intervention.”
BskyB’s response is 140 pages long and it goes on in a consistent vain. I have a lot of sympathy with Sky’s argument. However, when BT was forced to open up the local access to Sky I didn’t hear any objections. BT is forced to sell its Broadband services to BskyB (and others) at wholesale prices that are then marked up and sell on to consumers.
This was imposed by the same regulator and the difference was that sky benefited from similar measures imposed in one area but cries “Fowl” when pointed at them.
Their argument holds some truths such as …BT is now reluctant to invest in fibre to the home as BT would probably have to allow competitors to have access and would not make the return on the investment that balanced the risk.
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