The Future of Channel 4.

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.

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 ….

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

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.

Being Green or just common sense?

I never take out extended warranties as I have found if it lasts 12 months, it will probably carry on working for several years. We have tended to replace equipment because there is something better, or when it breaks down. In the case of our first washing machine, a Creeda, after 15-years. However, the main reason I don't take out extended warranties is because I can generally repair the equipment quicker and cheaper myself.

I know that most people are afraid to take the back off a TV – “Danger” stickers reinforce the fear. “No user serviceable parts” are a challenge for me. Unplugged from the mains (and antenna) and there is little that you can do wrong. Taking out a few screws and having a look, it wont bite and you can always simply put it back. Most electrical and electronic devices have plug in modules these days, maybe a retaining screw or two. The point being, there are no special tools required in most cases to repair stuff.

I come from a time when, as a teenage, I understood 90% to 100% of the technology in my home. That applied to the 12” black and white TV and the valve radio. It also applied to “technologies” of the plumbing, woodwork and gas. In my adult life I have kept up this understanding. I am always interested to find out how things work, from businesses to people to computers and more.

So why is this important? People block up ventilation holes to stop drafts and kill themselves in their ignorance, or spill hot coffee and are surprised that it is hot or expect that cruise control will steer the camper van down the road while they go and make a cup of coffee in the back. Clearly most people are not that stupid and survive without thinking too deeply about how anything works, until it goes wrong. Even then they use their disposable income to call some “skilled” person in to put it right.

Anyway I digress…having always had a go at repairing stuff when a Morphy Richards (retro looking) toaster packed up on me a few years ago I looked in the top and could see that one of the heating elements had a gap in it. It had blown. The special anti-tamper screws were no obstacle, simple a minor challenge. Having removed the damaged element (6-screws and a couple of push on connecter like those on the back of you car head light – not rocket science) and called Morphy Richards to order a replacement. “Oh no we don’t have spare parts for those…they are not meant to be serviced!” “Throw it away and send us a copy of your receipt and we’ll send you a replacement.”

What a completely wasteful process. Green wasn’t such a big issue but it angered me that the only practical reasons why it was not serviceable where the anti-taper screws and the lack of basic expendable components – more for the land fill!

So back to recent events! It always seems that just after Christmas and all that expense, January turns into the month where a whole load of unexpected problems and outlay turn up. Amongst these this year the washing machine blew a fuse. I replaced the fuse and the machine responded by flashing 4-times pausing the repeating the 4 flashes in a continuous loop. A quick look in the user manual tells me that this means the door is not shut – clearly it is, so there has to be something else. Following the logic?

A washing machine is clearly a bit more complicated than a toaster, so I look around on the internet for a service manual. Hopefully a chink of light to help me know what I am doing. I’ll have a go at anything but being informed action improves the chance of success. I contact Zanussi and Electrolux and their service agents but none will supply me with a service manual – “They are trade only… You could hurt yourself!” “We would be liable”

I hate the woman that bought the coffee from McDonalds spilt it and then successfully sued because it didn’t have a warning on it that it was hot. I recently heard about a woman that successfully sued because there was no warning about the cruse control on her camper van. She had put the cruise control on and gone into the back to make some coffee. Apparently she had not realised that she still had to steer. These people fuck it up for the rest of us big time.

Anyway being sane and with some grey cells in working order I want to work on MY property. They sold me the machine. I own it. If I want to hit it with a hammer or take it for a swim (is there a warning about that?) or play with it, that is up to me. Why won’t they give me the information to make it as safe as possible? (Please use a life jacket when going for a swim with your washing machine) But oh no “we’ll send a service engineer around” £50, which I decline. “But what will you do?” “I’ll take it apart without the service manual.” “That’s dangerous and we don’t advise that.” “It’s more dangerous because you won’t sell me a manual and I understand why you don’t advise it. It’s because you want to charge me £50.”

Now you may think this reckless but in a washing machine there are a very limited number of components. The most common problems include the motor, the heating element and the pump.

Eventually I find a site offering a generic washing machine and dishwasher manual http://www.2ndwave.co.uk/manual.html . This is not the most up to date manual but the basic are right on, and it will at least show you how to get into the thing.

Eventually I discover that the programmer has been blown by a short circuit in the interlocking door catch. Unfortunately I don’t discover this until I’ve spent £30 and waited 3 days for the new door lock to turn up (lots of places that will sell you the parts – including Zanussi’s service agent – but no manual! “It’s OK to blow yourself up as long as we didn’t give you any help in avoiding it!”).

The programmer will cost £175 to £189 including VAT + delivery. The act of replacing it is easy a couple of clips and three or four idiot proof multi-way plugs – I only have to take two screws out and slide the top off. But the cost presents me with a dilemma. If I spend £175+ and having replaced it, it goes bang, I’m £170+ down the drain.

If I get someone to repair it, they will want to charge their labour. They will also want at least some cover for the risk that it goes bang on them. So looking at around £250 – new machine £278. So in the dawn of a green age I throw what is otherwise a perfect machine away.

And that, you may say, is that. But what angers me is that this 4-year old machine looks brand new. The inside isn’t even dusty. The £170 for the programme is ridiculous. A quick search of the internet and you can get a simple laptop (with far more processing power) for less. An observational note to Zanussi is pending a response and I have to move on… the washing is piling up.

Before I end I just want to go back to the beginning… if I’d have taken out an extended warranty for an additional 3-years it would have cost me £185 and have run out in November last year..

So when the good, the great and the politicians tell me to be green they are taking to the converted, at the bottom of the chain. Maybe a chat with the top of the chain about their designs would be worth it for the sake of the planet!

Thus endeth the rant.

Poor performance (by the company)

As the need to reduce cost looks at cutting staff companies look at individuals’ performance and specifically poor performance as a way of managing people out of the business.

This method avoids making announcements to the stock market about compulsory redundancy, that could have a negative affect on the share price or reveal a weakness in the longer term success/strategy. However it isn't aways the individuals fault that they are in a position that appears like they have become poor performers.

This is how it works: -
1 Someone that can talk a good job and sell an idea turns up making promises about an investment, product launch, acquisition, strategy or other course of action.
2. Lets say it is to acquire another company. The benefits will be that it compliments our existing services, customers, markets, it deliver quick growth and new opportunities new revenues. It moves us up the value chain, makes us less of a commodity and gives us a competitive advantage. - The list of MBA speak that never seems to get pinned down is seeming endless.
3 They sell it big. Large numbers mesmerise the "powers that be", because they have targets of their own to grow revenue and their bonus depends on it. They don’t really understand the proposition, can’t be bothered with the detail and do not get the claims validated. In the good times they ride on the fact that they will make money anyway.
4 The person that originally talked the job, will now seems to have three or four advocates from different disciplines that don’t understand the proposition but can add some verbiage that seem to provide independent validate the proposition. Of course they are not independent as they seek to carve some form of personal gain.
5 The project is approved, the plan is put in place and the contract is negotiated. The implementation may be done by the same people or handed to someone else. Ongoing operation will normally be handed to someone else.
6 Anyone that questions the proposition or the contract will be told that “you just don’t get it”. The objectors will not necessarily want to tell the King (their bosses) that he is naked. Those that do are often dismissed as just being negative and maybe even jealous.
7 Based on the promises made the people that are brought in to deliver and run the ongoing business are given targets. The forecast was unreal and the targets are therefore are unattainable.
8 The original group of advocates will often have reformed, based on the success of their pervious exploits (there ability to see the future and develop new business), in another department, division or company.
9 Those left behind unable to meet the targets are labelled “poor performers” and managed out of the company.
10 Everyone is left with the feeling that it was a good idea but we just couldn’t make it work…
11 No boady ever seems to want to learn, pull out the original case, see where it was wrong or where it went wrong and take steps to avoid the same pitfalls so we end up back at square (point) 1

In world of an entrepreneur failure is felt first hand. Even if the lesson is not learned the opportunity is there to learn. Sure some entrepreneurs bury their head in the sand, but for corporate managers to do this is negligent. Most entrepreneurs fail several times before they eventually get it right.

In large organisations, the intra-preneur has moved on before their mistakes come to light. This leaves the organisation worse, rather than better off. It also leave otherwise competent staff carrying the can.

Potentially the company manages out these “poor performers” leaving the real culprits behind. Do this across a large organisation and it gradually increases the likelihood of failure.

Managing out poor performers is one thing but recruiting people simply based on who they worked for in the past, what they claim to have done and be able to do, is about as much use as the US visa waving form asking if you are a drug dealer on not… I wonder how many drug dealers have answered yes?

Often capabilities and skills within the company are ignored. The opportunity to develop people, motivate them, for the company to get loyalty as a driver, as well as personal gain are lost.

Is that what happened in the banking world – is the premise that a company has to be geared to be running efficiently sound like the bollocks it clearly was. If anyone remembers the “Trouble Shooter” programme on BBC and the Morgan car factory programme it seems some how justice that they seem managing the credit crises with their philosophy far more easier than Ford or GM et al with their superior financial advisors.

TV is not dead but it could be terminal

In the beginning the broadcasting was limited to geographical regions due to largely to technical limits of transmitter height, transmitter power, radio frequency propagation and the curvature of the earth.
The technology and its limits lent itself to regional and national programmes. This in turn fitted nicely with cultural boundaries, language and advertising brands. TV programme rights followed suit and were sold on geographical (usually national) basis.

A French person can watch free to air (FTA) French programming in France (with or without adverts) but if they come to the UK they can not. The broadcasting technology didn’t allow it. When satellite came along this was not the case – hence the preverlance of BSkyB systems in Spain where UK expatriates watch UK TV, even though this is not allowed by BSkyB.

What is the impact of this – on the programming, none. On the advertising maybe it is less effective but when Ford advertises a car or there’s an advert for Cif, or Snickers, these are international brands and the value is unaffected. The losers are those advertisers that don’t provide their product in Spain. You could also argue that the local TV advertisers are also losing out, but do the expat’ community speak Spanish or watch Spanish TV?

If you now travelled from Spain to say Turkey, or further away from the UK, you would eventually find that the satellite footprint ended and even a very large dish would not pull in a signal.

The internet now bypasses the limitations of satellite in not being distant limited. SlingBox and others have utilised this to enable consumers temporarily away from home to watch TV from home. Losers? The advertisers aren’t losing, because they are not trying to get an impulse buy, the “impact” of the advert will have an effect when you return home. The rights owners haven’t lost out as the consumer has only temporarily shifted location.

As internet TV becomes more prevalent the model that grew out of the technological limitations becomes increasingly threatened. As geo-blocking artificially tries to limit access it throws down a gauntlet for those that see the Internet as a free and open medium. However, on the internet the role of the broadcaster is missing.

Broadcasters provide a useful role not just in what they commission (by far the most important role), not the scheduling of content, but the role of content discovery that the consumer needs. From a consumer’s perspective broadcasters aggregate content that would otherwise require a trial and error search on the Internet. If the broadcasters’ brand value is clear such as Discovery, History, MTV or Disney etc the consumer knows what content to expect. On more general channels the experience can be a bit more hit and miss.

The role of discovery can be fulfilled by social web sites, community blogs etc but how many do I need to join and how often do I have to check them. Broadcasters could develop a strategy to be the online content discovery mechanism that would naturally flow into the content delivery mechanism and thereafter the advertising channel. Since the content is potentially distributed globally they become global brands and since local adverts and adverts based on personal profiles are possible the advertisers win too. The online portal becomes a pull through to the traditional broadcast, where higher quality and differentiated services such as 3D can be delivered.

I don’t know what the future of the internet hold for the broadcasters but the old model is not going to survive.