The Television Business Will Never Be The Same

Michael Hedges May 13, 2013 Follow on Twitter

The marketing geniuses in every field have worshiped at the premium offer temple for as long as sellers have been selling. Customers are told that for just a tiny bit more a whole new world of fun can be theirs. It’s popular because it works. Loss-leaders work, too.

So here comes Google with premium video content on dozens of YouTube channels for very low subscription prices. Though widely expected since Google started joint ventures with producers, known and unknown, two years ago, old media people, new media people and techies were struck by the audacity of charging people around five euros a month for a video channel. Is there not an endless supply of video content available on the web for free?

Yes, there is and, no, it doesn’t matter. There is always a market (read: paying market) for specialized content. In 2011, early in Google’s experiment with pay-TV, YouTube offered live-streamed telecasts of the India tour of England cricket series from willow.tv. The price was, roughly, €75 for a 6 month package. It was a hit.

One of the YouTube premium channels is from Sesame Street, the child-friendly educational and entertainment brand first broadcast on US public television. There’s also National Geographic Kids, a kick-boxing channel and one from the Woodworkers Guild of America. And, of course, there is the Fix My Hog channel for fans and handy fixers of Harley Davidson motorcycles. Virtually all are from seasoned producers. Some will win and some will lose.

Google will not, however, lose. The revenue split is thought to be 50/50, plus there’s the usual and customary ad revenue. But that’s the small change. The big change is getting internet using TV fans to spend more time on YouTube. And every marketing genius knows that consumers develop a special attachment to products and services that come with even a nominal cost and, like magic, tend to use that product and service more. A side benefit for Google is removing the incentive for big content producers to pursue those irritating lawsuits over copyright, lest they find themselves among the un-selected. Everybody remembers when Apple introduced iTunes and changed the music business forever.

BT, the UK telecom formerly known as British Telecom, is taking an “audacious” battle over premium sports content straight to pay-TV operator BSkyB, reported the Guardian (May 10). To customers buying a triple-play package the new BT Sport channel will come (nearly) free, the classic loss-leader. Sports and feature movies are the biggest drivers of pay-TV revenue.

BSkyB, principally owned by News Corporation, is widely considered one of the best-run pay-TV operators ever. With sky-high rights and production costs, margins for BSkyB’s sports packages are low; hence, the push into the higher margin triple-play business. BT’s free sports incentive plan is a competitive headache.

“UK sports fans have had a rough deal for too long,” said BT CEO Ian Livingston, setting up the marketing pitch. “Many have been priced out of the market, but we will change this by giving away BT Sport free with our broadband. Sports fans are the winners today.”

UK TV fans will be big winners, at least in terms of prices paid for video content, as competition for their attention leaps into top gear. When gigantic cable operator Liberty Global’s acquisition of Virgin Media is final in June, the CEO will be Tom Mockridge. You remember Tom. He ran Sky Italia, News Corporation’s Italian pay-TV company, battering and bruising Mediaset, the Berlusconi family broadcasting house, for eight years.

Some say there’s bad blood with News Corporation magnate Rupert Murdoch over promises that may or may not have been made to Mr. Mockeridge on becoming the first-responder at the News International disaster. And the rivalry between Mr. Murdoch and Liberty Global chairman John Malone has long been intense. Virgin Media is also competing for triple-play customers.

See also in ftm Knowledge

The Games People Watch

Media and sports are a powerful combination. Together they capture huge audiences and considerable money. This ftm Knowledge file looks at the competition from football rights battles and cycling coverage with new media to the Olympic Games. 82 pages PDF (October 2012)

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Google Is... Still

Google's leaders say their goal is to change the world. And they have. Far more than a search engine, Google has impact over every media sector and beyond, from consumer behavior to broadcasting and advertising to newspapers. That impact is detailed in this ftm Knowledge file. 84 pages PDF (June 2012)

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Television in the UK

Viewers in the UK love their 'telly'. The BBC is under pressure, BSkyB expanding, ITV and Channel Five are under new management. Hardly a week goes by without a complaint, new rules or other change. 58 pages PDF (October 2010)

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