The Mad Men Of Television

Michael Hedges October 4, 2010 - Follow on Twitter

Television is really quite simple. Even with a zillion channels, people choose one program after another. Sometimes they pay for their pleasure directly and sometimes indirectly. But for people on the fringes that’s not enough.

UK Culture Minister Jeremy Hunt delivered to the Royal Television Society (September 28) a vision for television. Over the last dozen years there have been so many visions for UK TV the picture has become rather kaleidoscopic. He reiterated a “vision for this country to become the first in which a new generation of local media companies will emerge.”

Funny, most UK broadcasters want nothing more than to get out of local TV. But, then, Hunt wants to hack away at “established structures.” Some of those “structures” have produced world-class television for more than a generation.

Accepted strategic thinking says a market leader sets the rules and others follow. That has certainly been the case in UK television. The BBC was the only television in the UK until 1955 when Independent Television (ITV) was established. When that project disappointing one and all the BBC was given a second television channel in 1964. Color arrived in 1967. More channels followed with different hues and textures.

The UK government meant the ITV network of regional television operating as Channel 3 to provide competition for the BBC as commercial, advertising supported public service broadcasters. Each network franchise – England, Wales, Scotland, Channel Islands and Northern Ireland– came with news and public affairs obligations. At present, most use content produced by ITV plc, the largest franchise holder and ITV is the standard brand name for the ITV1 national channel and three digital channels.

Channel 4 was, then, established as a public service broadcaster in 1982, separate from the BBC and meant to “exhibit a distinctive character.” Ultimately it was a mash-up of pure public service (BBC) and market-driven television (ITV). Channel 4 is, by license, a “publisher-broadcaster,” buying and not producing its content.

The last licensed national television channel was Channel Five. Unlike others, Channel Five was designated as a commercial, entertainment channel. It was nearly still-born as the regulator – the Independent Television Commission, at the time - rejected all the initial bids, including one from Mediaset, principally owned by the Berlusconi family. Channel Five was revived, investors found including Time Warner, and eventually rebranded as simply Five.

But the shareholding went through several iterations. Time Warner left, foreign ownership limited to 25%. Eventually, RTL Group was in control. Seeing the handwriting on the wall, RTL Group looked at merging Five with Channel Four or ITV. By 2006 conventional wisdom called for ownership consolidation.

Even as the regulator eased foreign ownership limits and other regulations – local origination, for example – investors just couldn’t see much near-term promise from UK free-to-air television. ITV refinanced and went through two CEO’s. By this last summer, RTL Group sold Five to newspaper publisher Northern & Shell.

Chuckling through all of this is Rupert Murdoch. News International, principally owned by Mr. Murdoch, publishes several UK newspapers and holds a commanding stake in pay-TV operator BSkyB. There is also a 17.9% holding in ITV, which UK competition authorities have asked Mr. Murdoch to reduce. He’s appealing.

BSkyB has become, arguably, the market leader in UK television. With revenues (2009) of £5.2 billion, it’s a whopper. It has channels galore, an online music store, broadband, email, HDTV and, soon, 3D TV. Certainly, BSkyB – commonly referred to as Sky - has won and lost various competitive battles in recent years but on the whole – with subscribers just under 10 million – it has a commanding position in UK television.

A new HD channel, planned for early next year, is Sky Atlantic. It will be – literally and figuratively – the European HBO-leap professional TV watchers have predicted. The premium channel will offer first run American series productions, many from HBO, including ratings buster Mad Men, currently broadcast by the BBC.

Mr. Murdoch has – as always – an impressive pull with UK politicians. Before the April general election, then shadow Culture Minister Jeremy Hunt (Conservative) was singing the right song. “The BBC has to be very careful with the market power that it wields because I don't think it's in anyone's interests, not license fee payers, not the BBC itself, if it ends up being the only show in town,” he said to the Independent (March 8). “Usually the BBC's intentions are good but sometimes, unintentionally, it has a very negative impact on the market.”

After the election Hunt seemed to soften the language, calling the BBC a “crown jewel.” In the RTS speech, he complained of “three out of five programs made by our public service broadcasters are produced in London. They will note that there is nothing but national news on most of the main channels, beamed shamelessly from the centre.”

Decentralizing UK TV seemed to be the main take-away from Hunt’s RTS speech mixed with a pitch for IPTV. Local TV might not have a sustainable commercial business model, he implied, but somewhere there’s a solution, obviously not involving the BBC. Separately, he reaffirmed the leftover campaign promise to reveal contract details of top BBC performers.

“The truth is that the whole of the sector must now face up to the impact of the internet, and make sure that their business models are not over-reliant on advertising revenue,” he said without a hint of what business models at a time of government austerity might work. “We must grasp the opportunities provided by technology to develop new and innovative models that can really work.”

Hunt singled out the YouView IPTV venture as “exciting.”  All the big television and ISPs – sans BSkyB – are behind it. Local TV operators published a letter to Minister Hunt in the Times – owned by Murdoch – calling for a “thorough competition investigation” into an “attempt by some of the biggest players to hijack the fledgling local TV market.”

UK Television is certainly complicated.

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