Kate Bulkley, Media Analyst.

Five mulls switch to pay-TV

By Kate Bulkley

Broadcast News

For Broadcast October 01, 2009

Five is considering taking its main terrestrial channel into the pay-TV market as it investigates radical survival strategies.

Sources close to the broadcaster revealed the plan is part of a potential strategy to shift its entire channel portfolio (Five, Fiver, Five US) to pay.

It is one of several options open to Five as it looks to embrace the pay market, as acknowledged by Five chairman and chief executive Dawn Airey at the recent RTS Cambridge Conference.

At the event, Airey admitted the “pure broadcasting business is pretty much a loss leader”.

“We are looking to consolidate or potentially go pay,” she said. “We won’t be able to be the same as we are now in terms of structure, in terms of platforms we are on, and in terms of partnerships we have… it will change - and I suspect it will change quite quickly.”

Another option understood to be under consideration is introducing paid-for pull VoD services. This would mean using Project Canvas or services such as the Arqiva-owned Kangaroo platform to charge consumers directly for content.

“Capturing consumer loyalty through a monthly payment doesn’t have to only be on Sky,” said one industry executive.

If it moved to pay, Five would have to renegotiate deals for acquired shows.

Five’s plans are part of wider free-to-air interest in the pay sector.

ITV’s house analyst bank UBS outlined the “pay-TV opportunity” for ITV earlier this year. The broadcaster seriously considered the strategy, but decided the numbers didn’t add up. An ITV spokeswoman added: “The maths doesn’t work for us but that’s not to say we would rule it out forever.”

Airey’s boss, RTL Group chief executive Gerhard Zeiler, told the Edinburgh Television Festival that all free-to-air broadcasters must “identify which part of their offer is so exclusive and unique that it would work in a pay environment. If the advertising industry doesn’t pay every single bill anymore, then the consumer - directly or indirectly - will have to step up.”

Five declined to comment.


How it stacks up

Five would lose around half of its £300m a year ad revenue if it moved to pay, based on pay-TV (Sky, Virgin and others) reaching half of all UK TV homes (12 million). It would need to generate £145m in subs revenues to make up the shortfall - around £1 per subscriber per month.

Analysts think that figure is “very high” and Toby Syfret of Enders Analysis said going pay would be a massive risk if Five hoped carriage fees would make up for lost ad revenues.

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