Kate Bulkley, Media Analyst.

Content: the new commodity

By Kate Bulkley

Broadcast News

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For Broadcast February 12, 2015

Telcos are changing how programming is valued, says Kate Bulkley

What were TV types chattering about last week?

Fortitude’s consolidated audience of 1.7 million for its Sky Atlantic debut? Or BT’s £12.5bn purchase of mobile network EE?

I suspect it was the former, but there’s plenty going on in the macro world of communications – the likes of BT, Vodafone and TalkTalk – that everyone in the TV biz should understand.

The big new players coming into our industry have a very different way of valuing and appreciating programmes than their traditional TV counterparts.

Content in the digital world of communications is more of a commodity than ever before. Remember how Apple got into the music business with iTunes and made everything easier to buy, with low pricing and quality marketing?

The iTunes business model pioneered successful digital music sales, but Apple doesn’t produce music, nor invest much in ensuring that content is the best it can be. Instead, music is the carrot iTunes uses to sell its iPods and other devices for vast profits. Look at Google and YouTube: Google doesn’t commission programmes, but is keen to attract them so it can increase its search results and advertising numbers.

Now Vodafone will launch a cloud-based TV service in the UK, while TalkTalk has bought online streaming service Blinkbox for an estimated £5m to get into the content business. It believes Blinkbox might help drive mobile viewing and higher data usage.

And then there is the BT/EE deal. It seems telcos are lining up their ‘quadruple bundles’ to attract subscribers – offering services including mobile, telephone, broadband and TV. Doesn’t it sound like your TV show is more of a commodity than ever before?

That’s especially true when you realise that the big prize all the telcos are chasing is the hefty margin from broadband. BT Sport is ‘free’ with a broadband subscription, not the other way around.

Welcome to the telecoms revolution, where Vodafone’s market capitalisation is £61bn and BT’s is £36bn, compared with ITV’s £9.2bn and BSkyB’s £16.3bn. Who has the financial muscle here?

Perhaps to hedge its bets, late last month Sky embraced the ‘quad-play’ idea, announcing it will provide wholesale access to O2’s mobile network from next year.

So, how will the telco affect the TV business long term? Well, the cost of the content is going to go up.

There was never any question that the cost of Premier League rights would surge again this year, only three years after what felt like unbelievable numbers at the last auction. Sky is now paying more than £11m a game for the Premier League, and a big game typically delivers a maximum audience of around 2 million viewers.

So why does anyone throw up their hands in horror when Fortitude (pictured) reportedly costs £2.5m per episode and managed a similar number for its opening show? Particularly as narrative repeats make more sense for drama than football.

With this reasoning, should the next great drama on Sky Atlantic have a budget nearer £6m per episode?

I can see Stuart Murphy clapping his hands in glee.

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