Kate Bulkley, Media Analyst.

C4 will benefit from bartering

By Kate Bulkley

Broadcast News

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For Broadcast June 18, 2015

Tapping into new ad revenues is a model for success, says Kate Bulkley

In the 21st century television world, defending and growing your business often seems to come down to simply getting bigger.

Scale is the new mantra. We’ve seen it happen with production companies (see this week’s revelation that Zodiak is talking to Banijay), with broadcasters (Sky UK becomes Sky Europe) and with channel groups (Discovery buys Eurosport). ITV has done it most spectacularly with its ITV Studios business.

But tapping into new ad revenues is another model for growth and one that Sky and Channel 4 have begun to plumb, both collecting data from viewers and leveraging it to create more sophisticated and targeted advertising offerings, new-style sponsorship deals and innovative product placements.

But there is another way – one that looks to combine this strategy with a dash of venture capitalism.

Pioneered by German commercial broadcaster ProSiebenSat1, and with backing from seven European broadcasters including C4, is the European Media Alliance (EMA).

Here, the idea is to use your idle or under-used advertising inventory as barter to help fledging companies get their message out on TV. The young company gets its product on the box, while the ‘investing’ broadcaster gets a share of the company’s revenue, an equity stake, or a bit of both.

The role of the EMA is like a knowledge network and a clearing house for all its members to find those upcoming companies that could benefit from TV advertising.

Giving “slightly more flexible commercial agreements” opens C4 to a new group of advertisers who will, hopefully, grow up with the broadcaster and one day become full-pay advertisers, explains C4 director of sales Jonathan Allan.

“It’s about bringing new advertisers to TV that don’t have the cash in their business because they are growing.”

Allan is quick to say that although the Commercial Growth Fund is not about resurrecting 4 Ventures, C4 will be taking some VC bets. By bartering its ad inventory for equity or a share of revenues in the businesses, C4 is hoping it picks the next Facebook. Now that would go a long way towards securing future revenues.

Last week, C4 announced that music-sharing service Deezer will benefit from the Commercial Growth Fund, and it’s a good investment because the online music business is set to become a lot more competitive with the launch of Apple’s Beats service and the ongoing ambitions of Spotify.

Getting in on the ground floor is important because as we’ve seen with the online property market, Prime Location, Zoopla and Rightmove are fighting it out and advertising is a major weapon.

These are not new waters: ProSiebenSat1 (another Deezer investor) reckons it had ¤1bn (£700m) of idle advertising inventory at the end of 2014. It has investments in 60 companies, largely in e-commerce, and the digital side of its business is growing faster than the rest.

C4’s decision to set up the Growth Fund and move into the EMA comes amid fresh speculation around privatisation.

It is a great response to Tory tub-thumping, showing that C4 is thinking outside of the box, by jumping into a whole new world of potential cash.

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