Issue 10, 01 October 2001

What do you want if you don't want money?" was a big hit for '60s pop star Adam Faith, but the refrain failed to inspire cable and satellite audiences when Faith launched the The Money Channel 40 years later. "We overspent and made the wrong predictions for advertising. We felt that we would open up new levels of advertising for a specific audience [but] the ground shifted under our feet," admitted Faith, who closed down the unprofitable channel earlier this year.

When The Money Channel launched in 2000 Faith and his backers believed money was the new rock 'n' roll. The dotcom boom was in full throttle and Faith believed that everyone from schools to private investors would buy his mixture of stock market analysis, tips and money-based chit-chat.

But, as he told the recent Royal Television Society get-together in Cambridge, the project was "hugely ambitious" and ultimately too expensive to keep up and running.

Faith's problem is one faced by all new digital channels. They may have a great niche, like money or health or babies, but making it work is tough.

Business plans based on traditional economics fall over in the digital world. "Digital meant you could launch any kind of channel on the cheap," says Adam Singer, CEO of Telewest. "But that didn't mean that the [audience's] eyeballs were going to increase. It was like having a lush field of grass and letting too many rabbits out onto it. They ate all the grass and died."

The odd thing is, despite the stark evidence that niche channels are a tough sell to a fragmenting and increasingly distracted audience, people keep launching them.

Granada's Well Being and Carlton's Taste are typical examples. The only difference with The Money Channel is that big retailers - Boots and Sainsbury's - have invested money in the channels and helped set up companion websites.

Yet, strangely, neither Well Being nor Taste use these well-known names in their branding. Both Well Being and Taste cut staff and programming budgets this summer.

To be a successful niche service you have to offer something that people are willing to search out and pay for, either on a subscription or a per usage basis. Advertising is the icing on the cake - nice to get but not enough to live on.

"Broadcasting is an old paradigm," says Don Tapscott, futurist and author of Paradigm Shift. "It's not 'broad' and it's not 'casting'. And it won't be 300 channels, it will be 50m, including the websites designed by my kids!" For a generation 'bathed in bits' the personal control they are accustomed to on the internet is influencing how they 'view' TV. This is the Playstation generation, more interested in video games than watching TV. They like Buffy the Vampire Slayer and The Simpsons, but if you haven't heard, popular TV shows are being pirated on the web. So if you set your PC up to download them before you go to school, a couple of episodes will be waiting on your desktop when you return home.

TV and film are experiencing the same revolution that hit the music industry.

It's still time-consuming to download TV shows from the web, but it's going to get easier as broadband rolls out. And more importantly there is a generation growing up that is used to control of when and where they view. They want to "drill down immediately using their digital TV", in Singer's words.

There is still room for new channels in the digital world, either highly targeted, multi-platform niche operations or those backed by multimedia empires that can absorb costs. This latter includes the licence-fee funded BBC, which was recently given the green light by the UK government to launch eight new digital services, including three TV services. The two children's services and one arts and culture channel have put companies running similar, commercial digital services on alert and fuelled a debate in the UK about what the role of a public service broadcaster in the digital world should be. It's a thorny topic but one thing is clear: for commercial channels like Nickelodeon and The Arts Channel, the economics of the digital landscape just got a lot more competitive. "We will just have to be smarter," admits John Hambley, CEO of The Arts Channel.

And if the experience of Adam Faith is anything to go by, there is little room for mistakes. Fledgling channels without strong political backing and very deep pockets could well end up singing another Faith number one hit of the '60s called "Poor Me".