01 January 2004

The launch of the FX channel by News Corp is a first - the first channel with a mix of films and comedy aimed at 'adult men' and the first wholly-owned by News Corp to be launched on BSkyB in the UK. Cheekily dubbed FX289 so that Sky Digital viewers won't forget where to find it, this is unlikely to be the last time News Corp drops a 100%-owned channel onto its UK platform. And the channel brand also has its eye on other European markets and countries even further afield.

With an ambition to be the channel of cult hits (The X-Files, NYPD Blue and The Shield are prominent in the schedule) and a sales pitch targeting those guys who "buy face cream, but who aren't vain," FX is determined to carve out a niche in the crowded UK channel universe. FX is clearly doing the right thing; in the channel launching game, finding a new niche or a signature programme that brands your channel is crucial. Standing out in the cluttered landscape of multi-channels is increasingly hard to do.

FX has a lot of assets that some other aspirant channels don't. First and foremost, it is owned by News Corp, a company that includes a Hollywood studio and has a lot of programming firepower. But perhaps more importantly for the channels business, News Corp owns and operates pay-TV platforms.

FX's backers understand that the fragile economics of niche channels mean that one-off channels are much less likely to make it.

Indeed, News Corp's Fox International Channels group already runs National Geographic channels outside of the US in joint ventures with the owners of the eponymous magazine and NBC, as well as managing the History Channel and operating a number of Fox-branded channels in Latin America, Japan, Spain and Italy. With FX's launch, Fox now has its first foothold in the UK.

On pay-TV platform Sky Italia (also owned by News Corp) Fox already runs National Geographic, Adventure One (a Nat Geo spin-off), a Fox channel and History Channel and has plans to launch at least one other new channel by April or May. At some point Fox will also launch an FX in Italy.

The end game for Fox is to create a group of channels and then "move people from channel to channel and take them places they might not ordinarily think they want to go," says David Haslingden, chief operating officer of Fox International Channels.

The family of channels concept is not new. Flextech, the programming arm of cable operator Telewest in the UK, has a similar strategy (albeit only in the UK market). Flextech runs a diverse group of channels but uses economies of scale to keep costs to a minimum. It has created its own mini-electronic programme guide to move viewers from one of its channels to another, in an attempt to keep them inside the Flextech viewing and advertising universe. The individual channels sometimes even buy programming rights so that a show can be aired on several Flextech channels, including its newest, FTN, which is available on the Freeview digital terrestrial platform.

"Flextech are onto something in the UK," says Haslingden. It's a strategy that Fox wants to emulate because the economics of pay-TV are changing.

According to consultancy Screen Digest, total pay-TV revenues in western Europe will grow by 23% over the next three years, but the number of new pay-TV subscribers will grow by only 10%. Operators will therefore place emphasis on growing existing subscriber revenues. That means they only want channels that encourage subscribers to pay more for their pay-TV service.

The biggest of Fox's competitors are other Hollywood studios, all of which are in the international channel business. In Europe, Sony's AXN channel has launched in Spain and Portugal as well as eastern European markets. But the big western European markets have so far eluded the studio, which says it would rather walk away from a bad deal with a platform operator.

For the studios, launching channels on pay-TV platforms is a delicate mix of negotiations around movies, TV fare and other programming rights that can be brought to the table. And of course Fox also brings its connection to News Corp, which gives it an edge over many other channel aspirants both big and small.