The Broadcasting Strategy
The Broadcasting Strategy
The Broadcasting Strategy
UK CARRIAGE DEALS.............................................................................................................................3 EUROPEAN SATELLITES...........................................................................................................................3 EUROPEAN PLATFORMS..........................................................................................................................4 CARRIAGE CRITERIA...................................................................................................................5 THE PROCESS.......................................................................................................................................5 KEY PLAYERS IN BROADCAST SERVICES.............................................................................6 PLAYOUT........................................................................................................................................8 ADVERTISING INSERTS..............................................................................................................9 FOREIGN FEEDS............................................................................................................................9 SKY CONDITIONAL ACCESS....................................................................................................................10 IN CONCLUSION...................................................................................................................................12
The Infrastructure
Distribution is fundamental. The content can be brilliant, but without distribution it cannot generate revenues. The forces of supply and demand have moved in favour
Copyright2003
Copyright2003
UK carriage deals
Recent UK carriage deals illustrate that even the bigger players among the channel suppliers have found the going tough. At the end of 2001, MTV was forced to accept lower fees after a tough negotiation with Telewest. The renewed carriage contract included a cut in fees but added MTV Dance to the Telewest line-up. Flextech was forced to accept a cut in its rate per subscriber from BSkyB of at least 10% in 2002, according to Press reports. This was part of a new five-year carriage deal for all its 13 wholly-owned and joint venture UKTV channels. Previous fees ranged from around 15 pence per subscriber per month for UK Gold to around eight pence for Bravo and Trouble, according to the reports. These fees were already significantly lower than those obtained on Skys analogue platform. Flextech noted that any loss of revenues per subscriber would be offset by an increase in the number of subscribers. Subscription revenues should not be seriously undermined over the longer term as long as the pay-TV market continues to grow. A five-year deal was regarded as important by the company as it provided secure longterm subscription income and allowed it to plan ahead. At the end of 2001, Discovery reached agreement with NTL covering its 10 whollyowned or joint venture channels from 1 January 2002. This also involved a reduction in carriage fees in return for a long-term distribution deal of five and half years. NTL and Telewest have also been negotiating new deals for carriage of BSkyBs channels. The Office of Fair Trading rejected a deal between NTL and Sky in September 2001 that set a pricing structure over five years following its investigation of an alleged abused of a dominant position by the satellite operator over the supply of its premium film and sports channels. In December 2002, the OFT finally cleared BSkyB of breaching competition rules after a three-year investigation.
European Satellites
Copyright2003
European Platforms
A new channel must aim for the widest possible distribution. Exclusive distribution on one platform, for example, does not make a lot of sense unless it can get much higher carriage fees as a result. Even then it may prove costly over the longer term. Where there are two competing satellite platforms, in France, for example, an exclusive DTH contract with one normal, but then it makes sense to try to get distribution on the platform with the most subscribers, unless carriage terms are significantly better on the other. In the UK, distribution on BSkyB must be the priority as with over six million subscribers to pay TV of a total nearly 10 million, it dominates the market. Satellite distribution, however, tends to be more expensive than distribution for cable only as the channel needs to be on a DTH satellite transponder that can be picked up by individual households. It costs more to lease space on such a satellite than on one that only needs to be picked up by cable headends. But in a country like Britain, a channel will be losing access to the majority of subscription homes if it is exclusively on cable. Not only does this mean no DTH carriage fees for these subscribers, but also a substantial loss of potential advertising revenue. In addition, carriage on Sky in the UK is likely to improve the chances of getting carriage on cable. The cable companies no longer see their pay-TV packages as a means of differentiating from Sky, rather the telephony and broadband services they offer is regarded as the differentiating factor. And while it may be very difficult to get paid carriage from Sky, it is not impossible if the product is right. The platform has a budget to spend on content which may not be increasing, but there is money there for new channels, although any fees to new channels will come out of those paid to current incumbents.
Copyright2003
The Process
First a channel needs to get distribution in place and lease capacity on a transponder with uplink. It then has to arrange encryption/ conditional access and playout deals. Negotiations can be simultaneous, but everything obviously hinges on carriage. The playout contract should not be signed until the last minute as the other deals need to be in place for revenue to be generated. It may be possible to combine the distribution deal with encryption and conditional access if, for example, a channel does a deal with BSkyB in the UK which includes leasing transponder space as well as encryption and conditional access. Otherwise, transponder space can be leased from BT or NTL in the UK, while companies like Pearson or Molinaire supply playout services. It is always possible to go free to air, in which case it may not be necessary to encrypt. A channel might do this if it cannot negotiate carriage fees or if it wants to build its brand for a period by offering it free. If it follows this strategy, the channel does have to clear the rights across the satellites footprint or it has to soft encrypt so that, although free to air, a card is still needed from the platform to receive it. In either case, the channel will still need to do a deal with the platform to be on the Electronic Programme Guide, although in the UK on BSkyB this is not a problem as Sky is obliged by regulation to provide access. The rights issue is more problematic. If the channel does own its own content, going free to air will make it difficult to sell the rights to its programming in territories where it is not distributed directly as a localised version. Up until 2003, the UKs terrestrial broadcasters the BBC and ITV had been paying BSkyB 5 million and 17 million respectively for conditional access for their digital channels. Faced with a hike in its rate to the same level as ITV, the BBC decided in
Copyright2003
Copyright2003
Its satellite services supplies broadcasters requiring satellite solutions either for DTH or to cable operators, as well as backhaul for redistribution. For DTH, BT helps to identify appropriate satellite capacity, as well as providing uplink facilities if required. NTL is the UKs leading cable operator, with interests across Europe. In addition to this, NTL is also the distributor of the UK commercial terrestrial network, ITV, as well as other channels, and it provides satellite uplinking services.
Copyright2003
NTL services include playout as well as uplink. It offers an automated server-based multi-channel playout for both live and pre-packaged multimedia programming. NTL has Digital Media Centre at Langley, Berkshire, providing playout and production services for ITN, British Eurosport, SDN and Front Row. Other channels that it uplinks include the shopping channel QVC as part of a three year deal worth more than 1 million. The channel is played out from QVC's studio in London and sent to NTL's teleport at Crawley Court in Hampshire for onward distribution. From there NTL uplinks to Sirius GE1E, as well as providing an alternative analogue route for QVC. NTL uplinks Cartoon Network, Bid-Up TV and TV Job Shop from Crawley Court, although it is developing a new 20 acre uplink site near Winchester, giving extra access to Eutelsat and Astra's fleet of satellites. Conditional access and encryption is likely to be part of the deal with Sky and there is an annual fee charged for this, as well as inclusion in the EPG. BSkyB charges were around 30,000 for the EPG, but rose to up to 75,000 from January 2003. Once the carriage, transponder and uplink have been put together, the channel will need a transmission facility. They will take a schedule and all programme material, prepare it for transmission and then transmit it. The signal will be distributed, probably by line (fibre), to the uplink facility that will then send it up to satellite. UPC Media in Amsterdam provides a wide range of broadcast services, particularly suitable for pan-European and Central Europe feeds, from its Digital Media Centre. This includes channel management and language versioning as well as uplinking and playout.
PLAYOUT
Copyright2003
ADVERTISING INSERTS
The advertising goes in at the last minute. The playout companies will have every advertisement on their server that has been approved in the UK. These are therefore ready for insertion. They will normally get central playouts from BACC three or four times a week and they can insert any of them into the channel. It is also possible to get them to handle quality control so that all the channels material is in compliance with ITC standards and that it is both technically suitable and does not have anything shocking in it editorially. The channel only needs to send the playout facility the list with the ads sold and they will be inserted from the server. If there is a foreign feed with foreign ads, then these would have to be trafficked in from the agency in the traditional way and shipped to the playout centre. UK ads should not be broadcast in Europe and it is therefore necessary to have a second channel, Channel B, with identical programming, but in which the ad breaks are filled in or replaced with promos or something that will fill the space if the channel is to be available outside the UK. The alternative to filling the gaps with promos or short programmes would be to sandwich all the programmes closely together leaving no gaps, but this means a second deal with playout centre, plus an ability to do different languages. It will therefore cost more than Channel A as extra equipment is needed to deliver the feed.
FOREIGN FEEDS
Distribution across Europe can generate new revenue streams and this can always be an option for a channel once it has established itself in one territory. These days it is not advisable to put out an identical channel across several territories without localising it for the different markets, but with digital technology this has become
Copyright2003
Sky Conditional access Details on BSkyBs conditional access conditions and charges are in Appendix and at www1.sky.com/corporate/sssl.htm. In 2001, the UK telecommunications regulator Oftel announced that it was to review access charges for TV channel carriage on satellites, and would consider whether
Copyright2003
Copyright2003
Copyright2003