Birth of a station

Advertisers are in the dark over the positioning of Channel 5. Sceptics question whether it can deliver on its early promises and how it will fare in a market made more competitive by the launch of digital TV. Nevertheless, the channel will be

Channel 5 exists because advertisers wanted it. They lobbied for it and a Thatcher government delivered it. So it is ironic that agencies and advertisers are increasingly unsettled about what C5 will be when it finally goes on air in March, over two months late.

They don’t know what its programmes will look like; they don’t know how much its airtime will cost; they don’t know when it will launch or indeed how it will promote and position itself. And some unkind observers say the people running C5 are equally in the dark.

The station will go to the Independent Television Commission on October 17 to ask permission for a two-month delay to the start of the service. The ITC will agree and C5 will start operating in March. But advertisers need information now.

The channel, which will be the biggest commercial TV launch since the creation of ITV, will hit 80 per cent of the population within 12 months and has the potential to redraw the UK television advertising market.

Excepting a few obligatory statements about “extending viewer choice”, the 1990 Broadcasting Act makes C5’s objective clear – “introducing new competition to the advertising market”.

Edward Lloyd-Barnes, a director at the media buyer IDK Media, suggests that C5, by continuing the fragmentation of audiences, may change the way TV campaigns are bought and planned on all stations and could drive up advertising costs. “Some of us see it as the beginning of the end for TV as a mass medium,” he says. Even if that exaggerates the immediate impact of the station, it underlines its importance to advertisers.

“Even without detailed programming information, it is possible to foresee C5 causing a reasonable amount of inflation at ITV,” says Lloyd-Barnes. “The classic TV campaign, which takes four to six weeks to hit its target audience, will come to an end. Instead, without big ratings, advertisers will need eight to 12 weeks to get the required coverage.”

Because of a botched application round in 1992 it is now ten years since the Government first announced it had found space on the UHF spectrum for a TV service that could reach 65 to 70 per cent of the population. In that ten years, competition to ITV has come along in spades.

This goes to the heart of pessimistic projections of C5’s future. It was created to provide competition and more advertising minutage but its raison d’être is now only half relevant. It will provide more minutage, but there is no lack of competition and it is now so late off the blocks that it may get lost in the world of digital broadcasting that is due in autumn 1997.

“I’m sorry to say this, but it is four years too late,” says Alan James, broadcast director of the Ogilvy & Mather-owned media agency The Network. “There is no need for it in the market, there is already plenty of competition.”

C5 has to prove that there is a reason for it. It must develop clear positioning, and not just appear as a cheaper alternative to ITV.

“ITV is likely to lose four per cent of its audience next year,” says Ivor Clark, broadcast manager at buying agency MediaCom. “That’s not a dramatic decrease for advertisers because we are predicting an increase in demand of only one per cent – leading to airtime inflation of five per cent.”

Not all those viewers will transfer to C5. But the idea of the new station taking viewers from ITV worries advertisers. They are hoping it will take its viewers from the BBC.

“Advertisers are not that fussed about having extra competition,” maintains Bob Wootton, the Incorporated Society of British Advertisers’ (ISBA’s) media services director. “It’s the extra audience we want. If it divides the existing commercial audience further, then that’s not on.”

But inevitably that is what C5 will do, and individual ISBA members will do the best deals possible for themselves. The problem for advertisers is that taking viewers from the BBC is not easy.

According to ISBA figures, the BBC’s total annual share of viewing has only declined from 45 per cent to 44 per cent over the past 20 years.

C5 maintains it will take a seven per cent share of viewing, with an unprecedented 3.5 per cent coming from the BBC, which ISBA describes as a challenge.

It should also be remembered that it is no more profitable for C5 to take viewers from the BBC than from anywhere else. C5’s sales director Nick Milligan claims it wants to steal viewers from the BBC, and will structure its scheduling to do so. But that is just diplomacy. It is interested in audiences, full stop.

Agencies are having a problem estimating the size of the audience share C5 will achieve in its first year because its programming is yet to be announced, although some can be predicted (see table). But most agency estimates give it a seven or eight per cent share of commercial impacts, which measure the number of viewers per ad, by the end of 1997.

This compares with more bullish predictions from C5 that it can hit ten to 12 per cent of impacts.

Equally contentious are the estimates of how much ad revenue that viewing share will earn C5. Agency estimates are around 80m, giving it four per cent of commercial revenue. The same predictions suggest ITV will have an ad income of 1.7bn, Channel 4 will have 541m and Sky 110m next year. The most bullish at C5 believe ad revenue of between 140m and 180m can be achieved.

“GMTV is expected to take 80m this year,” says one source. “It only has three hours a day. So it is ludicrous to expect C5, with 24 hours, to take the same.”

In its early negotiations with agencies, C5 has only given a broad impression of itself. But what has been made clear, according to several sources, is that C5 will “bargain”.

“C5 won’t go to Procter & Gamble or Unilever offering 50 per cent discounts on ITV,” says MediaCom’s Clark. “Instead it will target the 3m to 4m advertisers who will command a discount but not drag its average price too low.”

Clark believes C5 is more likely to offer discounts of around 35 per cent against ITV. Bill Barker, broadcast director at J Walter Thompson believes the discount will be even higher – about 40 per cent. So a consensus – or a negotiating position – has already been created in agencies.

At C5 it is a different picture. Sources close to the sales team predict a discount of 15 per cent on ITV’s price being closer to its target rates. But C5 is still feeling its way toward a market price.

“Some agencies may try to use it as a cost regulator – to keep its average TV costs down,” says Barker. “But because it will get a large number of its ratings in London rather than in cheap regions, it won’t be as cheap as some think.”

The uneven distribution of C5’s regional coverage (see table) is both an advantage and disadvantage. It could make it complex for agencies to buy the correct weight of ads. But the extra coverage from frequency 35, which the Government awarded it two weeks ago delivering an extra 1.8 million homes, and which has been used to excuse the delayed launch, should even out some of the regional disparity.

Within three to four months the channel is expected to divide its ad sales into four regions: Scotland, Ireland, London and the rest of England. C5 believes advertisers chasing a young, mid-market audience will use C4, Sky and itself to secure regional coverage – especially in London – before negotiating with ITV.

A flavour of what C5 will broadcast can be gathered from the description of Dawn Airey, its programme director, by a former colleague at C4: “All she cares about is numbers. She is ruthlessly commercial and doesn’t give a toss if it is credible or worthy.”

The schedule will be filled with light entertainment, comedy and bought-in films. Its drama output looks like being either bought in from the US or taken from the archive of one of its financial backers Pearson/Thames. Current affairs will be unashamedly populist and sport will be thin on the ground, unless rumours of a tie-up with BSkyB prove true.

It plans to stretch its seemingly threadbare 110m programming budget through joint production and acquisition deals, mainly with BSkyB. And it believes it can multiply the value of its programme purchasing by four by “renting”, rather than buying, programme rights.

C5’s chief executive David Elstein bases the future success of C5 on this new type of programming economics. In contrast, C4 has a projected programming budget of 350m and ITV 800m.

In addition to “new programming economics”, the station is placing a lot of emphasis on its ability to schedule freely against the shibboleths of public service broadcasting. News at Ten, the Nine O’clock News and regional news magazines will all be targeted. This, it claims, will also allow it to punch above its 110m weight.

But sceptics point out that if a TV company could attract lucrative audiences using novel programme purchasing and clever scheduling instead of money, one would have already done so.

Crucially, the dual purchase strategy with Elstein’s old company, BSkyB, is related to more than just economics.

As a brand, C5 wants to position itself as young and new. It sees itself very much in the mould of BSkyB’s US sister station Fox Network – Rupert Murdoch’s largely successful attempt to break into the ABC, NBC and CBS network cartel. To that end, C5 has collaborated with BSkyB to buy the rights to Fox staples such as Beverly Hills 90210 and Melrose Place.

In constructing models of C5’s audience, many agencies reach for the BSkyB connection. They believe its stated aim for a mass, young audience inevitably leads to comparisons with satellite and cable TV’s most popular channel, Sky One.

A third of Sky One’s audience is aged 16 to 34 compared with 22 per cent for ITV. Only 14 per cent of its viewers are over 55, compared with 40 per cent for ITV.

If Fox and Sky One are the models, there is still some mystery about how they can be successfully imitated. The launch advertising campaign and the brand positioning of the channel are still under wraps.

Some within Saatchi & Saatchi, which created the retuning campaign, are concerned that the retuning campaign was kept separate from the programming launch. “You can’t encourage excitement about the retuning without telling people what they are getting. It has been too understated,” says one Saatchi source.

C5, for its part, maintains that its research shows awareness of the retuning campaign at 90 per cent. But there is still a belief that the “give me 5” campaign was a missed opportunity reflecting the point that C5 is still searching for its identity. A search that has led it to a pitch for the “branding” advertising work which Saatchi & Saatchi hoped it would pick up automatically.

“It is disturbing that it has chosen to begin its communication with the public using logos and technical information with no product substantiation behind it,” says Paul Longhurst, media director at Ammirati Puris Lintas, which presented for the retuning campaign. “It should use whatever is going to be its ratings winner, the one that also hits its core audience, and use that.”

Longhurst, who believes C5 will succeed, points out that the only TV station to focus on technology was the defunct satellite station BSB.

C5’s marketing director, David Brook, believes he can position the station as the UK’s first “modern and mainstream” TV channel. Its research identified the BBC as “the establishment”, while ITV is “music hall”. “When asked ‘if ITV was a holiday what kind would it be?'” says Brook, “people say Butlin’s.” But Butlin’s remains very popular.

Brook wants to make C5 “Florida or the Mediterranean”, but that is not clear positioning. More details will be revealed to agencies later this month but there is now a great anticipation that Brook will have to provide a clear, coherent idea of what C5 will be.

The key propositions will be that the channel is free to use and accessible. But the problem with Brook’s accessibility is that it also involves being all things to all people – that is, non-targeted – which goes against the trend in a crowded market.

C5’s backers talk of making a profit within three years. This would mean matching the best results of all UK TV launches – the subscription cable and satellite channel, UK Gold and its diet of repeats.

Elstein, Brook, Airey and Milligan make a formidable team backed by some of the deepest pockets in the British media. Their philosophy is that C5 is the first truly modern terrestrial TV channel, the first channel created by the post-public service world of Thatcherite deregulation – it can pretty much show what makes a profit.

Unfortunately, the rapid pace of development in media means that this model of modern TV might only have a six-month window before the next new thing – digital satellite – is launched by BSkyB. Notwithstanding Elstein’s pledge to seek satellite and digital retransmission for the new channel, some believe it could be smothered at birth.

But it must be remembered that the expensive retuning and the lobbying for extra frequencies have paid off, and C5 will be in 80 per cent of homes – far more than satellite or digital. It will now have to convince advertisers and agencies, made anxious by the delays and secrecy surrounding its launch, that it can convert them into viewers.

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