The ITC treads cautiously on the advent of digital television. It expects the first services to go on air in mid-1998, and the first licences to be awarded this spring, although it won’t confirm just when it expects spring to arrive.
Just as cautious, are those who will be marketing the new channels. While the many reports which have been published on the subject recently, talk blithely of revenues from sponsorship, advertising, subscriptions, pay-per-view and sales of decoders, attempts to prise details from Sky on how digital will affect sponsorship, meet with a blank response.
So what will digital mean for the sponsorship industry? Some see it as a money spinner, others are more cautious. “Sport must be careful not to be deluded by technology, it should not lead editorial,” says Barrie Gill, chairman of CSS International and recently elected chairman of ESCA, the European Sponsorship Consultants Association.
“The advent of technology has accelerated the interest of big business in football clubs. They see a Manchester United channel as a huge money spinner in the future. Even I would subscribe to a Leeds United channel, although this may say more about my masochism than business sense.
“Every sport could have its own channel, but this would bring inherent dangers. Sport is about inspiration, exhilaration and participation, and if it is not possible for the ordinary fan to watch Man United except on digital TV, then the sport would suffer. Governing bodies are going to have to decide between guaranteed income and future interest in the sport.”
He cites a recent trip to South Africa to illustrate his point. British football matches get a fair amount of coverage there, enough, he says, “to get the kids in shopping centres walking round with football kits with the names of Ryan Giggs and Eric Cantona on the back. What would happen if they could not watch it on TV? Mass audiences are essential to the health of the sport.”
It’s a guessing game as to whether the sophisticated and expensively produced televised sport that we know and love will disappear from the mass market screens.
In the short term, as far as the Premier League is concerned, its latest deal with Sky for live rights to matches takes it well into the millenium, and contains a provision for pay-per-view.
Even with an OFT case pending over whether joint bargaining for TV rights constitutes restrictive trading practice, the League does not foresee a situation where individual clubs would negotiate individually for live rights. This is not to say, however, that clubs couldn’t organise their own deals with broadcasters for their own channels, focusing on pre-recorded games, features and so on. Such ventures wouldn’t threaten League sponsorship deals, there is more than enough in the marketing pot to go around.
One factor is certain, however. If there is an explosion in the number of channels, there is going to be a desperate rush for funding, particularly for sports channels. British consumers have come to expect certain production standards and are not likely to be satisfied with anything else.
“Whereas I’m not sure about the effect of digital TV on sponsorship, sponsorship will be vital to its funding,” says Martin Lowde, head of sponsorship at Laser, LWT’s sales arm.
“We’ll see channels being sponsored, films sponsored, and taking it one stage further, advertising funded or co-funded programming. This will facilitate the early growth of digital TV, much as it did in the US in the Fifties.”
And if a broadcaster doesn’t have the limitless funds with which to tempt rights owners, it will be much easier to join forces with, for example Microsoft, and launch the Microsoft Channel, than to try and get venture capital.
“There will be companies who want to fund it,” says Lowde. “Those in financial services, computers, service companies – such as those in the travel sector – are all likely candidates. I foresee it being a company in services will be first to test the water.”
Alternatively, we could see the first fruits of the IPA’s lobbying of the ITC in favour of masthead programming. Tie-ups with magazine publishers will be seen as an important source of programming to satellite and cable competitors, especially if they are still unavailable to terrestrial broadcasters.
The benefits for the viewer of digital are obvious – a higher quality picture with CD-quality sound, less risk of interference, greater viewing choice, and more interactivity.
The picture for advertisers is less clear cut – initial coverage might be limited to around 60 per cent to 70 per cent of the population. More channels could lead to greater fragmentation, and the market could be dominated by a few major players.
So how will broadcasters attract advertisers? “The most obvious way is video-on-demand,” says Ian Anders, TV group manager at CIA Media Network. “Sky will have numerous movie channels, therefore the films that they are showing will start at 20-minute intervals.
This means that for spot advertising, the audience delivery becomes almost impossible to measure. As a rule of thumb, the sector breaks are more important on satellite channels, so a sponsor whose name appears on the opening and closing credits is in a good position. I would have thought sponsorship could well be a major threat to spot advertising on digital.”
It may well be that a brand owner is offered better value for money through broadcast sponsorship than spot advertising, but will it be worth it for those who put the deals together? Paul Green, a director of Media Dimensions, which masterminded the Morse, Maigret and Rumpole of the Bailey deals, is doubtful.
“It opens up a whole new load of niche opportunities, but I wouldn’t have thought it would be remunerative initially,” he says. “The deals, in the whole area of sponsorship, are no easier to put together than they were five years ago.
“When you are going into a sponsorship, you have to assess the time and effort that is going to be needed. With digital, even if a client pays the full commission, the amount is going to be pretty marginal compared with the work involved.
“The premise we always look at with sponsorship is, if it is not going to be as effective or more effective than spot advertising, then don’t do it. That is something we will always focus on. If you have an existing commercial and can buy into the programme, by inference you are associated with it. If you are going to go that stage further and become the owner of it, it will require a whole new set of disciplines. Until the sponsorship is big enough, it is questionable whether it is worth doing.
“Sponsorship is still little used on the major stations even though it is high profile – it attracts a minute percentage of revenue and programmes available for sponsorship. Our pragmatic attitude is that we would concentrate on ITV, C4 and C5, and the big Sky channels.”
For the anoraks, though, digital does have its attractions. Formula 1 is one of the first to take advantage, signing a deal with German digital TV company DSS which enables subscribers to dictate from which vantage point they want to view the race. The viewer can alter nate between watching it from Schumacher’s car, from the pits, or a number of other positions if he or she so desires. As long as it attracts a big enough audience, everyone, including team sponsors, will be happy.
But for the bulk of audiences, such gadgets may only be tempting as a one-off, not for every race. Other facilities, such as being able to insert virtual advertising on perimeter boards, might be of more interest, but only to the advertisers.
However, for the consumer, there are bigger worries. “I’ve lived in the US for the past two years,” says Adrian Metcalfe, chairman of API TV,” and even though confronted with 60 channels, I only ended up watching two or three. It is very hard to track down what is on at any one time.”
Such viewpoints prompted CIA MediaLab to commission RSMB to undertake a longitudinal analysis of the BARB panel, identifying those throughout the analysis period who had acquired multi-channels, and looking at their viewing patterns before and after acquisition. The study was carried out in October 1996 and published this January.
The commonly held view, is that when people acquire cable/satellite television, they increase their viewing and spend a lot of time investigating the new channels. However, over time their viewing settles down and they, in part, return to viewing terrestrial channels.
If this were so, broadcast sponsors would be right to be wary about digital. But, the study found that the phenomenon of heightened initial viewing is not seen, and the time spent viewing does not increase. Viewing increases gradually, and does not “settle back”. Both the absolute level of viewing to cable and satellite, and its share of total television viewing, continues to grow.
The reality is that so much choice is initially a shock, but discerning viewers do learn to discriminate and, in time, get to know where and when to find the programmes. This is where opportunities arise for the sponsorship industry.
At the moment, for those without cable or satellite, one of four screens presents itself when we switch on. With the onset of digital, there is a capacity for advertising as part of the channel selection software. So, according to a new Financial Times Report, The Digital Broadcasting Revolution, a sports front-end, the screen first seen when turning on, may carry advertising for a sports manufacturer or a sports event, or may be sponsored by a specific channel.
The key advantages of front-ends are the ability to capture all viewers with a generic screen and, more significantly, the targeting of individual consumers for pre programmed front-ends.
If a customer has pre-chosen sports programmes to appear when the television is switched on, then the front-end slot will be sports based. Whoever captures the viewer at that point, whether a sponsor or an advertiser, has a unique opportunity – and it will cost them dear.
According to Metcalfe, they won’t be the only ones forking out. “Soccer is successful, because it is professional and covered from a number of camera positions,” he says, “but if you put on billiards and cover it with two cameras, it will be so boring it will be inadequate.
“Everybody wants digital to work, but the poor old consumers will have to pay for it one way or another, either indirectly or through sponsorship.”
The only certainty with digital is that it is going to cost consumers and sponsors, and that until it’s actually here, its marketing benefits for the sponsorship industry are pure speculation.