Power struggles await the digital contenders

Next year will see a plethora of new channels, from Channel 4’s Film Four to various masthead TV offerings. However, it will also witness the demise of smaller channels as the stark economics of digital sink in.

The balance of power has shifted to those who distribute channels. Not only has supply long outstripped demand on analogue platforms, but digital providers will inevitably seek analogue carriage to offset initial slow returns from digital. Add to this channel unbundling, which makes channel branding even more vital, and the market looks extremely volatile.

The news that local cable news station, Channel One, will close at the end of this month shows how hostile this market will get. Multichannel broadcasters must expect the kind of power struggles seen between packaged goods and the big four supermarkets in the late Eighties.

The Discovery Channel has embarked on a sound retail-led strategy in its bid to remain the number one documentary brand. It announced the launch of a raft of new brand extensions, such as Animal Planet, to head off competition from channels like National Geographic.

Multichannel marketing has a new mantra – create “must stock” brands. Or as media analyst Matthew Horsman calls them, mini-drivers.

Not every channel can be “must stock”, but we will certainly see an emerging superleague of core channels such as Living, the number one channel for women, that will drive specific niche audiences into digital.

Sky, as ever, has been quick off the blocks. It has tied a number of brand leaders into exclusive deals – or rather deals that lock ONdigital out of the frame for the time being. So far this includes MTV, Nickelodeon, Living and Discovery.

We know sports and movies have reached saturation point. We know too that interactive TV will be slow to take off, as testified by the delays at British Interactive Broadcasting. This leaves us with a range of other programming strands as possible drivers. Sky has already started to push new genres such as the family and documentaries to create growth.

ONdigital has taken a different course. It has opted for more of its own-label product from Granada and Carlton. Whether this compromises the core proposition of pre-selecting only the best channels remains to be seen.

One thing is for sure – 1999 will be crunch year for platforms and channels. Broadcasters must invest heavily to create real brand equity – in channels and programming – for the new platforms.

Can digital cable differentiate itself from Sky? Can the UK really sustain three digital platforms? The experience of Spain, which cut its digital platforms from two to one earlier this year, might suggest otherwise.

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