Tuesday 6 December 2016

Dwindling ad kitties spell buyouts and big changes as broadband firms pounce on Irish media companies

In a fight to the death with social networks, Irish media firms are reaching for consolidation and new content ideas to compete

Published 17/07/2016 | 02:30

With its summer run on BBC1, ‘Red Rock’ is now one of Ireland’s most successful television exports
With its summer run on BBC1, ‘Red Rock’ is now one of Ireland’s most successful television exports

In a week when more people talked about Pokemon Go than Prime Time, big chunks of the Irish media industry appeared to have one thing on their mind: consolidation.

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UTV Ireland was sold for €10m to the same owner (Virgin Media) as TV3. The Sunday Business Post was merged with Cork-based printing company Webprint. And both events came shortly after the sale to Rupert Murdoch of FM104, Q102 and a bunch of other well-established local radio stations.

Meanwhile, the entity formerly known as Setanta Sports was amalgamated into Eir's basic broadband offering, with all of its premium football content now available free to almost 400,000 of its broadband subscribers.

And Twitter announced that it will broadcast live from upcoming US presidential conventions.

Over at RTE, incoming director general Dee Forbes told staff that she wants to "future-proof" the organisation. "In a very fragmented world, we have to keep earning that role," she said, referring to the organisation's historic position in Irish media life and its need for new public funding.

But in a market where two companies - Facebook and Google - take more and more of available Irish advertising, how will current Irish media outfits keep earning at existing rates? And what does consolidation bring?

The underlying commercial climate remains a scary one for most traditional media companies. Even as the economy grows, ad revenue and subscriptions slide.

One recent set of figures from Ireland's Nielsen-backed Television Audience Measurement bureau shows a huge drop-off in ads seen by Irish people on traditional scheduled TV programming. The drop-off comes as other metrics indicate more time spent with online video and phone content.

In print, paid circulation is declining by around 5pc per year. Print ad rates are suffering too, while digital revenue from newspapers' websites and apps are struggling to make up the difference.

Against this background, some companies have decided to go big or go home.

"In the content world, scale is very important," said John Malone, the ultimate owner of TV3 and UTV Ireland through his controlling stake in Virgin Media parent company, Liberty Global. "Clearly there is still room in the media sector to create some bigger and more global entities."

Malone made the remarks in an interview with US television network CNBC earlier this year. But the results are now being seen in his company's emerging media strategy - which is to buy up studios and "underinvested" broadcasters around the world.

"The danger for a company like Virgin Media or Liberty Global is to be shut out of content," said Virgin Media Ireland boss Tony Hanway earlier this year.

"Content prices are going up all the time. It therefore makes a lot of sense for us to start dipping a toe in the water of owning the content assets and understanding how they're created…

"That gives you a front row seat - so that you're not out there in a Dutch auction, bidding for ever more expensive content. This way you've got a share of the pie."

Early returns are modest, but, from Hanway's perspective, promising.

TV3's Red Rock soap opera recently started a summer season broadcast run on BBC One.

"It's a huge day for TV3," said TV3 managing director Pat Kiely. "Red Rock has now probably become one of Ireland's most successful television exports."

But it will take a lot of Red Rocks to make TV3's home-grown content, or that of future sister network UTV Ireland, into lucrative ventures.

While current advertising metrics aren't inspiring, Hanway thinks that Virgin can turn its stations' ad technology around.

"One of the points when traditional TV comes under pressure is advertising," he recently said. "I always have a problem with TV advertising. It's very untargeted. It's just beaming into the house. A 15-year-old teen will be stuck watching a detergent ad, though it's not a product he'd buy.

"What we have to look at is how we can start using targeted advertising so that people can see ads that are more relevant. This would be very interesting for advertisers. Liberty Global can lead the way in that."

Hanway's thinking appears to acknowledge how social media companies - which are now earnest rivals to broadcast networks - see our media attention spans.

Video growth on Facebook and Twitter is exponential: new Twitter boss Mark Little told this newspaper last week that it grew 22,000pc over the period of a year.

These companies do not yet match television networks for time spent on video. But they are far more accurate in targeting the people advertisers want to reach.

And they do not yet have to reckon with the social media video goliath likely to soon emerge into advertisers' spectrums - Snapchat.

Snapchat now has over 150m daily users watching media-made videos. (In Ireland, it has over 800,000 users according to recent figures from Ipsos MRBI.)

Of all the networks out there, it looks set to capture a huge chunk of the next generation of video consumers.

And this is set to weave even more fragmentation into the Irish commercial media landscape. Snapchat's click rate ('swipe-up') for Snap Ads is five times higher than the average click-through rate on social media platforms. And in the US, a single 'sponsored geofilter' reaches around half of daily Snapchat users.

So Snapchat is basically now a series of content channels in itself. But many current media executives have never even tried using the app, let alone started to think how to compete against it.

"I downloaded it but hadn't a clue where to start," one executive told me last week. "So I just deleted it and went back to Twitter."

None of this offers any immediate guidance to companies like Virgin Media in deciding what to do with UTV Ireland, should it get the go-ahead from the Competition Authority to acquire it.

And the company's executives are keeping their own counsel about whether the station's facilities - or other elements of its make-up - might be amalgamated with TV3. However, bosses talked last week of more money to be made available.

"The proposed acquisition of UTV Ireland will ensure further investment in the independent Irish television sector as we continue to compete head on against significant local and international competition," said Virgin-owned TV3 boss Pat Kiely.

But as if Facebook, Google and Snapchat weren't already enough competition, the media landscape may soon have another tech giant prowling around looking to annex further commercial territory: Apple wants to get into content in a fairly pointed way.

The company's head of software and services, Eddie Cue, told the Hollywood Reporter last week that the tech giant has been in "discussions" with Time Warner about possible commercial arrangements. One of these potential scenarios, reported the Financial Times, was the full acquisition of the €50bn studio - which owns Game Of Thrones broadcaster HBO.

Cue denied that Apple was "actively trying to buy any studio". But Apple is currently getting into the business of being a content provider, as its launch of Apple Music - with its own radio stations and 15m subscribers - demonstrates.

At its most recent conferences, Apple chief executive Tim Cook said that the future of television lies in apps. As a general media rule, Apple believes that people will pay more for things they're interested in.

"Most people, at the end of the day, end up paying more, not less, for the things they love," said Cue last week.

Last week's big Sky television launch backs this up. A customer requesting its latest 'ultra high definition' sports package will have to pay €104 per month. But Sky is confident it will get the numbers because of its core belief in content. Its confidence may not be misplaced. In Ireland, its TV subscriber numbers have held steady at around 700,000 while main rival Virgin's subscription figures have fallen sharply.

We've heard it before: but content is king.

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