Saturday 10 December 2016

Three weeks that shook up the broadcasting world

Following some rapid M&A action, the cosy-but-cut-throat broadcasting market is going to get even more competitive in the near future

John McGee

Published 17/07/2016 | 02:30

Rupert Murdoch acquired Wireless Group, the owner of a raft of radio stations in the UK and Ireland including Dublin's Q102, and FM104.
Rupert Murdoch acquired Wireless Group, the owner of a raft of radio stations in the UK and Ireland including Dublin's Q102, and FM104.

Who would have predicted at the beginning of the year - when media industry analysts churn out their annual forecasts - that in the space of only three weeks the Irish broadcasting industry would effectively be turned on its head? Mystic Meg would have had difficulty foreseeing what has unfolded.

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For an industry that gets to witness the occasional bit of M&A action every few years, the past few weeks have seen more action than a Jason Bourne movie, and the scene is now set for what looks like a compelling sequel in the battle for the viewers, listeners and all-important revenues from advertising and subscription bundles.

First up was Rupert Murdoch's News UK's £220m (€264m) acquisition of Wireless Group, the owner of a raft of radio stations in the UK and Ireland including Dublin's Q102, and FM104.

This first foray into the radio market sees it pitted against the likes of RTE and Communicorp in a competitive market worth around €125m a year in advertising revenues.

Next up was Eir's launch of Eir Sport (the new name for Setanta Sports). Having splashed out a rumoured €20m to buy the broadcaster last December, Eir signalled its intentions to advertisers by making the pay-service free to its existing 50,000 TV customers as well as its 370,000 broadband customers.

In one fell swoop, that's a lot of potential eyeballs for advertisers.

Arguably the most significant move, however, is Virgin Media's proposed acquisition of UTV Ireland for €10m which was announced last week. Having already paid €87m for TV3 in 2015, Virgin's ambitions in the Irish market should make rivals sit up and take note.

Although the proposed takeover still has to clear a number of hurdles (in the form of approval by the Competition Authority, the Broadcasting Authority of Ireland and, finally, the Minister for Communications), it seems likely that the all-clear could be received within a three to six-month time frame.

After that, the gloves are off.

Up for grabs will be a slice of the TV advertising market which this year is expected to be worth around €244.8m, according to Core Media forecasts.

However, the battle for content (and viewers) will be the most eagerly awaited of all.

With the backing of Liberty Global, which reported global revenues of $18.3bn (€16.4bn) in 2015, Virgin Media's content and broadcasting ambitions are still in their infancy.

These ambitions are built around four key pillars: production, sports, free-to-air broadcasters (like TV3 and UTV) and subscription video-on-demand (VOD).

In all of the battles to win new viewers and subscribers, the common thread that runs throughout most of the recent M&A activity is content. While all the usual cliches about content being king apply, if it helps win new subscribers to a particular subscription platform as well as offering the opportunity to sell advertising around the content, it becomes a very compelling commercial proposition.

In the case of an enlarged TV3 Group, leveraging off the parent group's access to content that it has at its disposal will be important for its future growth.

For example, Virgin Media owns the UK production house All3Media which has produced TV dramas including Penny Dreadful and Call the Midwife.

It also owns New Pictures which has produced dramas including Indian Summer and The Missing. More recently it bought a stake in Lionsgate, the company behind Orange is the New Black, Mad Men and the popular Hunger Games franchise.

Equally, access to the technology underpinning the rapid changes in the market is paramount.

This is an area that Liberty Global has been investing heavily in over the past few years, both directly and through its Liberty Ventures offshoot which invests in emerging start-ups.

Possibly one of the most attractive opportunities from TV3's point of view lies in narrowcasting and the ability to use the Virgin Media platform to serve more targeted and relevant advertising to key demographics based on their viewing habits.

This opens up all kinds of commercial opportunities for the broadcaster.

A reinvigorated TV3, whose new parent has deep pockets and is committed to growing the business (as opposed to a VC company looking for an exit), will be good for the entire sector, says Peter McPartlin, managing director of media agency MediaCom.

"The TV market in Ireland is still growing, and while people are consuming it in different ways and on different devices, there is growth and those with good content will do well," he says.

"But the UTV deal will be good for the overall market, and I assume that it has its commercial and content strategy worked out by now."

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