UTV's €25m plan to take on RTE and TV3 should be a thriller
As the scramble for ad revenue starts, northern channel's Irish play is the least of TV's worries, writes Roisin Burke
Published 10/11/2013 | 21:30
WHAT is UTV playing at? That is the question on the lips of everybody in TV since it revealed its new Irish channel plan on Wednesday.
Is the Northern Ireland broadcaster calling an upturn with spectacular foresight on the blitzed TV advertising market – forecast to actually grow for the first time since 2007 next year – or has it something else in mind?
Fighting back, TV3 briefed media agency bosses that same day that it would put the guts of the €15m it is saving by ditching its loss-making rights to Coronation Street and Emmerdale into new, original home-grown programming, including the ballsy plan to make its own new soap opera.
UTV's snatching of the jewels in TV3's programming crown is the biggest ever acquisition deal in the Irish TV market, suggesting the broadcaster paid possibly €20m for it.
With its stated plan for the new channel to break even in its first year in 2015 and be profitable in its second, it has its work cut out.
It is estimated it will need to shell out €25m a year on staff and content to do what it says it wants to do: take on TV3 and RTE and win. An ambitious mission starting from its Republic of Ireland audience share base of less than 3 per cent.
Advertising revenues from Coronation Street and Emmerdale were worth about €8m to €10m to TV3, with Jeremy Kyle and other shows bringing that up to a further €12m.
Local programme making will also be at the heart of driving viewership at UTV Ireland, chief executive John McCann told the Sunday Independent.
As well as one hour of original news and current affairs programming it will invest further in original home content.
And it won't be of the cheap-as-chips Tallafornia variety. "Oh no," the sedate Ulsterman says emphatically.
"The best way of looking at it is the programming that we do in the North, and that doesn't tend to be Dublin housewives' style."
Will UTV staples such as farming reality show Rare Breeds and Nationwide type programme Lesser Spotted Ulster help it win an epic ratings bloodbath this side of the Border?
"UTV are cash rich enough to do this, but whether their owners will back it is another question," says Bill Kinlay, of media buyer Mindshare, regarding big potential investment in programming making.
Major stakeholders are FL Partners, the equity group that sold luxury yacht maker Sunseeker for €168m and Shane Rehill's TVC Holdings.
The whole venture seems risky.
Sky News Ireland launched into an economy and ad revenue market that was booming. It survived two years. Channel 6 resorted to screening porn to survive before being absorbed by TV3. City Channel folded.
But the UTV move – subject still to a broadcasting authority approval – is the least of an embattled TV advertising industry's woes.
Audience for juggernaut soaps has plummeted in the past five years by 20 per cent. And the whole 'housekeeper' advertising audience category is dwindling in value as FMCG (branded household goods) come under pressure from own brands and cash-conscious householders.
But adversity is also opportunity for TV3.
It has talked with some of the most distinguished names in programme making about creating its own new soap opera, including the more youth-oriented Hollyoaks maker Lime Pictures.
"Now we have a sum that people here could not imagine going into programming," says TV3 boss David McRedmond. "For the first time we have serious money available in our own productions and acquisitions."
"It's a huge body blow for TV3 but not a catastrophe, but [TV3 shareholder] Doughty Hanson might think differently," says the head of Ireland's largest advertising buying group, Alan Cox, of Core Media.
"It will survive this and come through. They have shown they can do quality programmes. They absolutely must put it into Irish programming," Mr Cox says.
"If they just go out to try to find a 'me too' Corrie, it will not be received well by the industry.
"Too much of their schedule was middle-of-the-road housekeeper audience targeted. It needs to branch out and diversify to reach younger people."
Media buyer bosses say it should mine a richer ad-demographic seam: more professionals and young males, through ads for mobile phone companies, alcohol, cars, technology, travel companies and luxury goods.
This would also be a starkly different direction to the one UTV Ireland appears to be set on.
"News outside of RTE is not a big audience puller," says Mr Cox. "I don't see why TV3 should up the ante on that, with Vincent Browne.
"I think TV3 definitely need to look in drama space.
"There's a real opportunity here, as long they have the backing of Doughty Hanson."
It's well known that UTV looked very closely indeed at buying TV3, getting to the due diligence stage but didn't bite.
UTV owners TVC or FL Partners may or may not be involved in bidding on the channel's circa €50m Anglo loans – currently in second-round-bidder-sale stage as part of the IBRC sell-off.
TV3 has been progressive with its digital element. It recently launched ShowPal, its companion to the thriving trend of 'second screening' – watching TV while tweeting or otherwise engaging on social media with others via smartphone or tablet.
It has also broken its ITV dependency elsewhere, and has got into major productions such as the Great Irish Bake Off.
"We've built the best studio in this island and in there right now filming Keith Barry, Brainhacker – that will sell in 100 countries. The set is extraordinary," says Mr McRedmond.
There are two other major co-productions in train including a quiz show called The Lie, and four home-grown documentary series showing this month – a two-parter on Sinn Fein and the fly-on-the-wall show At Home with The Healey Raes.
"This could be a very lucrative opportunity if they get the content right," says Mr Kinlay.
Managing director of RTE TV Glen Killane sees good and bad in the UTV move, confirming that the State broadcaster is forecasting a break-even this year after a €65m deficit last year.
"We welcome UTV making programmes and employing people, but we don't want to see TV3 damaged; RTE wants a strong TV3 and a strong indigenous broadcasting sector," Mr Killane says.
He raises the spectre of the real, serious creeping threat to Irish advertising.
"There is actually no longer any such thing as an 'Irish' TV advertising market." There are 100 or more channels on UPC waiting to opt out, with British channels such as Sky Living tailoring their advertising for an Irish audience and selling advertising at a massive discount compared with home broadcasters – with no VAT or other return to the Irish Exchequer.
"They are carving out chunks of revenue and not putting anything in, taking €30m and rising out of the Irish market, we estimate."
That said, there are early signs that the TV advertising market may be in the very early stages of recovery after a spectacularly dreadful five years that slashed revenues almost in half.
"We expect modest growth next year of between 1 and 2 per cent – the first since 2007," Mr Cox predicts.
The plight of TV advertising at RTE reflects the carnage that took place post-boom in the sector, with a drop of 50 per cent since 2007
RTE TV Ad Revenue