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British broadcasters edge ahead of US counterparts


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British broadcasters edge ahead of US counterparts

Claire Enders, founder of Enders Analysis, at the event

Source: FT Digital Summit

Industry observers gathering at the FT Digital Media2016 summit in London agreed that U.K.broadcasters have held up well against disruptive newcomers in comparison totheir U.S. counterparts.

A year ago, Wall Street woke up to the full impact ofcord-cutting on traditional broadcasters' business models. As a result,investors grew increasingly wary over the pace of American consumers migratingfrom pay TV packages towards cheaper "skinny" bundles and onlinestreaming services.

This picture, however, appears to look quite different inBritain, where broadcasters have arguably had better success in curbing thecord-cutting trend, particularly among younger consumers.

For a start, cord-cutting numbers are lower in the U.K. bycomparison. A recent studyfrom Nielsen showed that U.K. viewers are only half as likely to cut the cordin favor of online services, compared to the global average.

"The increasing popularity of online-only TV serviceswill continue to put pressure on the likes of and [-owned] , but a wholesalereplacement of these traditional subscription players is unlikely,"Nielsen's European digital lead, Terrie Brennan, said.

For most U.K. viewers, online VOD and traditionalsubscription services are complementary, and "cord shaving" is morelikely: consumers opting for slimmer subscription packages from traditionalplayers, rather than cancelling them outright.

It is true that broadcasters in Britain face lessaggressive, home-grown competition from digital disruptors such as , and -owned in the U.S. market.

Claire Enders, founder of research firm Enders Analysis,told delegates at the event that, crucially, broadcasters in the U.K. havestolen a march in their home market by ushering in more aggressive advancestoward online and catch-up TV models.

Enders argued that traditional U.S. pay TV broadcasterslargely "came to roost on YouTube" — particularly those that relied on shortform content consumed primarily by 16-24 year olds such as 's MTV. She added that thiswidespread reliance on short form content was particularly damaging for manyU.S. broadcasters since, more than a decade after -owned YouTube was founded,short-form content is "not going to hit any home runs."

Instead, online and catch-up viewing of longer-form contentin the U.K. has been an "extraordinary locus of revenue generation,"Enders said, adding that such new models have enabled U.K. broadcasters to reachnew audiences.

Enders also credited the high pace of technologicalinnovation to the competitive dynamics of the British pay TV marketplace. Thereis competition from Sky, all of the existing pay TV establishments and the"many hour-long options on [the BBC's] iPlayer without any adverts," she insisted.

Caroline Thomson, chair at Digital UK, said in agreementthat a competitive marketplace has kept traditional media players in the U.K.afloat.

"For decades, Britain has had this extraordinarilysuccessful broadcasting ecology, which initially started with this sort ofgenius that the BBC and ITV, and [later] Channel 4, competed for audiences butnot revenues … and then the market was open enough to let Sky [in]," sheexplained.

Sky in particular has been a significant disruptor that"made everyone sit up and pay attention," she added.

As a result, British broadcasters' efforts appear to bepaying off. Figures from a 2015 reportshow that approximately 97% of U.K. population view, listen to, or read BBCcontent every week. Additionally, Channel 4's 13.5 million registered viewersinclude more thanhalf of all 16-24 year olds in the country. Meanwhile, Sky closedits 2015 financial year with 506,000 new customers: its highest organiccustomer growth in more than a decade.

Also speaking at the FT Digital Summit, Gary Davey, Sky'smanaging director of content, said the group owed a significant portion of itssuccess to its huge emphasis on delivering "choice and convenience"to customers seeking high quality content.

Panel at FT Digital Summit
Source: FT Digital Summit

A showcase in flexible viewing, is the most recent addition toSky's core products and the company's answer to the threat of cord-cutting. Theplatform, aimed at the premium end of the market, offers customers the abilityto take content recordings on the go, as well as the option to pause viewing inone room and continue in another.

Also making an appearance at the event, David Abraham, chiefexecutive of the British public service broadcaster Channel 4, argued thattechnical innovation in the U.K.'s broadcasting industry is ahead of NorthAmerica, as online offerings have not compromised linear viewing in Britain.Adaptation is the key.

"We have been able to adapt our model and offer ourproposition to advertisers and to consumers which complements the other thingsthat are on offer, rather than facing a situation where those new services arefundamentally cannibalistic to what we are doing," Abraham told theaudience.

He stressed that All 4, Channel 4's online and on-demandproposition that combines catch-up, live streaming and exclusive content hasbenefited greatly from its mobile-first strategy and investment in proprietarydata technology, enabling the company to offer both linear and non-linearhighly behaviorally targeted advertising.

However, panelists discussed whether advertising on theother side of the pond ought to be pared-down. Insight from Enders Analysispresented at the summit showed that U.K. TV viewers are shown seven minutes ofTV advertising each hour, compared to 20 minutes in the U.S.

The intensity of advertising in the U.S. is fundamentally"inhibitive of enjoying a narrative form of any kind," Enders said,leading to a mass exodus, particularly among younger viewers, towardnon-advertising-based models.

Nevertheless, Thomson was quick to point out that Americanbrainpower is largely behind the industry's golden age in television, enjoyedby hundreds of millions of viewers around the world.

"It's very fashionable in Britain to denigrate Americanprogramming but … American television, particularly in scripted drama at itsbest, is still the best in the world," she concluded.