CEOs of ITV, Channel 4 and Sky open up about their futures
In a wide-ranging interview at Mediatel's Future TV Advertising Forum, television bosses outlined the challenges and opportunities they face - and their strategies for growth
The CEOs of the UK's three largest commercial broadcasters have - for the first time - come together for one interview as they continue to collaborate on strategic issues.
"We're no longer enemies," said Channel 4 CEO Alex Mahon of fellow bosses Dame Carolyn McCall, the CEO of ITV, and Stephen van Rooyen, the CEO of Sky, as the broadcasters used the Future TV Advertising Forum to promote the "power" of long-form video content.
The businesses, traditionally fierce rivals until the market saw powerful new players emerge, have already partnered on a number of projects - from a joint media festival to woo agency planners, to cross-platform content deals and shared research papers.
However, Wednesday's interview tested the limits of their collaboration, giving some indication of the direction TV is heading in areas such as tech innovation and business strategy.
All three broadcasters are making adtech investments that will make TV more 'addressable' with new ad targeting capabilities. These range from Sky's AdSmart offering, which can tailor ads at the household level and is useful at attracting new advertisers to TV, to Channel 4 rolling out AI powered, contextual advertising that is able to place a brand’s ads next to relevant scenes in a linear TV show.
However, despite Sky's van Rooyen telling the audience that Sky AdSmart had grown its revenues by 30% this year, McCall said ITV - despite some industry speculation - is not yet interested in using Sky's addressable tech.
"If it was easy for us to collaborate on AdSmart, we'd do it," she said. "But it's not, because we are an advertising funded business with 3,000 client relationships."
McCall said using the tech would also mean giving up revenue on tech costs and commission. "It does not make much strategic sense," she said. "I believe ITV has to do it for itself."
Interviewer Dominic Mills, a journalist and Mediatel columnist, suggested this made ITV a "laggard", but McCall stressed that ITV was part of "structural change" with a strong proposition in digital.
McCall also said ITV had been discussing targeted advertising for a long time, and that the company's strategic review had investigated areas the business felt it had not yet "nailed". Explored within that review were ways ITV should innovate and be "more client responsive" and creative, with targeted advertising "a big part" of delivering that.
However, noting that TV's mass reach makes it the ultimate brand building medium, McCall said targeted advertising has been "hyped". It works well for some advertisers, she said, "but for others it is just not going to be very effective at all."
Yet, it was confirmed that ITV will have its own adtech stack in time - and there are some targeting capabilities on ITV Hub already.
However, for Sky, addressable is luring new advertisers to TV - both big brands with niche audiences, and smaller or regional businesses. This helps TV to actually step on the toes of Facebook, which makes 60% - 70% of its ad revenue from SMEs.
"For us, addressable has been a success in an otherwise up and down TV market," said van Rooyen. "It's been pretty resilient over time [and is] the bit of our business that's been growing - by almost 30% this year."
Meanwhile, Channel 4's Mahon - disparaging the poor viewability rates of some online platforms - said advertisers want the quality, reach and scale of TV, but with more data and addressable capabilities.
"We're working to deliver that," she said, while highlighting impressive ad recall rates for Channel 4's new AI tech.
Netflix and Amazon
Asked how subscription VOD services such as Amazon and Netflix are impacting their businesses, all three bosses were reasonably relaxed.
"[SVOD] is an absolute threat," said Mahon, "but sometimes it's a new business opportunity."
What is important, she said, is that people are consuming video content. The growth of Netflix and Amazon in the UK is "training audiences to watch more and more video - so it's a balance. Sometimes that's a threat. Sometimes that's an opportunity to co-produce something."
Asked if there was any space left in the UK market to launch a new subscription VOD service, both McCall and Mahon said yes.
"There's actually a gap in the market for original British content," said McCall, while Mahon said Channel 4 would happily look at SVOD opportunities, but warned free-to-air content was essential for giving advertisers the "oxygen" they needed.
In September, Sky and Netflix announced a partnership to create the UK's largest on-demand TV service as part of a new premium subscription package.
Asked why Sky should partner with a rival subscription platform, van Rooyen said it was what his customers wanted.
"They had already chosen to subscribe to Netflix, whether we liked it or not," he said. "And our research showed our customers want it [as part of Sky's package]."
Van Rooyen added that operating in the video market was not a zero sum game. "All these arguments seem to be hinged on the fact that there's a massive loser and a massive winner," he said. "That is not what happens when people have four-and-a-half to five hours a day to fill watching video."
Despite killing off the idea in the past - in the guise of Project Kangaroo - the communications regulator, Ofcom, said last week that in the face of new competition from American companies, it urges UK broadcasters to unite to create a 'British Netflix'.
"There's total agreement that if you put Channel 4, BBC and ITV together in some way, shape or form, that would be a potent offering for British consumers," said McCall about the idea of a single VOD platform.
"We are very different organisations [making it a challenge] but I think there is something there. It's encouraging that the regulator - who in the past has stopped progress - is now ready to encourage this to happen."
Although Sky, already operating a subscription model, is not keen on the idea, Mahon said it was a "promising" concept.
Evolving business models
With different business models, the three broadcasters have each taken different approaches to growth. Channel 4 is a public service broadcaster with an ad-funded model, Sky maintains a subscriber business, while ITV is entirely commercial and also largely ad-funded.
Yet all three, as van Rooyen said, have diversified revenue streams to ensure there is no single point of failure.
To evolve their respective business models further, Channel 4 will continue to invest in other businesses, established and new, via its commercial growth and indy growth funds.
ITV, meanwhile, is growing its studio business as well as eyeing up direct-to-consumer ventures to make the most of "super fans" willing to pay for the content they love.
Sky, maintaining a healthy subscriber business, is also now selling original productions globally as well as developing a newer, "transactional" business through SkyStore, selling movies straight from the cinema.
However, where there is a mutual benefit, all three businesses said the spirit of collaboration will continue.
"We will co-operate whenever we believe it will enhance our proposition," said McCall. "And we will certainly co-operate on the power of TV, because that will help us grow the cake."
The next challenge then is Brexit - which McCall warned would likely see advertisers look to the short-term gains from online 'activation' advertising, when they need to invest in longer-term brand building, which is traditionally TV's main selling point.
ITV has already seen ad revenues slip because of economic uncertainty, with a disappointing dip in Q4 2018 after a solid World Cup summer.
"One of my greatest concerns over the next few years is over Brexit - and that advertisers don't continue to spend when they most need to...they need their brands to be very visible and we all agree that TV is the most effective place to advertise."