Please adjust your set for a digital revolution

Brent Impey says CanWest has some

When people turn on their televisions next year, they will have more choice than ever - thanks to the introduction of digital free-to-air TV.

While more choice, crystal-clear reception and the possibility of more interactivity may be good news for viewers, it presents challenges for broadcasters.

In the words of TV veteran Robert Boyd-Bell: "It frees you from the straitjacket of traditional broadcasting - what it doesn't do instantly is find new audiences and new money, and that's the big problem."

Up to 10 new channels will mean increased programming costs for companies such as state-owned TVNZ and publicly listed CanWest MediaWorks at a time when the advertising market is softening.

The additional content, however, is "make or break" for the success of the service, says a Government-commissioned, independent study released last month, because viewers will need an incentive to part with about $200 for the set-top box needed to make the switch to digital TV.

The study, by global management consultancy Spectrum Strategy Consultants, reasons that New Zealand will be better served by digital free-to-air TV transmission.

It says that without the switch, free-to-air broadcasters' 80 per cent audience share could slip to 50 per cent, or lower, and be overtaken by technology-savvy pay-TV.

In the highly competitive free-to-air TV business, broadcasters' plans for the digital roll-out remain closely guarded.

"There's a lot of smoke and mirrors around the whole thing," says James Blackman, chief executive of regional broadcaster Triangle Television. "Even TV One and TV3 aren't prepared to disclose to each other what they are going to do yet."

Commentators expect TVNZ to have two channels in addition to TV One and TV2 at launch time.

CanWest - owner of TV3, C4 and RadioWorks - confirms plans to launch an additional channel next year and another in 2008.

Maori Television will initially stick to one channel but aims to launch more down the track.

A question mark remains around the involvement of Prime Television, which is in talks with the FreeView consortium after leaving it this year under its new owner, pay-TV company Sky Television.

FreeView consists of CanWest, Maori Television Service, TVNZ, Radio New Zealand and the New Zealand Racing Board, which have joined together to facilitate digital TV.

The digital terrestrial service, which is being developed in tandem with a digital satellite service, will initially have space to transmit up to 18 free-to-air channels, although only a small number are likely to be ready by the launch date next year.

Whoever is ultimately involved in digital TV, the new channels are likely to be cheap for the broadcasters to run and appeal to niche audiences, tapping into the much-hyped trend of audience fragmentation.

Specialist children's, education, health and well-being and history channels are among the possibilities.

Rumours of a non-commercial, public service-style broadcast are also on the grapevine, tipped by a memo to the TVNZ board from former chief executive Ian Fraser leaked last year, as is the development of a 24-hour news channel.

Broadcasters can reuse previously screened content and maximise viewers by replaying late-night shows during the day.

"You could broadcast Shortland Street five times a day, on the same day, so you had five different opportunities to watch it," says Boyd-Bell, a long-time TV producer and one of three founders of educational internet TV provider e-cast, which is considering buying into the digital free-to-air platform.

"You've got to start looking at where there are real niches and an obvious place to look is to see what's worked for Sky. What's worked for Sky is food. What's worked for Sky is music."

Content could also come from other new players or regional stations, such as Blackman's Triangle Television, wanting to avoid being overtaken by technological change.

The Government last month announced a package of $25 million over five years to assist FreeView broadcasters in setting up free-to-air digital TV and offered free access to digital frequencies during the transition to digital, which is estimated to be worth up to $10 million.

CanWest MediaWorks chief executive Brent Impey says finer details of commercial arrangements are still to be finalised but the company is not looking at increasing its operating costs significantly.

He is hopeful that the agreements will see technical and engineering costs remain steady and the company's only increased costs will be programme content.

Impey - who only lent his support to digital terrestrial development plans after the Government announced its support package - says the transition to digital is essential from a technological standpoint and also presents an opportunity to expand the business.

CanWest reserved enough space on the Optus D1 satellite, due to be launched this year, to run five channels but is in no rush to introduce new channels unless it will get a return from them.

Impey confirms plans to launch a new channel next year and a fourth in 2008, while retaining focus on high-rating TV3 and younger sibling C4.

Content for the new channels has not been decided - "we've got a few crazy ideas", says Impey - but it is likely to be niche and carefully targeted to harness advertising.

"It's about the market fragmenting, finding a niche that you can monetise," says Impey. "It will mean that we will be attacking other advertising budgets, different marketing budgets, PR budgets even."

Sponsorship and support from the company's developing online business are potential revenue streams.

"We need to be creative to look for as many other ways as we can to build a commercial base for those businesses," says Impey.

The company learned from its experience with C4's predecessor, TV4.

The channel was launched in a traditional, mainstream format, in almost direct competition with the other big channels, and ran with losses of about $6 million a year.

It was reformatted to a youth-focused channel, with a large amount of low-cost music content, and last year made a profit.

C4 attracts advertisers which might not advertise on TV3 and new targeted offerings would give similar opportunities.

"They add to the business - but they are adding to the business at the margins. It's not adding another mainstream TV channel," says Impey.

"We've seen during the boom time, up until last year, growth of advertising on niche channels, but as the market has tightened definitely the advertising is gravitating back to the main channels. C4 is going well because it's tightly targeted to a 15-to-29 audience."

Martin Gillman, chief executive of independent media buying agency Total Media, agrees C4 has identified a market highly attractive to certain advertisers.

As such, it wins a share of the national TV advertising expenditure, last year $666 million across all networks, according to Advertising Standards Authority figures.

"Mainstream media always struggle to attract a youth audience because their media consumption habits are different to an older audience," says Gillman. "C4 can be pretty good value for advertisers."

Media buying agency Mitchell & Partners general manager Trudy Dickinson says niche channels are ideal for some advertisers but most still want to reach mass markets.

TVNZ policy and planning special adviser William Earl says the broadcaster will announce its digital plans soon but would not be drawn further.

"TVNZ has been working on combinations of different approaches for a year and is close to making its decisions about what those services are and how they will be funded," says Earl. "What those services will actually be, specifically when they will be ready to launch, how much they might cost, what they might look and feel like and how they will be funded are all things that we keep quiet about."

Forsyth Barr analyst Rob Mercer is not convinced of the value of the Government's plan to set up a digital service when publicly listed pay-TV company Sky Television already provides it and alternatives, such as internet protocol TV, are on the way.

He says that now an alternative platform is on the way, it is time for free-to-air broadcasters to examine their strategies.

Offering niche channels could make TVNZ financially stronger, he says, rather than the broadcaster trying to defend its market dominance through mainstream offerings.

Lower-cost content watched by fewer viewers could make the company more profitable, particularly with increasingly fragmented audiences.

"I think there's sort of like an evolution of change happening here anyway - that the viewers, they want more choice. The traditional free-to-air broadcaster is trying to compete in what's a quite rapidly changing environment."

State-owned transmission company Broadcast Communications this month said it had signed its first agreement to reserve digital TV space for an independent broadcaster - a provider outside the FreeView group.

Managing director Geoff Hunt won't release details, saying the independent broadcaster wants them to remain confidential.

He says final negotiations for a similar agreement with a second independent provider are almost finalised and BCL is talking with more companies, including overseas ones wanting to start up here..

He will not disclose the cost of buying into the service - although it is understood to be $600,000 a year - and said that while $50 million to upgrade BCL's network would be passed on to broadcasters, it would occur over about 15 years and avoid the need to pay to replace ageing analogue transmitters.

The Government-commissioned report says making the transformation could cost broadcasters in terms of spectrum licences, marketing, programming and the added expense of transmitting in digital and analogue until the older system is eventually switched off in six to 10 years.


The new era at a glance

* FreeView is a marketing and administrative body for free-to-air digital TV, made up of members TVNZ, CanWest MediaWorks, Maori Television, the NZ Racing Board and Radio NZ.

* The consortium will share the platform and is working on technical aspects, including an electronic programme guide.

* Viewers will need a set-top box and will be able to choose either satellite transmission, which requires a satellite dish, or terrestrial transmission, which requires a UHF aerial.

* Satellite transmission will begin first - possibly by the end of the year - while land-based transmission will be gradually introduced from next year.

* The present analogue signal will be simulcast for six to 10 years, so viewers who do not make the switch immediately will still be able to watch television programmes.