Opinion

3d-logoSomething I’ve noticed this year is the endless tears over the loss of Campbell Live and now 3D. “We’re losing quality journalism”, we’re told.

Quality news and current affairs, and journalism, has become like the ballet, or symphony, or orchestra. Adored by a passionate few but for the rest of us, we’d be unlikely to ever attend. At the same time, however, we wouldn’t be too happy to see them gone as we can acknowledge their cultural significance.

Since the beginning of 2014, it was no secret to anyone that both 3D and Campbell Live were struggling with their audiences. Campbell Live, against a rejuvenated Seven Sharp spent all of last year taking steps backward after a significantly good year in 2013. Every week, the story that was being painted was looking bleaker and bleaker. Come 2015, the show was given a lick of paint in the form of new branding but this was hardly the solution to what had been an obvious problem. Continue reading »

Yesterday, Mediaworks sent through some data regarding the performance of When Hilary Met Oprah. As soon as I read that they had used cume as their measure, I cringed. Only a couple of months ago I pointed out that using cume as a measure for TV3’s first season of Masterchef New Zealand was a bad idea.

There were a number of problems with the data and rather than provide my own commentary around what Mediaworks had sent me, I decided to publish them wholesale and give you, the readers, a chance to mull over the spin.

Before we get into it, for those who don’t already know, cume is short for cumulative audience, or the total number of people who watch a part of a program. It can be useful for broadcast events like a telethon or the Rugby World Cup, for example, and provides a total number of viewers who tuned in for a part of it. Other than that, it is a vanity measurement. Continue reading »

With a media report that the New Zealand rights for the English Premier League (EPL) have changed hands we speculate about the future landscape for Seasons 2016-2019 and the implications for broadcasters and viewers alike.

And with French Top14 Rugby seemingly not offered by Lightbox Sports this year we muse on whether the possible loss of EPL might result in the demise of Lightbox Sports for consumers.

The “Incumbent” is ousted again

In 2013 sports rights wholesaler MP & Silva, who bid highest for the rights to distribute EPL in New Zealand, onsold the rights to newcomer Coliseum Sports Media for the 2013-2016 seasons.  Earlier this month MediaBusinessAsia reported that BeIN Sports, the sports television subsidiary of Al Jazeera Media Network , has acquired the rights for the 2016-2019 seasons.

The report from MediaBusinessAsia hasn’t been verified elsewhere so at this stage we can only speculate on the implications and possible outcomes for EPL fans in New Zealand.

Pricing

MediaBusinessAsia reports that the price paid for the 2016-19 period is less than that of the previous 2013-16 package.  At less than USD10m this sounds attractive given the premium paid around the world has generally been 100% over the last period.  Australia, for example, has a price paid of USD$140m by Optus compared to the incumbent Foxtel’s $50m previously.  Other publications believe that Optus could be paying around USD45m annually or AUD50m.  Either way it is a significant increase on the previous rights.

Print

On face value NZ looks to have got off lightly however one must consider the currency effect.  In mid 2013 when the Coliseum deal was announced the NZD was trading around 0.8000 suggesting NZ rights were about NZD4.20m per annum.  However it is difficult to believe that the rights wholesaler MP & Silva onsold the rights with no margin (or a loss) so we could assume that $4.2m per annum is a low watermark.

Rights for 2016-2019 appear to be less than $10m so will argue USD9m or USD3m per annum.  However at currency rates of 0.6600 this translates to NZD4.5m per annum (assuming zero forward points for hedging) – a 7% lift on previous period.  Again this assumes that the new rights holder is willing to onsell for no margin and this again would be a low watermark for 2016-19.

Assuming no other price changes for the next year it would appear that NZ subscribers could expect a 7% (or more) price increase into coming years.  Given the feedback witnessed when the Basic $149 season package was eliminated from the market in favour of the current $199 season price it would be fair to say that another price increase would not be favorably received.

Route to Market

Of critical importance to current EPL fans in New Zealand (and indeed all those overseas Lightbox Sports fans using DNS services to subscribe to PremierLeaguePass in New Zealand rather than paying full price in their home market) is how the games are broadcast in this market.

For a wholesaler there are a limited number of parties that are likely purchasers.  However with BeIN Sports acquiring the rights there is a chance that instead of sale of rights to a local broadcaster that BeIn Sports looks to package a channel itself for broadcast in New Zealand.  And given the track record of BeIN Sport around the world this is a real and distinct possibility.

Market Economics

Lightbox Sports, as the incumbent, has good information on the market potential and price sensitivity of EPL subscribers in New Zealand.  It may or may not have an idea on the domestic vs international subscribers in its base and how sticky those subscribers may be given EPL pricing in other markets.  As such its price payable is dependent on the number of subscribers it has or could grow. At $4.2m pa with no marketing or other costs (eg CDN pricing to NeuLion) it would have needed 21,000 subscribers to cover the cost of content previously.

BeIn Sports could sell the rights to Sky Television similar to its deal announced in August to sell selected games from the Champions League, Europa League and Football Cup.  Sky’s economics would be based on potential viewing audience (previously just 1.5% of viewers watched the EPL on Sky) and its ability to reattract lost subscribers.

Finally BeIN could launch an ESPN-style football channel packaging its existing football rights plus EPL.  Or BeIN could launch a streaming service in NZ similar to Lightbox Sports if the pricing offered under the other scenarios proves insufficient.

Wholesale to streaming service:  

Pricing $4.5m pa

plus margin (say 10%):

 

Number of subscribers required to breakeven at $200/pa excluding marketing/broadcast:  c25,000
Wholesale to broadcaster:  

Pricing $4.5m pa

plus margin (say 10%)

 

Cost amortised over 600,000 sports subscribers:  $8.25 pa (or 70c per month)
Launch of BeIN Sports channel  

Pricing $4.5m pa

plus 500k pa transponder lease (assuming inability to leverage old Setanta Sports signal from Australia)

plus additional football rights costs

plus margin.

Price required to sell to Sky over 600,000 sports subscribers:

Dependent on value of other football rights amortised over base.

 

Lightbox Sports already shedding sports rights?

Touted in late 2014 by Coliseum’s CEO as the “Premier League of rugby, played in stadiums that are full every week” and offered to subscribers for a paltry $5/month or $49 for a season it appears that the appetite for French rugby has diminished.  With the season starting in August and already some nine weeks past the opportunity to resubscribe to Top14 appears unavailable.

 

Lightbox Sports has not been shy in advertising its aspirations to continue to acquire and stream sporting content but it appears that with one offering already gone and another possibly under threat the first significant foray into the third age of television may already be at risk.  While there are many months between now and the commencement of the 2016/17 season for deals to be forged the loss of the highly publicised EPL would be a bodyblow for Lightbox Sports.

 


 

Who is BeIn Sports?

By way of background the Al Jazeera Media Network sports subsidiary BeIn Sports acquired Setanta Sports Australia and holds a number of rights for different football competitions around the world.  It has both broadcast channels in many countries but has also streaming operations where best suited or where obtaining broadcast access has proved problematic.

In Australia it is available on Foxtel, FetchTV and via streaming with BeIN Sports Connect.

Two night’s ago I watched The Block – Villa Wars on TV3 and last night I braved Masterchef Australia on TV ONE – sadly my other half keeps clogging up the planner with X Factor UK … and all of these occurrences have prompted me to expand some thoughts with this post.

Around 20 years ago the TV landscape changed both on screen and behind the scenes, as a viewer you don’t really need to know how or why but I will share. Cameras went from being analogue to digital and broadcasters around the globe started to accept programmes for broadcast shot on $5000 cameras (previously the average price of a broadcast camera was in excess of $50K).

Editing became non-linear – basically meaning that a standard ‘tape to tape’ edit suite costing a facility at the very least a quarter of a million dollars and at the very least a hirer $250 per hour – could now be replaced by a powerful computer costing around $20K. Continue reading »

Much of the criticism and complaints about Sky is about pricing and whether it is value for money.  In the recent Lightbox survey of those that cancelled in the last 12 months some 40% cited it was too expensive.  And of those that altered their package 68% said they did so because it was too expensive.

So how expensive is Sky? 

We know from Sky’s annual reports that the average revenue per user (ARPU) is almost $80 per month.  [NOTE: the average household that chooses to “cut the cord” is only going to save $80/month – not claimed $100-$150/month or 25% to 87% more than the average subscriber pays as Lightbox would have you believe, but dont let the facts get in the way of a good story].    At $80/month that translates to $2.63 per household per day.

We also know that the average Sky viewer watches about 1 hour of Sky programming per day. http://www.throng.co.nz/2015/11/where-have-all…e-re-revisited/  And that the average household size is 2.7 people [NZ Census 2013] hence the average household consumes 2.7 hours of Sky programming per day.  So we’d conclude that the cost per viewing hour is ~$1.00/day.

dollarsperhour

The economist would define expensive as the point where the utility derived from consuming the good is exceeded by the cost of the good.  In other words there are a number of households where the cost of entertainment at $1.00/hour/person is too high.  Few people determine this explicitly but we all undertake the same process implicitly.  The question is where does perception (of value) meet reality (of value).

 

Is the Cost Per Viewing Hour high?

Even today you could watch the latest blockbuster at the movies for $18.50 with a CPVH of $7.80 (average length of theatrical release is 142 minutes) and feel your viewing experience was value for money.  Or the same blockbuster in Gold Class or equivalent for $35.00 with a CPVH of $14.80 and feel your viewing experience was value for money.  Others might find it expensive even at $7.80/hour.

Wired magazine calculated CPVH in 1995.  Back then people tended to pay, on average, USD2/hour regardless of the type of media consumed.

wiredtwodollarshourSm

The former editor of Wired, Kevin Kelly, updated in 2010 (and also inflation adjusted the 1994 data) with indications that on average households paid USD2.50/hour. Cable TV was about USD2/hour or NZD3/hour (~$1/hour per person).

costperhour

One could argue for/against converting from USD to NZD but given content costs for broadcasters are predominately USD, equipment costs are USD, and even new media makes an exchange rate adjustment for supplying its content to New Zealand vis a vis the United States.  [Note that watching a movie in the US is ~$8.00 compared to NZ’s $18.50].  For arguments sakes one could use the last 15 year average exchange rate of 0.66 [RBNZ Table B1].

Inflation adjustment for cable CPVH from 2010 to today would be USD2.18/hour or NZD3.30/hour (or a little over $1/hour/person).

 

Comparative Cost Per Viewing Hour in New Zealand

There is a clear distinction between the pay-per-view services and the subscription streaming services.  And in the absence of average viewing data for New Zealand for the streaming services we are left with the pay-per-view operators.

Content falls into three broad categories – new release movies, recent release and back catalogue movies and television shows.

New releases are available on a PPV basis on Quickflix, Google and iTunes (and formerly ezyflix).  Prices range from $4.99 to $7.99.  Given an average movie length of 142 mins this translates to a CPVH of between $2.11 and $3.38.

Back catalogue movies or recent releases are more akin to Sky’s Movie package.  Prices range from $2.99 to $6.99 and CVPH ranges from $1.26 to $2.95.

Television shows on a PPV basis range from $2.99 to $3.99.  And for a 41-45 minute episode have a high CPVH of $3.99 – $5.32.  One could speculate that such a high CVPH explains the very low uptake of services such as Quickflix and Ezyflix relative to the streaming services of Netflix & Lightbox or the advertising funded streaming services of TVNZ OnDemand and 3Now.

 

Price range Duration Cost Per Viewing Hour
New Release Movies $4.99 – $7.99 Average 142 mins $2.11 – $3.38
Recent Release Movies $2.99 – $6.99 Average 142 mins $1.26 – $2.95
TV Episodes $2.99 – $3.99 Average 142 mins $3.99 – $5.32

 

Comparing NZ Cost-Per-Viewing Hour to US Cost-Per-Viewing Hour

Statistics on CPVH are available from a number of sources.  Deutsche Bank published to clients in 2014.  Basic cable in the US is 25c per viewing hour (NZ 37 cents) with premium cable at US 35 cents per hour (NZ 53 cents).

deutschePPVH

Similarly other commentators (David Justus at ContentCurrents.com) have shown US PayTV to cost $0.61/hour per household or 0.23cents per hour per user.

screen-shot-2013-02-08-at-9-55-30-am

Unfortunately it appears that these statistics are based on watching all television on a cable platform and include retransmission of the networks and their affiliates.    It may be that the 233 minutes of watching on the Sky platform (Sky channels plus FTA on Sky) is the equivalent metric of the 5 hours per day of television watching in the US.  If this were the case then the apples for apples case is NZD0.25/hour/user for watching television on Sky.  However it would be unpalatable for a New Zealand consumer to include paying to watch FTA on Sky as part of the subscription paid to Sky given the free alternative on Freeview.

In the absence of data that excludes viewing of retransmitted channels in the US it is hard to get an accurate comparative figure for the cost of watching pay content on a pay platform.

Conclusion

So one could argue, despite the vitriol and narrative expressed by some commentators (and even competitors) the cost of Sky at ~$1.00/hour seems reasonable value compared to PPV alternatives.

The average Sky viewer watching Sky programming pays $1.00/hour – and it’s up to the individual (or household) to determine whether that has value.

 

In the analysis presented to date we have looked at where the viewers have gone across the broadcasters. In essence the losses highlighted in earlier graphs presented on Throng didnt take into account the “plus 1” channels and overemphasised the channel share loss by TV2. However the summary was FTA loss of share to paytv in terms of the number of viewing eyeballs.

The general thrust of questions or comments were that people are migrating away from television towards an online (or even time shifted) world. ie TV2 or TV3 losses were younger viewers switching off. Those statements were wrong. This analysis has been, to date, a channel share analysis. One channels loss of share must be made up for by another(s) channels share gains.

In this next stage we look at measured viewership over the last 5 years.   And that leads to the first and largest CAVEAT in this section. The latest data covers 2014 and as such includes some post-launch Lightbox influence but is prior to Netflix’s official NZ entry and the most interesting aspect will be 2015. However the historic period in question makes for interesting reading.

Television viewership peaked in 2010 and 2011 with average daily minutes watching of 202 (3 hrs 22 minutes per day). It has started to decline since with a CAGR of 3% per annum.

Minutes

There is clear distinction between viewers aged over 40, whose television consumption has remained largely unchanged over the last 5 years, and those under 40, whose television consumption is declining at a rate of 5.7% per annum.

40plus

 

Viewership by platform

Previous analysis showed that Sky has been taking share from FTA broadcasters over the last 5 years. And coupled with the notion that Sky households are likely to be more predisposed to viewing television (volume of channels covering a wide range of interests and demographics and the direct funding relationship vs indirect of FTA broadcasting) and younger generations have been spending less time watching it seems hardly surprising that viewership in Sky households has been relatively flat.

platform

Further granularity on viewing minutes

Given the channel share data and the average time spent viewing data we can drill further to understand how television audiences are, on average, spending their time.

minutes

Of largest concern is the apparent decline in the viewership on the FTA channels. Couple the channel share decline with overall FTA viewership decline and we can see some stark examples – eg daily viewership on TV3 has fallen from 30 minutes per day in 2010 to almost 20 minutes in 2014.  Thats an annual decline of more than 7.5% pa over the observed period. Both TVOne and TV2 have seen annual declines of c4% pa. But the largest decline on Prime of 11% pa from 13 minutes per day to 8 minutes per day despite increased investment in programming begs the question on the financial viability (not strategic viability) of the channel.

The FTA broadcasters will all highlight the increased usage on their OnDemand products however this is of cold comfort to advertisers and their clients whom are unable to reach those viewers given the very nature of low advertising inventory in the OnDemand programmes. Once again we are witnessing the reinforcement of the notion that content, like news on websites, is free to watch on the internet.  Monetising content on the internet is a ship that may well have sailed for the FTA broadcasters.

As more and more and more viewers shift online for media consumption it feels like the FTA fraternity is in a race to the bottom of the revenue and profitability cliff.

 

Some Interesting Observations

If we break out the Sky vs Non-Sky viewing in the households with Sky we obtain a more interesting picture on FTA viewing in general. Despite the overall decline in FTA viewing minutes it has been almost entirely driven by the non-Sky households. Those households with Sky continue to watch a similar level of FTA television to that at the start of the decade.  So the decline in FTA is being driven by those households that dont currently pay to watch television and hence see little value in content.

FTAbyplatform

Conclusion

Much speculation has been made by Throng about the trends of cord cutting and the impending demise of Sky as a platform in the third revolution of television, as some commentators are choosing to call it. At present the winds of change for the directly funded platforms have yet to start blowing. The subscription based revenues, rather than advertising insulate both revenue and profitability significantly when compared to the indirectly funded players.

Some rudimentary analysis of viewership behaviour in New Zealand suggests that those broadcasters reliant on indirect funding (ie advertising) are already experiencing trends that could have a significant impact on their strategic and operational plans.  How long will it be before TVNZ and Mediaworks feel the need to introduce a Hulu, HuluPlus or paid streaming service for current and back catalogue content?

As consumers we may find that the golden age of experiencing free quality content for entertainment rapidly becomes a historical notion if the FTA broadcasters of today experience the same revenue dollar declines that are currently occuring for viewership.

Previously we summarised the publication of Throngs research into audience share across the FTA broadcasters and observed a combined 12 point decline in the audiences of TV2 and TV3.

 

We surmised that this audience shift must be to the “Plus 1” channels, the  other Freeview channels or to the Sky platform.  In this article we hope to add further granularity to the discussion.

 

With thanks to the fine people at The Nielsen Company we can examine not only where channel share is going, we can also account for the “Plus 1”channels to get a better understanding of viewership.

 

channel share
As presented earlier TVOne has had relatively flat audience share over the last 5 years, and that TV3 has experienced a recent decline however the audience share of TV2 has been relatively flat when taking into account the TV2+1 channel.  Recall that TVOne+1 launched in mid 2012 and TV2+1 launched in 3rd quarter 2013.

In contrast to the FTA channels Sky has grown is audience share over the time period.  Its viewership, however, can be heavily influenced by sporting tournaments or events such as the Olympics (2012), Commonwealth Games (2010,2014), and FIFA World Cups (2010, 2014).

 

Plenty of comment has been made about the shift of viewership away from television to streaming and other mechanisms.  The prior analysis has been about where the television audience is currently placing its eyeballs and the level of consumption is an area to be further explored.

Over the weekend NFL, in association with Yahoo, provided free streaming of an NFL game.  Admittedly it was the Buffalo Bills (season record 3-3) against the Jackonsville Jaguars (1-5) playing in London at 9:30am ET on a Sunday morning but it was live and free to a global audience.

It was pronounced a success by the NFL with 15.2 million unique users viewing the game with around 5 million of those from outside the US.  However this means that only the same number of US viewers watched the game as they did for the an earlier season Sunday morning game shown on broadcast television.  And that US viewership of almost 10 million for the live stream compares with regular daytime and primetime audiences of between 10 million and 25 million for games.

Over 460 million minutes of video was consumed. An impressive number until put into context.  Thats only slightly more than 30 minutes of video per unique user in a game that runs 195 minutes.  So on average viewers saw less than one playing quarter of the game.  And recall that this game was made available for free to all viewers anywhere in the world.  Should an organisation attempt to monetise this in a pay-per-view basis you could bet your bottom dollar that audiences and viewership could only go down.

CNN’s Money confirmed an average viewership of 2.36m viewers per minute.  That is paltry compared to the primetime audiences which average between that 10 million to 20 million viewers per minute.  Given the nature of the NFL and its ability to place advertising during breaks in play its hard to imagine that a global brand wouldnt try to use such breaks for promotion – but with an audience of only 2.36 million in any given minute its hard to see reach and value for the advertising community.

In its home market its difficult to see internet streaming being of sufficient value to introduce another bidder for highly-sought-after rights in competition to the well-sliced broadcasting pie.  At least for the forseeable future.

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Tears for Duncan

A number of people on twitter were upset yesterday that I had suggested the Duncan Garner should be replaced on Story. Damian Christie went as far as suggesting it was “the same gross thing” that the NZ Herald did to Seven Sharp when it first launched, and something he wrote about at the time around the bullying of Charlotte Dawson and her subsequent suicide.  History shows us, however, that Christie was out of touch and that the Herald, for a change, were onto something.


Continue reading »

duncan_garner_1200I made it quite clear before Story went to air that Duncan Garner was the wrong person to front TV3’s new current affairs program. After a month at the helm, and ratings that are doing as badly as Campbell Live was before Mediaworks put the program into review, it is clear that more changes need to be made.

Story hasn’t warmed to viewers. Part of that problem is Garner. He is not a natural when it comes to fronting these types of shows and by now, those making these decisions should have figured that out. Much of what Garner does comes across as forced, unnatural and disingenuous. His banter, like many in the media these days, fails the authenticity test. Even though it has only been a month, it’s time for him to go. Continue reading »