Opinion

The TV industry ain’t out of the woods yet

Ahead of various media bigwigs and CEOs heading to Canberra tonight to push for the Turnbull government's proposed media reforms, Path 51's Simon Larcey argues the networks need to do far more than just wait for the legislative changes.

The television industry must have let out a collective sigh of relief with the news that onerous license fees are set to be scrapped. Network Ten in particular. It’s no secret the beleaguered business has been hanging on by a thread for some time, and now it looks like they will have an extra hundred million or so in their pocket, provided the government can get its progressive media reforms through the Senate.

Simon Larcey: “The proposed legislative changes are just the tip of the iceberg”

And it’s not only the license fees. The anticipated scrapping of the two-out-of-three rule could see News Corp make a play for Ten, which would also lead to a much-needed capital booster.

The demise of Ten over the past few years has been something of a surprise for someone who still sees enormous value in the television industry, and who believes a vibrant local industry needs multiple free-to-air operators to remain competitive. I’ve been watching the share price decline and was shocked to see its market cap go south of $100 million (and this just a few years after Lachlan Murdoch paid $128 million for just 9% of the company).

But will the proposed media reforms be the silver bullet Ten needs? Network boss Paul Anderson has promised the cash injection will be used to prop up local content, but what about the money that all the networks will lose from the wagering sector, which is facing major new advertising restrictions? Will increased cash and flexibility be enough to solve Ten’s financial woes? Will these changes allow all the networks to stem the flow of audiences to competitive platforms like Netflix?

The next steps are going to be critical.

There is still amazing value in television, particularly from a reach perspective. Where else can you reach hundreds of thousands or even millions of people at a time? Australians still love TV. But unless the networks invest more heavily into SVOD and quality local content, and until they can start attributing TV advertising to real business outcomes, then the media reforms simply won’t be enough. This applies to the TV industry as a whole. Everyone is facing similar headwinds, they are just felt more acutely at Ten.

If anything, these reforms are the tipping point. This is the biggest opportunity the industry has been given in a long time, but the networks must capitalise on this chance, or they will risk being further dominated by offshore competitors with seemingly endless content budgets and ever-growing audiences.

It’s easier said than done, but a lively television industry needs to make these changes now, or else risk going down the same path as print. It’s all about finances and flexibility, and a willingness to change. Sure, we have seen developments in the right direction, like Nine investing in Stan with Fairfax. But more change is needed. If players like Ten remain stagnant, then they risk going the way of the taxi industry, which refused to change in the face of the Uber onslaught and has been left crippled beyond repair in the process.

With a reduction in licensing fees, there are a few opportunities the networks should explore, like developing new digital formats that allow them to compete head-to-head with foreign VOD companies. Networks should also shift funding into a broader range of quality local content – yes, I know, reality TV is popular and cheaper to produce, but it doesn’t appeal to all advertisers, and good programming attracts good advertising. Investing in quality content means getting behind a range of genres that will attract various audiences and ad budgets. It also creates an opportunity to sell the new content to international markets rather than just in Australia, providing an additional revenue stream.

Of course, there is another part of the puzzle that is just as critical – performance and attribution. More funds need to be spent on proving the worth of television, on demonstrating how investment generates return for marketers, and establishing where TV fits in the consumer’s path to purchase. TV has struggled to compete with digital metrics which can track, target and retarget audiences, which can show investment directly leading to conversion, and which can trace individuals as they move through the digital environment.

The trick is establishing where TV fits within the broader picture – how are consumers moving between the offline and online space? – and using tools to maintain the consumer’s attention when they shift from the TV screen to their second screen.

The proposed legislative changes are just the tip of the iceberg. Ten has been given a reprieve, but they need to jump on this opportunity. Along with Seven and Nine. Shake things up. Reduce costs. Increase revenue. Invest in content. Push VOD and charge. And most importantly, invest in tools to support the advertising model and demonstrate to clients the impact TV has on real business outcomes. Prove advertising works and the advertisers will come.

Simon Larcey is the managing director of Path 51

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