Europe’s commercial broadcasters in transition

By Ian Whittaker, Advisor-in-Residence, The Project X Institute

Looking at evolution of the European Free-to-Air (FTA) Broadcasting space over the last 20 years, one is reminded of the classic French phrase “the more things change, the more they stay the same”. On the one hand, linear TV audiences have clearly declined, new technologies such as PVRs have changed the landscape, the rise of multiple alternative video viewing platforms such as YouTube, Facebook, Instagram and now TikTok have taken away both younger audiences and advertising money, and the growth of streaming services such as Netflix have changed fundamentally the way consumers watch video content.

On the other hand, the major players in the European Broadcasting space, at least in the major markets, remain the same, the regulatory structures – both at the European and the national levels – remain largely in place, the sector’s advertising revenues over the past 20 years (at least in nominal terms) have continued to grow, and the major FTA players remain the only way to reach a simultaneous mass market audience, especially in markets such as Italy and Spain.

Ironically, the pandemic may, in the long-term, prove to have been a case of short-term pain, long-term gain for the broadcasters, in part because it brought audiences back to FTA television, part because it accelerated the share shift of revenues coming from alternative services, particularly AVOD offerings, and also because the pandemic spawned a range of new businesses that advertised on television. Even if interest rate rises across Europe reverses the flow of cheap money to challenger firms, there is still likely to be a long-term uplift.

These positive factors are reflected in the results reported by some of the major European groups, with ITV, RTL and M6 reporting 2021 revenues above pre-pandemic levels, while most of Europe’s other major broadcasters have recovered most, if not all, of their pandemic revenue declines.

The pandemic may also have helped broadcasters in two other more subtle ways. First, the crisis may well have strengthened the views of policy-makers and politicians, both at the national and the European level, that FTA Broadcasters are a vital part of the media landscape and thus need to be protected. For example, look at the UK’s new Broadcasting Bill, which includes significant protections for the UK’s PSBs. Second, the pandemic may have been a timely reminder to advertising decision-makers that consumers still watch a lot of free-to-air, ad-funded television.

Perhaps most importantly, it’s now clear that Europe’s FTA broadcasters can no longer be seen solely as linear TV businesses, but are now multi-platform video content distributors, with mass-market streaming services and fast-growing digital businesses. Increasingly, broadcasters are becoming platform agnostic, tapping into the growing consumption of streaming services on connected devices – and helping to keep ad spending and audiences in the TV ecosystem.

Potentially, it may also mean that the competitive playing field with the major internet companies is levelling. YouTube and Facebook have worked hard to convince advertisers that their platforms are substitutes for TV advertising, but the broadcasters are now competing with their own offerings.

This “de-siloing” of advertising money is likely to be one of – if not – the critical question for the long-term prospects of the European FTA broadcasting industry. Advertising money, both at the advertising and agency levels, still tends to be silo-ed into different pots according to the platform (so a ‘pot’ for television and a ‘pot’ for online). The general assumption has been that the growth in AVOD is essentially coming out of linear TV, but new broadcaster AVOD offerings may increasingly look to compete for digital video budgets.

Linear TV continues to have important strengths, in most major European markets. Yes, its share of both viewing and advertising revenue will continue to decline, but the linear TV advertising product is still robust and unique in many ways – attracting large mass audiences, relative to anything else, family friendly, brand safe, and high quality.

At the same time, online advertising is facing headwinds, with growing concerns about data privacy, the elimination of third-party cookies, and ongoing concerns about transparency and brand safety and suitability. The latest results for YouTube and Meta show growth rates slowing down significantly, albeit from very high levels. Similarly, SVOD growth is now slowing, with Netflix reporting recent declines in EMEA subscriber numbers and growing signs of slowing momentum.

What lies ahead during the 2020s?

On a corporate level, it is likely that we will see more consolidation moving forwards. There have already been several major mergers, in France (TF1 and M6) and the Netherlands (RTL Nederland and Talpa) and, with the UK Government looking to sell off state-owned Channel 4, there is increasing talk of an ITV-Channel 4 combination. While these combined market shares may look excessive in the context of the television advertising space, the reality of a more competitive marketplace may encourage regulators to allow further consolidation.

We’re also seeing more diversification, with broadcasters looking at new revenue streams, expanding internationally and looking again at digital opportunities. There is also a renewed focus on content and IP. In some senses, the global streaming services have done European Broadcasters a great favour, by growing global demand for great content from different countries and by stimulating a dramatic investment in European content production facilities.

One diversification that does not seem to be working well, at least not yet, is the move into SVOD. The experiences of BritBox in the UK and Salto in France suggest that this is a challenging space for FTA broadcasters. FTA Broadcasters in Europe have never managed to do pay well – remember ITV Digital?

What about technology? Don’t be surprised if things do not change too dramatically. The idea of switching off the terrestrial channels and moving everyone over to streaming is being discussed, but any change will take many years – something for the 2030s not the 2020s. There are still plenty of areas in every country, particularly outside the big cities, which do not yet have high-speed broadband.

Overall, then, Europe’s FTA broadcasters appear to be in good shape to weather the digital storm and to maintain and even grow their businesses during the 2020s – as long as they can manage their costs, grow their digital offerings efficiently, and continue to invest in content that resonates with viewers.

Plus ca change indeed. 

About the author:

Ian is an experienced, commercially minded equities analyst with 20 years’ experience and is recognised and highly regarded for his industry and financial knowledge and expertise across all parts of the media, digital and marcoms industries.

Ian is the current City AM Analyst of the Year and twice previous winner of the award. He writes monthly columns on the TMT sector for City AM, leading media and marketing business magazine Campaign, and video-focused trade publication VideoWeek. He is Editor of The Bigger Picture, a subscription service providing in-depth market analysis for executives in creative agencies, advertising, broadcasting and the media and tech industries.

Ian is the founder and MD of Liberty Sky Advisors, providing bespoke advisory and consultancy services focusing on the media, digital, tech, marketing industries for a wide variety of clients including corporates, private equity, venture capital and start-ups. He is a co-founder of Bearstone Advisors, offering corporate and strategic guidance, as well as advice on fundraising, to companies in the tech and media sectors.

He is a member of the board of advisors at Songtradr, Inc., and an advisor to the Board of Mirriad Plc and consultant to JC Decaux UK.

Ian is a regular speaker at major national and international industry events and conferences and frequently quoted in the print and broadcast media, including Bloomberg, Sky News, CNBC, and Radio 4.

The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Mediagenix or The Project X Institute.