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Breaking Murdoch’s pay-TV monopoly? Chance would be a fine thing

August 29, 2009

James MurdochJames Murdoch certainly hit a chord when he likened the UK media sector to the Addams Family in his MacTaggart Lecture. Yes, all the elements of dysfunction are there: stunted growth prospects, an unnecessarily complex and muddled regulatory framework, commercial interests constantly being wrongfooted by the overweening power of the BBC…

Well, not all commercial interests as it happens. Take his own in the pay-TV sector. Despite the existence of the BBC and everything the political establishment has tried to throw against it, BSkyB has managed to create an enviable quasi-monopoly of its own. It has a market share of 80%, over 9 million subscribers, an annual marketing budget of £900m, and a stranglehold over premium paid-for sports and movie channels.

I’m indebted for most of these statistics to David Chance, who has taken the opportunity offered by the MacTaggart lecture to indulge in a finely-judged bit of Murdoch back-stabbing in the Financial Times. Chance knows a lot about BSkyB. For many years he was its deputy managing director. But he now speaks with a different voice, that of the aggrieved and down-trodden competitor. As chief executive of Top Up TV he is part of that 20% of the market (others include Virgin Media and BT Vision) which is not – in his opinion – getting a fair crack at pay TV.

It’s no great surprise to discover that Chance fully upholds the regulator Ofcom’s proposals for trimming BSkyB’s sails. That is to say, because Sky’s actions are “not consistent with fair and effective competition”, it should be forced (Chance’s words) into “a ‘wholesale must-offer obligation’: in effect making Sky sell its sports and movie channels to other pay-TV retailers at regulated prices – enough for Sky to make a good profit but less than Sky’s wholesale prices to cable now. This would introduce competition at the retail level of pay-TV and could slash costs for consumers.” Could, eh?

I have problems with this argument, above and beyond the fact that Ofcom doesn’t seem to have fully mapped out its proposals.

First of all, there is the Murdoch riposte that regulation of this sort will likely subsidise inefficient competition. BSkyB has got where it is today by robust performance which owes little to state support. If the likes of Setanta go bust, is that entirely a consequence of BSkyB’s ‘monopolistic’ position – or is it just poor business acumen on the part of the Irish TV station’s board? Have we – turning Chance’s contention about unfair competition inside out – any reason to suppose that Top Up TV or BT Vision would, objectively speaking, perform adequately without the leg-up of a tilted competitive field?

Second, if Ofcom carries out its regulatory threat, it will be replacing an imperfect market with a false market. How exactly are these “wholesale prices” going to be determined, and with whose consent? How will they be enforced? Let’s take one example of what might happen if they take effect. Rivals eagerly buy up at a discount content which Sky has had to purchase at great expense (probably in competition with these self-same rivals). They then use this content as a loss-leader to steal share from Sky. If the price is low enough, which subscriber would not be interested in that? As yet, of course, we await Ofcom’s verdict on this potential weasel.

In a broader sense, however, Chance definitely scores his point. The Murdoch empire can’t have it both ways simultaneously. On the one hand we have Murdoch Jnr, inveighing in the MacTaggart lecture against the vested interests of the BBC and the distortion this causes to the UK’s media ecology; on the other, Murdoch Jnr turning that self-same argument on its head to defend the privileged position of BSkyB against its pay-TV rivals.

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Baz, Big Brother’s Hero of Our Time

August 27, 2009

Peter BazalgetteI am indebted to my former colleague, Iain Murray, for reminding me not so much that Peter Bazalgette – the impresario behind Big Brother – is the great-great-grandson of Sir Joseph Bazalgette, but of what they have in common. It seems that genetic inheritance, if dominant enough, will out. Sir Joseph was an eminent Victorian engineer, one of whose grand achievements was the construction of the London sewerage system. Peter’s great achievement has been mapping the cesspool of the human soul, via reality television.

The first was undoubtedly a philanphropist, who happened to work for money. The other, I’m not so sure about. Gifted, witty, an after-dinner speaker worth paying money to hear; commercially adroit; along with David Elstein one of the most intelligent and perceptive commentators on the current media scene; a first-class psychologist. Yes, all these things are true. And yet the key adjective that comes to mind is “cynical”: not in his manner, but in the nature of his achievement. It’s the kind of cool, cultured cynicism of the Roman aristocrat of yesteryear, who – personally disdainful of animal bloodshed and human sacrifice in the arena – nevertheless proves a superlative organiser of the emperor’s “bread and circuses” entertainments programme designed to keep the unwashed masses compliant.

Bazalgette didn’t invent Big Brother, and he certainly didn’t come up with reality TV (although he has, in his time, been a fertile inventor of TV formats). Where he was smart was in grasping the reality format’s potential, back in 1999. To fill the void of values, in the wake of declining conventional ideological beliefs and the collapse of social deference, we have celebrity culture. That is to say, having destroyed the old idols we feel bereft and have to seek out new ones to worship. But where to find them? Magazines, from ¡Hola! to Heat, provide only limited production value; nothing by comparison with television when it comes to manufacturing instant stardom and providing gratification for our voyeuristic instincts. In this egalitarian age, the compelling thing about these instant wannabe idols is that they are just like you and me. All right, they may scream a bit louder, they may be more self-obsessed and emote a great deal more than the rest of us, but on one thing we can all be agreed: they, like us, have feet of clay. And in that we have the essence of their entertainment value.

Taking things a stage further, Bazalgette was quick to realise he held the whip-hand with our political, media and cultural elites – the “twittering classes” of which he is a renegade scion. They might sneer at what they saw, but by degrees they found themselves sucked into Big Brother’s maelstrom whether they liked it or not. And often they did not: it was a humiliating experience. Germaine Greer, for example, proposed herself as a human experiment, but found she couldn’t take the relentless exposure. On a personal note, Bazalgette’s most triumphant moment must surely have occured when he had to turn down haughty media grandee Jeremy Paxman for an interview with ousted BB candidate George Galloway MP, because it broke the House rules. As for the newspapers, he had them in the palm of his hand. Declining circulations and a loss of young readers meant they had no option but to cover the climax of a BB series on their front pages.

And where the newspapers led, the political class surely had to follow. “It is entirely legitimate to regard politics as a popularity contest,” Bazalgette once wrote. “After all, what you think of the person you are going to entrust power to for five years is pretty crucial. And in the close-up age of Big Brother and Heat magazine, our expectations are raised.”  A pretty flip explanation, you might say, for the appearance of Galloway or Christine Hamilton, wife of the disgraced Neil, but you know what he means.

Last and not least, Bazalgette was on top of the multimedia implications of reality TV right from the start. Only formally was BB a television show. It also embraced internet and mobile audiences, 24/7. In that lay a further little goldmine, surplus to Channel 4’s sponsorship and advertising revenue extracted from the TV programme.

I remember Bazalgette – at the Marketing Week Madrid Media Conference in 2001 soon after BB first aired – confidently predicting the eventual collapse of its blockbuster viewing figures. He, at least, was under no illusion about its ephemeral appeal. And, to prove the point, he has long since moved on from production company Endemol. Now viewers are down to 2 million, Channel 4 is finally calling time. But if BB is dead, the reality entertainment concept – or something very like it – is destined to live on.


Commonwealth Games team to get marketing makeover

August 24, 2009
Holmes: CG president

Holmes: CG fan

The English Commonwealth Games athletics team is about to get a marketing makeover, thanks to Duncan Lewis, appointed to the new post of marketing director by Sport England last month.

In the past, Team England has been able to depend on the seemingly inexhaustible largesse of the National Lottery and Exchequer. No longer. The department of culture, media and sport (DCMS) – to whom Lewis is ultimately responsible – has decreed that it must now begin to stand on its own two feet. Which means that Lewis is embarking on a drive to find sponsors and other commercial partners.

The Commonwealth Games have considerable assets as a brand. They are genuinely multinational, diverse in the sports on offer and well-liked by many of our elite athletes, like Dame Kelly Holmes – who was appointed president of the Games earlier this year. But the Games are a Cinderella compared with the Olympics. Lewis must grapple with this perceived inferiority, and also the conundrum of what Team England really stands for. To help him out, he has appointed identity specialists Corporate Edge, which has gained considerable “nation” building experience after working for our premier tourist quango, VisitBritain.

There’s more on how Lewis plans to tackle the identity issue and attract sponsors in my column this week.


To young people, the car has essentially become a mobile

August 24, 2009

imagesIt’s ugly and I wouldn’t buy it. But I’m not the target market. And you have to hand it to Nissan, they have come up with an intriguing social insight.

I’m talking about the US launch of the chunky little Cube, which bears an uncanny similarity to an iPhone on wheels. The similarity is quite deliberate, according to Nissan North America Christian Meunier: “We envision owners using their Cubes as one of their essential mobile devices, connecting with friends, sharing music and sharing fun,” he says.

Actually, the Cube – very much a youth car – long predates the iPhone, having first launched in 1998. Credit for this particular positioning must go to Nissan’s ad agency TBWAChiatDay which – you guessed it if you didn’t know already – also handles iPod and iPhone marketing for Apple.

I don’t think the parallel works at all levels.  iPhones, even in the USA, are far too expensive to be the exclusive preserve of youth. Whereas this $14,000 car is unlikely to appeal to anyone more mature. But as a planning insight the new Cube is not without interest.

550 Spyder to die for

550 Spyder: To die for

If you think about it, the slim, elegant smart phone of today’s generation is the equivalent of life in the fast lane in the Fifties. James Dean liked fast cars so much he managed to kill himself in one. Today, according to research conducted by CNW Marketing, young people – when asked what would most impress their friends – said an iPhone (80%). A new car came a distant second (20%).


Tales of the recession. Part 1: Cath Kidston

August 22, 2009

KidstonOK, I admit it. I must have been asleep all this time. The first I heard was the media hullabaloo trumpeting her success as a businesswoman. Cassandra Jardine in the Telegraph hailed her as a post-feminist icon, and pretty much everyone else has piled in as well.

Because? The year-end figures for Cath Kidston’s private company had just percolated to the surface (God knows why now, the year-end is March) – and they were astonishingly good. Sales have leapt more than a third to £31.3m and profits soared a majestic 59% to £4.6m (£2.9m). This is no flash in the pan. The 50-year-old designer has been sticking to her knitting for 15 years. What we have here is a recipe for success that has clearly been baked to perfection in the worst recession in living memory.

Now it’s not cheap, the stuff she sells in her 27 shops; nor is it to everyone’s taste. Some would characterise it as upper-class kitsch, whose last great exponent was Laura Ashley. So wholesome, so mumsy, so floral, so…English. Yet there are few places the Kidston motif has not managed to insinuate itself over the years. We even have the stuff ourselves – some rather nice mugs my wife once unwittingly bought at Waitrose. “These can’t be Kidston,” she declared authoritatively. “They’re not floral enough”. The monikored assay mark on the base of the mugs cleared that one up.

Whatever it is – let’s settle on zeitgeist – Kidston knows how to bottle and sell it. In her way, she’s a domestic goddess. A more matronly, kindly one than the grasping, go-getting Martha Stewart in her pomp, and a safer, less threatening one than the glamorous Nigella. But like them, she’s peddling a kind of escapism: in her case, the illusory, nostalgic domestic idyll of the Fifties. And women of a certain sort – the kind that can afford her – are lapping it up.

I agree with JKR’s blogger that calling her oeuvre “Pinnie Porn” unfairly demeans her. You wouldn’t employ that sort of perjorative language describing the achievement of Sir Terence Conran in an earlier era, would you? Indeed not.

You may convict Kidston’s design aesthetic of being bland, smothering, a conceit that denies everyday reality. But porn? No. it’s much cleverer than that. Good luck to her.

And, by the way, we still use the mugs and they’re still in perfect condition.


Is Intelligent Finance next on Lloyds’ chopping block?

August 22, 2009

IFSo the Cheltenham & Gloucester brand has had a reprieve, and the mortgage specialist’s 164-strong branch network will, for the moment, remain intact under the aegis of Lloyds Banking Group. Don’t for a minute think that this signals a change of heart about the high street banking group’s brand cull. It doesn’t.

C&G will be retained, pro tem, as a sacrificial victim to placate the competition deities in the European Commission, who are becoming increasingly restless about 1) Lloyds’ now enormous share of the UK retail banking market and 2) The huge slug of money it has received from UK taxpayers, which may – in some lights – be regarded as state subsidy, a no-no in today’s EU.

Elsewhere, the cull moves ruthlessly on. Lloyds will want to reduce its dependence on the Asset Protection Scheme (ie taxpayers’  money) as quickly as possible. One way of doing this is to tap shareholders for extra money via a rights issue. Another is to sell off non-core assets.

I note, for example, that Lloyds has been dismantling any remaining connection between the Halifax brand and its internet banking brand, Intelligent Finance. Should we expect an announcement about IF being sold off quite soon? And, after that, Scottish Widows?


Last post for the London freesheet

August 21, 2009

thelondonpaperSomething old, something new. While loss-laden Guardian Media Group dithers over a rare opportunity to mercy-kill the venerable but decrepit Observer, News International has shown no such compunction with its own failures, in axing thelondonpaper freesheet. Sixty rather shocked staff look like being out in the cold by mid-September.

In its way, thelondonpaper had become as much of an institution as the Observer, although a rather less sympathetic one. We’ll miss, with a sigh of relief in most cases, the army of free distributors who stiffened the ranks of seasoned chuggers obstructing our route to Oxford Street bus and tube stops. London Underground won’t, however, be regretting the 10 million tonnes of paper waste it had to dispose of daily. I imagine Westminster and Camden Councils will be similarly relieved at the reduced charge on their services.

I speak of this as the end of an era (albeit only three years’ long) because surely it is. Associated Newspapers cannot take long in reaching the same conclusion about thelondonpaper’s principal rival, London Lite: that it is a waste of time and money. Which would leave the much-better established Metro as sole contender in the London freesheet market. At least it has the merit of being able to make a profit in the good years.

Freesheets looked the way of the future when they first came out; in fact they were a last-gasp reaction by beleaguered newspaper barons. Paid-for no longer paid, as the eventual fate of the Evening Standard all too clearly demonstrated. The villain of the piece was the internet in general and Google in particular. If news and comment could be had for free, then where was the justification for all those expensive reporters and columnists on mainstream publications? Freesheets appeared to dispense with these tiresome overheads, by providing a confection of cheap wire news and stale celebrity chit-chat interspersed by listings. At the same time, traditional distribution and marketing costs could be stripped to the bone. But it was fool’s gold. Display advertisers, the freesheets’ exclusive source of revenue, didn’t buy into the recycled pap of their content. The worst recession of the past 50 years has proved the freesheets’ coup de grace.

However, the immediate reason for thelondonpaper’s demise (apart from its shocking losses) probably has something to do with Rupert Murdoch’s newly espoused enthusiasm for putting all his content behind paywalls. Ideologically, thelondonpaper simply wasn’t in tune with the new gospel.

Is there a silver lining in this cloud for Alexander Lebedev’s Evening Standard – which now faces considerably reduced competition? We’ll have to see.

Have a look at my colleague Ruth Mortimer’s blog for more thoughts on what the “free” concept had to offer. Also, a possible way ahead for niche products such as City AM and Shortlist, in the FT.


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