This new channel would revolutionise the way TV was broadcast, including for the first time commercials during programmes. The first commercially-funded television station was working with the Post Office, amongst others, and they were quick to address concerns about this radical new departure. “We shall not be bothered by a violinist stopping in the middle of his solo to advise us of his favourite brand of cigarettes, nor indeed will Hamlet interrupt his soliloquy to tell us of the favourite brand of toothpaste ordinarily used at Elsinore.”
The BBC was reported as coming under huge pressure as a result of this new competition, with “fears that the arrival of the ITA will cause a slide into lower-standard, populist programming.”
Perish the thought.
How would these pioneers have reacted to the current day situation?
The convergence of multi-media, “quadruple play”, an array of devices from MP3s to PCs to mobile telephones, all ultimately capable of receiving radio, hundreds of digital TV channels, accessing the internet, sending emails and so on?
Perhaps one thing that has not changed is that the above are simply delivery channels, a method of moving the required user experience to a device of his or her choice – whereas content is still king.
This of course was one of the reasons why ITV recently poached Michael Grade from the BBC – one of his first observations was that he was concerned about the quality of some of the programming ITV had been producing, and his keen innovative flair within the industry made him a natural choice to turn ITV’s fortunes around. It is, of course, early days to see whether he will succeed, although the early signs have been encouraging, not least of which was his recent trumping of his former employer to the FA Cup Final rights for the next few years.
Meanwhile, over in the US, Rupert Murdoch has characteristically gone in hard and large in an attempt to bolster his media empire further. His $5 billion (£2.5 billion) approach for Dow Jones, although initially rebuffed, is a clear declaration of intent.
The Dow Jones stable, apart from its newswires, includes the prestigious Wall Street Journal, Barron’s, and the Far Eastern Economic Review. This would be in addition to the existing News Corporation portfolio, which includes the New York Post, 20th Century Fox, the Sun and of course BSkyB.
BSkyB itself is embroiled in a potential Competition Commission enquiry, following its near 18% purchase of a stake in ITV towards the end of last year. This followed an approach to ITV from Virgin Media (then known as NTL), with Sky insisting that the purchase was for investment purposes, whilst Virgin Media complained that it was simply a blocking manoeuvre. The findings of the Commission will not be known for some time, but the intensity of this particular feud is representative of the fact that at the moment, there are a number of large media operators jockeying for space in what is becoming an increasingly cut-throat and dynamic industry.
Apart from the BBC Freeview service, there is also the imminent arrival of BT on the scene with its own TV offering. It is quite clear that the next year is going to be one of extreme change within the industry, and even today a picture is emerging of a handful of media enterprises becoming behemoths in a short space of time.
Investors should be watching out for potential areas of consolidation as this divergence continues apace – and, as ever, picking the ultimate winners of this scramble for dominance will be the result of some shrewd judgement.
Watch this space.
If you’d like to read more free research, comment and analysis from me and the rest of my colleagues at Hargreaves Lansdown please visit our website at www.H-L.co.uk
Richard J Hunter
Head of UK Equities
Hargreaves Lansdown
www.hargreaveslansdown.co.uk