BBC and ITV streaming dreams may become a nightmare

UK TV giants planning a new platform for later this year called BritBox but industry observers are already writing off the service

The main entrance to the  headquarters of the publicly funded BBC in London, Wednesday, July 19, 2017. The BBC published the names and salaries of its highest-earning actors and presenters, Wednesday, compelled by Britain's government to publish the salaries of on-air talent which had previously been secret, revealing that its highest-paid star, radio host Chris Evans, earns more than 2.2 million pounds ($2.9 million) a year.  (AP Photo/Frank Augstein)
Powered by automated translation

In November 2007, a group of British broadcasters announced they were pooling their content in a “rich entertainment site”, allowing viewers to see their favorite shows via the internet whenever they wanted.

Netflix had begun its US streaming service that year and was still more than four years away from a UK launch.

Regulators blocked the plan by the BBC and its free-to-air rivals, fearing it would prevent new entrants. Netflix and have since swept in to claim around two-thirds of the country’s video streaming market.

Now the BBC and ITV are trying again. The makers of crime series Line of Duty and period drama Victoria are planning a new platform for later this year called BritBox, offering popular shows from the two networks topped up with other fresh, exclusive content. But industry observers are already writing off the service and similar efforts across the continent, as the broadcasters struggle to solve thorny issues from audience data sharing to budgets and exclusivity of content.

“I don’t think any of the ventures being developed are going to be successful,” said Claire Enders, founder of media research firm Enders Analysis.

“They haven’t got the scale to survive now that their markets have been colonized by Netflix and Amazon. I think they’ll all be loss-making and they’ll all weaken the core business.”

Still, even the upstarts can have bad days; the days of watching The Office on Netflix are numbered.

The popular sitcom will leave the streaming giant and start airing on NBCUniversal's own online platform beginning in 2021. The NBCUniversal service, which is expected to launch next year, will have all nine seasons of The Office for five years.

The fate of The Office has been closely watched in Hollywood. Although the show was only a modest hit when it aired on NBC from 2005 to 2013, it became a favorite on Netflix. It's the No 1 streamed show and accounted for more than 52 billion minutes of viewing last year, according to NBCUniversal, a unit of Comcast.

"The Office has become a staple of pop culture and is a rare gem whose relevance continues to grow at a time when fans have more entertainment choices than ever before," said Bonnie Hammer, chairman of direct-to-consumer operations at NBCUniversal.

Netflix said on Twitter that it was “sad” that NBCUniversal was taking back the show.

“But members can binge watch the show to their hearts’ content ad-free on Netflix until January 2021,” the company said.

All the same, conventional television is in decline, with average daily viewing falling by 10 per cent between 2014 and 2017 to 2 hours and 54 minutes, according to British communications regulator Ofcom.

Investors have been dumping shares in European broadcasters, worried about the future outlook. ITV stock has lost almost two-thirds of its value in the past four years, while French commercial broadcaster Television Francaise 1 has fallen 43 per cent. Netflix stock has quadrupled over the same period.

TV executives agree that maintaining a confusing patchwork of competing platforms will make it harder to slow the advance of Netflix and Amazon’s Prime Video. They’re finding it hard to find a path forward.

BritBox may already have a problem: ITV and the BBC will have to convince consumers to pay for BritBox when some of the content will already have been available for free for a year on the BBC’s iPlayer service.

“There’s a clear appetite among British consumers for a streaming service which will bring together the biggest range and the best quality British content,” ITV said.

The iPlayer issue is one example of the competing incentives that make it so hard for broadcasters to deal with the biggest disruption of their industry since the start of commercial TV in the 1950s.

In Germany, ProSiebenSat.1 Media and RTL Group talked about a joint platform, then decided to offer competing products after clashing on strategy and deciding they would lose precious time in further discussions.

Cooperation doesn’t seem to come easily for network executives who are more used to fighting each other for ad dollars and are jealously protective of their most popular shows. Investors may also be getting in the way.

“The shareholders that sit underneath Netflix are willing to fund a business that’s loss-making to grab scale and size,” said John Turner of OC&C Strategy Consultants in London. “If you’re a shareholder of ITV, you want a dividend and you’re worried about the core business and this is like a hobby that’s being kept on the side.”

In France, where Netflix now has over 5 million subscribers, three TV networks have scraped together €45 million (Dh187.9m) to build a rival platform, Salto. With Netflix pouring billions of dollars into original content every year, Alain Le Diberder, a former head of new programming at the country’s biggest pay-TV broadcaster Canal+, said Salto is going to need between €400m and €500m.

With the deepest pockets and a technological edge, the US platforms are moving fast to reshape Europe’s media landscape. Their combined UK revenue last year was more than double the streaming income of the country’s five biggest broadcasters, according to a report commissioned by Ofcom.

As they recruit millions of new subscribers every year, that’s changing the habits of viewers, making them less tolerant of the fixed viewing times that underpin the old ad-based business model. Their vast budgets are also raising the standard of what’s required to win and retain audiences and creating a race for production resources that is inflating costs.

European executives often cite U.S. Netflix rival Hulu LLC as a blueprint for streaming success. The service founded by 21st Century Fox and NBC Universal began in 2007 - the year that Netflix began streaming - allowing viewers to see last night’s episodes online. Within three years, Hulu was the second-most popular video site worldwide after YouTube.

Yet Hulu also offers a lesson in what can go wrong.

The shareholders spent years arguing over who should lead the business and whether it should be a TV catch-up service or a source of original programming. Netflix focused on pouring money into fresh content and expanding to new markets. Hulu had 26.8 million paid subscribers as of March 31. Netflix had 148.9 million.

A similar dilemma faces the European broadcasters.

To make their services distinctive, they need to offer shows that can’t be found elsewhere. That means shifting investment away from their core channels, threatening viewer numbers and advertising revenue. Netflix and Amazon are also turning into important customers for their content, helping them to reach wider audiences in new markets but making decisions on whether to compete or cooperate even more fraught.

A decade after regulators nixed Britain’s first joint streaming project, European regulators also remain wary of broadcasting tie-ups, despite the new power of Netflix. The Salto project of state-owned France Televisions and its commercial rivals TF1 and Metropole Television SA is still waiting for antitrust clearance a year after it was announced.

“It drives me crazy,” France Televisions chief executive Delphine Ernotte said at an industry event in March.

“The European authorities took six months to say that in the end it was up to the French authorities to issue an opinion. Meanwhile Netflix has gained how many users? About a million.”