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Channel 4 and BT chiefs debate Netflix’s role in TV landscape

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By Jessica Davies, News Editor

April 1, 2014 | 4 min read

Netflix has its work cut out to if it is to sustain the "colossal" costs involved with commissioning original content, according to Channel 4 CEO David Abraham.

Speaking at the broadcaster’s breakfast briefing at Ronnie Scott’s as part of Advertising Week Europe this morning, Abraham stressed the importance of distancing the impact of the TV giant’s UK penetration in the US versus the UK, adding that it was “famously” secretive regarding its viewer data, which is all handled in the US.

“I suspect there is a lot of dipping in and out of content from consumers during the free trial window,” he said.

However, he admitted Netflix’s commitment to original content was “interesting”, but that it would have a tough job sustaining its business model in future if it continues to drive that area.

“Once you get into that game of doing major output deals with studios and doing original content the costs become colossal – so there is a big debate going on about the share price of Netflix and how sustainable that model is,” he said.

BT's consumer division chief John Petter described the trend of online video, driven by Netflix in the UK and Amazon, as “massive”, adding that Netlfix recently overtook HBO for subscribers in the US.

“Platform owners will have different stances to this but YouView, for instance, is is open to both Netflix and Amazon because consumers want this stuff. So far the trend is that consumers are not consuming Netflix at the expense of pay TV, but are watching on top of it for the most part. Having said that I think the traditional paid TV business models – like Sky and cable – are challenged by it,” he said.

Petter added that its success with BT Sport had proved it could push into new markets, and that it wouldn’t rule out commissioning more content in future. “The test would be not whether we do it – the question would be can we get into new area and be disruptive but create value for the business,” he said.

Meanwhile, Abraham also referred to Channel 4’s ongoing data strategy, which has seen it accrue 10.5 million registered viewers within three years. He described the market appetite for behaviourally-driven video-on-demand (VOD) advertising as “absolutely huge”.

Advertisers that have taken advantage of the additional forms of targeting available and done big tests with the broadcaster have gone on to see “phenomenal” results, often seeing almost double the impact rates, according to Abraham.

“It’s clear that is where the growth is in terms of overall total advertising. It’s how our industry can remain competitive. We don’t want to be like the print or the music industries – we want to be innovating – and the fact we have this amount of competition and this amount of investment going into technology like Youview – is fantastic for the medium of TV – we haven’t stood still,” he said.

The Drum understands that the broadcaster is currently investing in new ad sales technology, which it is working with off-shore people to create. The broadcaster’s head of sales, Jonathan Allan, told The Drum this is partly aimed at reducing transactional costs for agencies.

Meanwhile, it is also increasingly collecting postcode data with the view to incorporating that into its sell in future, letting it target advertising to specific streets, a move which would bring it closer to the kind of proposition Sky has with its addressable ad product AdSmart.

Europe Channel 4

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Channel 4 is a British public-service television broadcaster that began transmission on 2 November 1982. 

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