Commercial free-to-air TV: the death of a medium

It was Canadian media baron Roy Thomson who coined the aphorism that a commercial television licence was a licence to print money. Why is that no longer true?

The Nine Network's recent near death experience; the Ten Network's current capital raising catastrophes, and the Seven Network's ongoing financial woes have made it to the front pages of our daily newspapers,

There are three reasons why free to air commercial television is a bad investment.

First, the medium of television is the least interactive of the legacy media. By legacy media we mean newspapers, radio and television, but McLuhan's classic sixties distinctions between 'hot' and 'cool' media stall at the boom gates in the face of the oncoming Internet train.

This is why so much is made of programs such as the ABC show Q&A which broadcasts a live Twitter feed during the program – unless, of course you live in South Australia, the Northern Territory, Western Australia or Queensland in daylight saving time. The fact that much of the country is unable to participate in the Q&A tweet-fest seems to matter little to the taxpayer owned Sydney Broadcasting Corporation. Nonetheless, the final episode for 2012 on November 19, which featured the country's two most popular political leaders, Kevin Rudd and Malcolm Turnbull, generated 24,000 tweets from 5,400 Twitter accounts.

After all, as Noel Coward famously said, television is for appearing on, not for looking at. So Q&A aside, radio and the print media have adapted to the world of web 2.0 far better than television, although breakfast television has tried.

Secondly, the medium has become fragmented by the advent of pay TV, multi-channelling by free-to-air commercial television operators, and by multi-channelling by the ABC. There is an argument, not a particularly strong argument in my view, that multi-channelling by the FTA networks has cannibalised their audiences.

Thirdly, commercial television now has to share its previously unique technology platform -video - with the Internet. It has lost its monopoly on moving pictures. The best snippets of the best TV are on YouTube almost instantaneously. Moreover, viewers can now time-shift their viewing to suit their own needs and interests, and are no longer in the hands of network programmers.

The uptake of IPTV (TV on the web) will mean that essentially, video on demand will reduce all traditional television programming to live news coverage – including rolling coverage of major events such as natural disasters - or live sport; and that more likely this will be as much a social experience enjoyed with others in front of a big screen as an individual activity. Gimmicks in the coverage of live sport: hot spot; heart beat, hawk-eye, will not stave off the inevitable. Nine's cricket spider-cam is nothing less than the civilianisation of a drone developed to spy on insurgents.

And speaking of threats, an even bigger threat to FTA commercial TV – which has entertainment as its primary metier – comes from online games.

But ultimately, technology aside, there has been a failure by FTA TV to connect with audiences. There have been some programming clangers in 2012. Even with all the sophisticated audience metrics available, programs like the Ten Network bomb The Shire are still given the green light to go to air. Along with failure to connect with audiences, there is a continuing failure to respect audiences by commencing and concluding programs at the advertised time, often in an attempt to "hold" the audience from one show to the next.

Pay TV – particularly in the area of sports rights – has proved a nimble and assertive competitor. The anti-siphoning rules, which require major sporting events to be available to FTA audiences, are a form of protectionism which is unsustainable, although the current government has bent over backwards to assist the FTA operators by maintaining the anti-siphoning regime, and by reducing licence fees. It has also been reluctant to impose local content rules, particularly in relation to news and current affairs in regional Australia, which would increase the FTA network costs.

The equation of ownership with influence; so well demonstrated by Kerry Packer with the Nine Network in Australia, and Rupert Murdoch with Fox in the US, will also be a victim of platform fragmentation and increased competition, and some of that competition, like the BBC and the ABC, is publicly funded, to the chagrin of Rupert and James Murdoch.

The recent puff piece on Ten by Nick Tabakoff in The Australian (10 Dec 2012), labeled as an "exclusive", was really designed to put a floor under the share price when Ten resumed after a trading halt following its most recent capital raising. Headlined: "Bruce Gordon: I am here to 'help' Ten", it quoted Gordon, who also owns WIN, as well as 14% of Ten saying: "There is plenty of room for everybody to make a success of television presentation in Australia, and there is the advertising market to support it." Gordon is not accounting for the trend to advertise online; a trend which has already seen the national online advertising spend increase by double figures this year. The real boom is in mobile advertising, as the uptake of hand-held devices means more data is being downloaded to mobile devices than to desktops.

So the largest investors in the Ten Network: Bruce Gordon, Lachlan Murdoch, Gina Rinehart, and James Packer, the last three of whom inherited their wealth, are not particularly astute investors. They are investing in Wells Fargo coaches just as Henry Ford is building assembly lines in Detroit.