How are thematic channels faring?

If anything can illustrate the future of the TV channel business in Europe, it is how channels such as Canal Cocina in Spain and Film 1 and Sport 1 in the Netherlands are expanding their audience reach beyond the cable and satellite platforms to the world of on-demand and the iPhone.

Canal Cocina’s iPhone app has achieved 340,000 downloads from both inside and outside Spain since launching in September 2009 and is among the top three apps in the Spanish iPhone app store. Meanwhile, Film 1’s iPhone app, within days of its launch in August, reached number one in the Dutch iTunes store and has been downloaded on 10% of all Dutch iPhones (almost 50,000 times). Chellomedia is also developing an interactive magazine for the iPad and other tablets for launch in early 2011.

Niall Curran, chief operating officer of Chellomedia, which owns all three of these channels, says: “Over the past five years, we have been moving from a traditional media organisation and rethinking the approach to the product and how production will work in very different formats. “If you get it right, it’s a real value-add for your customers and also your cable and satellite partners.”

The future, according to Curran, is a trend towards a more sophisticated approach. Whereas 10 years ago broadcasters could expect subscriber growth from “just showing up” with a channel and some sub-brands to improve their shelf space on various distribution platforms, nowadays that approach has marginal effect. “Gone are the days of trying to have a non-localised approach,” agrees Tom Davidson, managing director of AETN UK, the operator of the History and Crime & Investigation channels, among others. “The bar is now set to how quickly you will localise and how local you will go.”

AETN, which runs seven UK channels including three HD simulcasts, moved into continental Europe four years ago with one pan-European signal, but now has language versions in all its markets and will start commissioning local productions outside of the UK by the end of the year because local production gives a “local flavour” that can help attract local audiences. “We are constantly looking for content that resonates with audiences and series-style content like Pawn Stars on History is the direction we are heading,” says Davidson “Once you get something that audiences like, you supply more of it.”

The pressure for both channel providers and operators in an environment where competition for consumers’ media time is growing has been intense.

While channel operators believe high quality linear channels still have a central role, there is also a focus on creating added-value services for platform operators, be it with catch-up TV video on-demand (VoD) services, HD simulcasts or other innovations such as 3D.

“No one has limitless bandwidth, no matter how whizzy their technology infrastructure,” says Curran. “In an environment where operators can allocate bandwidth to on-demand or higher-speed broadband, or to any number of things that need to go up and down the pipe, you’ve really got to make sure your channel propositions are punching above their weight.”

Expanding revenue sources

While the traditional business model of pay-TV channels – fees from platform operators and advertising – is strong, revenue sources are expanding to include VoD and more sophisticated advertising.

“As digital penetration increases, ad revenue streams, and especially tailor made, 360-degree, cross-platform ad solutions, including ad-funded programming, sponsorship, online and mobile, will become increasingly important,” says Bradley Wald, manager of EMEA for Comcast International Media Group, owner of E! and The Style Network.

One key to building the proper channel offer that includes localisation, VoD, HD and a path to 3D is to have the right technology in place. “The past 10 years has seen a revolution in how your content got to the play-out centre and then how it got to the customer. It is now possible to get your content without the cost of making, shipping and storing tapes.” says Greg Moyer, president of Scripps Networks International, which operates Food Network and Fine Living Network, and uses Chello DMC to play out its European channels. He adds: “We are also looking at the ability to limit the number of play-out centres by using remote playout technology that Chello DMC is now testing.

What is important is that they are technologically forward-thinking without being on the bleeding edge, where technology crashes.”

Davidson surmises that channel providers need to be forward-thinking about technologies like 3D and try to remain relevant. “Things such as 3D, which we know the operators are investing in, we want to be investing in as well, so there is a match between the delivery of the technology and the delivery of the content,” says Davidson.

In the summer, AETN trialled 3D with BSkyB in the UK and is now part of the pay-TV operator’s 3D channel. “When platforms are choosing between competitors, this really comes into play,” Davidson says. “They want to know who is going to help us drive the business, and we want to be on the shortlist.”