Despite tough market conditions, factual channel providers are looking to build on past successes by launching into new markets, developing new brands and investing in new technology. Graham Pomphrey investigates.

Factual channel providers have their work cut out if they want to launch into new markets or to deliver new brands into existing markets. Advertising revenues are declining the world over and the belts of pay-TV operators are ever tightening as difficult economic conditions start to hit home. Combine this with competition in the factual channel sector, even from channel providers dipping their toes into the factual pool for the first time, and it’s a challenging environment. But talking to factual channel owners, you’d be forgiven for thinking that, save for a bit more caution, it’s actually business as usual.

Economic impact

“Despite the tough environment, we’re continuing to be aggressive, albeit in a thoughtful manner,” says Sean Cohen, senior vice-president of AETN International, owner of some of the most successful factual channels in the world. A division of A & E Television Networks, AETN International markets and distributes a number of highly successful factual channels, including History (formerly The History Channel). This flagship channel alone reaches over 228 million TV households in 141 territories, broadcasting in 24 languages. Having a slate of strong, recognised brands stands AETN in good stead when it comes to pitching to operators, particularly during challenging times, according to Cohen. “We have the benefit of a long history and a big library of quality content. While it’s tough at times and no one is completely immune to that, we’re about as well-positioned as you can be. We’re focused on delivering factual, entertaining programming to consumers by working with as many platform operators as possible.” Over the past few years, Cohen’s focus has been on getting as many carriage deals for History as possible. Now it’s firmly established as one of the most widely distributed factual channels in the world, the company has been turning its attention to its other, more recently created channel brands – Bio (previously known as The Biography Channel), C&I (previously Crime and Investigation), along with drama channel A&E: “There aren’t many places in the world where we haven’t established at least one of our brands,” says Cohen. Incumbency has its advantages when the market gets stormy and AETN’s focus going forward is on leveraging its successful foundations to try and get four or five brands across all territories.

Discovery Networks International was one of the first, and is still one of the best-known, factual channel providers. Since launching outside of the US 20 years ago, it has gone on to develop an international portfolio of 21 brands, including new ones such as crime and forensics channel ID: Investigation Discovery, which launched in Europe earlier this year in response to strong customer demand for the investigation genre, according to Greg Ricca, president and CEO Discovery Networks International.

While most channel providers are feeling some kind of pressure from the economic climate, or will do at some point, the general feeling is that those who rely most heavily on pay-TV models for income are likely to come away relatively unscathed, compared with those who rely solely on advertising. Pay-TV remains the foundation for Discovery Networks’ international markets – it now operates at least five pay-TV channels in almost three quarters of its international markets. “As pay-TV penetration levels rise, our businesses will continue to grow,” says Rica. Discovery is also well positioned in that almost half of the company’s revenues come from multi-year subscription fees that aren’t subject to “uneven economic conditions”, as Rica puts it.

The flagship Discovery Channel is now seen by nearly 370 million subscribers in more than 170 countries and 35 languages around the world, and according to Ricca, the network’s heritage and global reach mean it’s less impacted by economic forces than other channel operators. “Given that we’ve been on the ground in so many markets for so long, we have the stability and scale that allows us to keep growing more competitively than if were just starting out. With revenue derived from operations in so many countries, we still have the opportunity for growth, even if some of the more developed markets are challenging.”

It is this stability that has helped Discovery to move into the free-to-air space. It launched its first free-to-air business, DMAX, in Germany in 2006. According to Ricca, free-to-air platforms can expand channel providers’ reach as well as drive advertising revenues. He says he is “extremely pleased” with DMAX’s performance as it has become one of the highest-related channels for men in the market. Discovery Networks International will hope for similar success from its second free-to-air channel, called Quest, available on the UK’s Freeview DTT platform from May.

AETN’s Cohen is similarly philosophical when it comes to the impact the economy is having on the TV industry. “People aren’t watching less TV. Anecdotally, they’re watching more. Where it’s exposed to advertising, free TV is hurting, but pay-TV has that additional source of revenue and we’re part of that community. We’re not recession-proof but we do have the sense that people aren’t giving up their subscriptions.” This is a view echoed by a number of channel providers, and recent results from European pay-TV operators appear to back it up. UK pay-TV operator BSkyB added 80,000 subscribers in the first three months of the year, for example.

But how keen are platform operators to continue to invest in new channel launches and how high are factual channels on their wish lists? According to National Geographic Channels International’s executive vice-president of content Sydney Suissa, factual as a genre will hold up well against others. “If you look at ratings over the years, factual tends to be a small share of the viewing pie, much smaller than drama or entertainment for example, but it’s a very stable share by and large.” He says factual is very much a “niche” genre, which gives rise to committed viewers. “There are very strong loyalties towards factual channel brands. In the entertainment world the loyalty tends to be with the programme,” he adds.“A viewer doesn’t care what channel they watch a movie on but a factual channel brand goes a long way to forming a viewers perception of the credibility of information being delivered by a factual programme.”

Building portfolios

The National Geographic Channel (Nat Geo)’s values are built around the fact that its programming is produced by the highly respected scientific and educational institution the National Geographic Society. By Suissa’s own admission, there’s sometimes a perception that the brand is all about “lions and tigers” but alongside wildlife programming it boasts science, culture and engineering as key themes. Nat Geo launched in 1997 and is currently available in 165 countries. More recently, the brand has expanded into a number of additional channels – Nat Geo Wild, Nat Geo Adventure and Nat Geo Music – which Suissa says has enabled it to better focus on important sub-genres. “The core channel becomes the incubator where you can test certain themes before you start branching out. Wildlife programming now stands out on its own on Nat Geo Wild and the same goes for adventure on Nat Geo Adventure. That in turn means the main channel can be more science-based.”

He says the core channel has always been the “passport” into a new territory and will remain so but that operators are keen to build on the success of Nat Geo to launch sister channels. He also hasn’t seen much impact from the economic downturn. “We all know it’s going to be a difficult year, or at the very least a year of mystery because we don’t know exactly what will happen or when we’ll come out of the other side. But we’ve seen no real impact on channel launches and we plan to roll out a load of new channels this year. Platform operators are still showing an appetite to launch.”

BBC Global Channels, a division of UK public broadcaster the BBC’s commercial arm BBC Worldwide, is responsible for launching various international channels across the globe. It is concentrating on a portfolio of channels including BBC Knowledge, BBC Lifestyle, BBC Entertainment, CBeebies and more recently its high definition channel BBC HD. The aim is to sell the whole package of channels to operators, which it has done with the standard definition channels in Poland via DTH operator Cyfra Polsat’s platform and in South Africa via MultiChoice Africa’s DStv bouquet of satellite channels. The Scandinavian market has also proved fruitful.

Dean Possenniskie, general manager and senior vice-president EMEA says that the BBC’s heritage of producing quality factual programming means BBC Knowledge is often of most interest when he’s talking to operators. “The natural conversation will often be based around BBC Knowledge because of the reputation the BBC has for the quality and diversity of content on the channel. It’s a real strength and we feel we can compete very well with other factual channels by combining excellent content with the BBC brand.”

The current marketplace is dictating that some operators would rather start with one or two channels rather than taking a full portfolio, as Possenniskie explains: “Most people will tell you that the market is holding up in terms of subscribers numbers but I don’t think now is the time for the rapid expansion of channels. I think [operators] will be very prudent in terms of costs and we’re finding that they are asking channel providers for a particular genre – it might be entertainment, it might be factual, depending on the operator. Some operators are looking at the coming year and want to ensure they’re getting the best value for money. There might be a particular genre where they think we can come in and present our channel for them to weigh up against existing offerings.”

He says that Global Channels is open to introducing a single channel on a platform and building a portfolio around it in the future. “Particularly when it comes to markets in western Europe, we might enter with one or two channels and add additional ones over time. It’s about getting a channel onto a platform, highlighting the quality we offer and the ability to localise and generally proving our worth.”
 
Entertaining elements

For factual channel providers trying to impress pay-TV operators and subscribers alike, the importance of getting the proposition right is more acute than ever. That means making the channel as appealing and relevant as possible. While grainy black and white image of tanks rolling into various European countries might spring to mind when thinking about factual programming, the reality is that factual channels cover a smorgasbord of content as providers have been working hard to ensure that their channels have as broad an appeal as possible without moving too far from the core subject. This means entertainment elements have been creeping into the world of factual programming for some time. “The key to being a successful documentary channels is making your factual programming entertaining,” says National Geographic Channels Interntional’s Suissa. “You need strong production values and you need to engage the viewer, which might mean incorporating entertainment values.” One of the grey areas between entertainment and factual programming is reality TV but according to Suissa, when done in the right way, the amalgamation of the two genres can work. “It’s been good and bad,” he comments. “It’s revitalised the factual genre in many ways by introducing strong storylines but at the same time it’s become stale and problematic in the sense that everyone’s copying everyone so they become formats and lose their credibility as factual.” A good example of the two genres working well together, he says, is the Nat Geo series Salvage Code Red, which follows a team of salvers racing against time to rescue stricken ships, their cargo and crew. “It’s a very strong way to do factual reality. We’re covering real stories but within an informative context – there’s a lot of science throughout the show.”

AETN launched scripted drama channel A&E in the US, but as far as Cohen’s concerned, internationally the company is focusing solely on the factual genre, although he too admits that entertainment is an important element of delivering factual programming. He says it also helps to have brands that are clearly defined. “We have brands that do what they say on the tin, like History and Bio. They are instantly recognisable, which helps when there’s a lot of clutter on multichannel platforms. It makes things easier when you can cut through that with a brand that’s recognisable.” As operator-controlled VOD libraries increase and navigating through thousands of hours of content becomes increasingly complex, having your brand stand out in this environment is also becoming critical.

Another channel provider dabbling in factual programming is Comcast International Media Group (CIMG), the umbrella organisation created in 2007 to deliver programming and channels from Comcast to audiences outside the US. Best known for its celebrity-focused flagship channel E!, which showcases the trials and tribulations of Hollywood’s finest, it branched out into the female-skewed style and fashion market with the launch of the Style Network in 2007.

According to CIMG’s senior vice-president Duccio Donati, the factual genre “runs a bit deeper with the audience than pure entertainment.” He adds,  “Whatever Style does, even if it’s a makeover show, it tries to form an emotional connection with the viewer.”  While E! and Style might not be seen as traditional factual channels, Comcast actively looks for gaps in the markets in order to best server the needs of pay-TV operators, whatever they may be. “Every one of our channels has defined audience of demographics and interests,” says Donati. “We looked at how well audiences are served by cable operators and found that operators were looking for a channel that served the demographics of females aged 13-34, for example, and the Style Network was an obvious next step for us.” Style Network is billed as a completely separate channel to E!, with less focus on reality or celebrity programming. Comcast is looking to build on the success of E!, which is now available in 91 million households in 121 countries in 21 different languages, to build a similar presence for Style Network. Donati says the company is “aggressively” rolling Style into as many markets as possible, with an emphasis on larger territories.

According to Donati, the free-to-air market has been impacted badly by the advertising downturn. “We’re seeing free-to-air channel providers trying to stretch their budgets as much as possible, using what they already have on the shelf and spending very wisely.” He is more optimistic about the pay-TV sector, however – it all comes down to how heavily your channel relies on advertising, he says. “We’re not seeing churn on the operator side yet because people are staying at home more than they were. At times of uncertainty, people don’t like change. It means we might see a slowdown in terms of rolling out new services an operators are unlikely to see their ARPU increasing as much as they been because subscribers are generally happy with what they’ve got but cautious about subscribing to additional service.” One of the advantages of being in a higher margin business like pay-TV is that channel operators can take some hits in some markets but they are able to weather them.

The uncertain economic landscape is likely to impact operator plans for rolling out new channels, but rather than holding back, Donati believes they will follow a more cautious path but continue to invest in the quality of the service offering. “You’re not seeing operators saying ‘that’s it, we’re not launching channels any more’. The operator business doesn’t stop; they have to keep churn down and keep growing ARPU. They’re faced with multiple challenges, whether its free-to-air or the internet, which means they’re faced with more and more reasons for people not to subscribe in the first place, or to stop subscribing.

For those reasons, they have to stay competitive by continuing to give value to their subscribers.” He says there is still plenty of space on platforms for additional channels and the importance of channel operators giving them a proposition that serves the right kind of audience and gives them value for money is becoming ever more critical. “Operators know their audience – who makes the decision to sign up originally and who makes the decision to stay signed up. They’re looking to make sure they feed those people. That’s why we feel we’re in a good position because our channels target very specific audiences.” He says operators will be concentrating on keeping churn as low as possible, then increasing ARPU and finally keeping up with and investing in new technology.

Additional services

Another way for international channel providers to improve their appeal to pay-TV operators and viewers is by localising content for particular markets. Discovery Networks International, for example, offers more than 100 localised feeds internationally. Some operators are taking it a step further and creating locally-produced content, such as the E! channel, which now includes local versions of  entertainment news stands broadcast in Italian, German, French and Polish. National Geographic Channels International ’s UK business has its own budgets to develop local programming, with titles like Churchill’s German Army that appeal to the local market. The channel provider also offers some localisation in Italy and Asia, but not to the same extent as it does in the UK. Suissa is keen on expanding the model elsewhere. “We have to get as good as we can at localising content because viewers want to see themselves reflected in the programming.”

The BBC is forging ahead with localisation strategies in Poland for BBC Lifestyle. It intends to open up a local office to enable it to develop formats for the market, a strategy that will eventually be rolled out into other territories. Lifestyle formats are particularly open to localised formats, with shows based around fashion, home improvements and personal development being easily adapted to suit local cultures and customs. “Our aim in the first year is to get the brands into the market, to understand the nuances of the local market in order to optimise scheduling and sales,” explains Possenniskie Stage two will be to open a local office with research and scheduling teams and on the back of that to look at local productions.” For BBC Knowledge, however, aside from language-versioning and marketing, Global Channels has no plans to develop local programming, a decision that relates back to the heritage and expectations inherently attached to BBC content.

The advent of high definition has also breathed new life into the factual genre. Along with sports and movies, factual programming is ideally suited to HDTV, allowing channel providers and programme makers to showcase documentaries and natural history series in rich colour and crystal clear definition, as Nat Geo’s Suissa explains: “Blue chip wildlife and natural history programming is so ideally suited to HD. It’s revitalised the factual genre by allowing a more filmic approach, which is a wonderful thing. There’s no greater image than what nature has to offer. Once you watch it in high definition, you can’t go back.”

Channel operators and programme makers  alike were not slow to recognise the potential of high-definition and began developing HD libraries and pipelines in earnest. Subscribers were in the main much slower to embrace the technology. But just as it seemed like the flood of high-definitions subscriptions was about to start, the economic downturn hit. If operators are being more cautious generally about which channels to launch, are they being even warier about bandwidth-hungry HD channels? “HDTV isn’t going to be omnipresent in the near future, but take-up isn’t going to stop,” Cohen says. “The HD train has been rolling along with a fair amount of momentum and while the economy might slow it down, it won’t stop it. Will certain platforms hesitate to take the plunge? It’s hard to say but we’ve been heartened by the number of operators that continue to launch HD channels.”

AETN distributes three HD channels internationally. History HD is the most widely distributed, available in 15 countries, while Bio HD and Crime & Investigation HD are available in the UK and Ireland. The schedule for its international HD channels differs from that of the standard definition channels, unlike in the US where its four HD channels (including A&E HD) are simulcast versions of the main channels. The broadcaster began producing content in high definition four years ago, and according to Cohen all programming is now produced in HD.

Discovery Networks International has rolled out HD channels in 30 markets to-date, including launches in Romania and Russia earlier this year. It recently expanded its HD channel portfolio with the launch of Animal Planet HD in Scandinavia. “As soon as local operators are ready to launch HD tiers, we will be there with our HD offerings,” says Ricca. 

Like other channel providers, Discovery Networks International has also placed an emphasis on getting content to new digital platforms. Its international digital media group creates content that’s relevant to local markets, working closely with Discovery’s domestic digital media teams to customise US content, which Ricca says helps to drive cross-platform sales and sponsorship opportunities worldwide. “It is increasingly important to us to connect with consumers through multiple touch-points, and in today’s fragmented environment, they turn to brands they can trust, like Discovery,” says Ricca.

Last year, National Geographic Channels International made a significant investment in developing its own websites in order to add a number of new elements, including social networking and exclusive video content not intended for linear channels. The Nat Geo Adventure website includes video blogs of users’ own travel adventures, for example.

“Overall revenues from online play a small part but an online presence is important in terms of the perception of the brand,” says Suissa. However, he believes that across the industry, there will be less investment in the digital space on the whole.

VOD, might be a more likely area of investment as pay-TV operators, particularly cable continue to add additional services to reduce churn and increase ARPU. It might also be a means of pre-empting the launch of a linear channel. BBC Global Channels has been working over the last six months to develop a branded, packaged subscription VOD offering to take to platform operators. “As a relatively new channel provider I think it’s an important means of entry into markets,” says Possenniskie. “Obviously linear channels are our core business but VOD is become more important and the success of VOD might lead to linear deals.”


Sidebar: Building on the brand

The factual genre can encompass a whole range of sub-categories, from wildlife to science, history to crime. Factual channel operators have been busy expanding their channel line-ups by diversifying the subject matter at the core of their brands.

Discovery Networks International, for example, now boasts 21 international brands. Since launching the Discovery Channel internationally 20 years ago, it has gone on to develop networks as diverse as Discovery Turbo, Discovery Science and Animal Planet. According to Greg Ricca, president and CEO of Discovery Networks International, when diversifying from a core brand, consistency is key. “Discovery has harnessed the quality, appeal and credibility of the flagship Discovery Channel brand to launch new channels around the world that are trusted by viewers – they know what to expect from Discovery, and we ensure that knowledge and satisfying curiosity are at the heart of all of our channels. We’ve gained audience trust and built market share internationally through the rollout of additional brands.”

AETN, best known for its History channel has since launched Crime & Investigation, Bio and Military History on to the international market. “When you launch a new channel, there’s balance to be made. You can’t get too far away from you do well,” says Sean Cohen, senior vice-president of International AETN. Military History, which launched outside the US, has obvious links to the incumbent History Channel, but Cohen admits that it took a risk when it launched Crime & Investigation (now known as C&I) on to the international market in 2005.“We’re staying pretty faithful to factual entertainment internationally. We took a slight risk in launching C&I to the international market in 2005 but ultimately it didn’t fall too far outside what we’re historically good at and it has performed very well.”

When BBC Worldwide’s Global Channels department was developing its strategy of expanding its portfolio of channel brands available for the international market, a factual-based channel was an obvious choice and BBC Knowledge was born. The availability of content relevant to the channel meant it could have been segmented even further, says Dean Possenniskie, general manager and senior vice-president EMEA, but the department was wary of diluting the brand too much: “Within the channel we have five defined sub-genres – science and technology, the world, the past, business and people. Potentially any of those could merit a full channel but based on our own research, there’s a real expectation that our brand will offer a very high-quality channel and we felt that containing all of that programming within one channel would make it really diverse and ensure high quality. If you develop too many channels there’s a risk of stretching your content too thinly.”