The television industry is undergoing a fundamental transformation according to a report launched today by Deloitte’s Technology, Media & Telecommunications Industry Group. It is evolving from being mass-market, single-event, and broadcast-focused, into a sector which is far more complex but potentially more profitable.

“The most significant change occurring is the fragmentation of audiences and the consumption of content across an expanding array of media, channels and devices. The combination of these factors is eroding the dominant position of television broadcasters and major networks,” comments Ed Shedd, media partner at Deloitte.

“In the UK, market share for four of the major broadcasters has been in decline for the last 10 years. Conversely, non-terrestrial broadcast share has gone from 6% in 1993 to 28% in 2005. Changes such as these have had a profound effect on the structure, dynamics and the future of the global broadcast television industry, for both private and public sectors.

“The mass audience which was once enjoyed is scattering, as a result of which the ability to charge premiums to advertisers is beginning to evaporate. This trend – even in countries that have undergone fragmentation for years – will continue and its impact will be felt across the entire broadcast industry.

“In an age of TV-on-demand, broadband access and the ever- increasing array of TV services to choose from, network operators have two problems.  To face up to their declining ability to broadcast to mass audiences, with the effect this has on advertising revenues.  And to find new ways of establishing closer and more profitable relationships with the people who used to be part of that mass audience.”

In a fragmented market, the way broadcasters have traditionally run their networks will no longer deliver the growth rates investors expect. In its report, Deloitte recommends that instead of relying primarily on advertising revenue and mass-market reach, networks will have to extend their business models to produce greater value along three new dimensions:

• Broadening their reach to new media channels and formats
• Deepening their relationships with customers by offering services, personalised to meet specific demands and needs
• Lengthening their content lifecycles through the creation of physical products. For example, DVD sales and rentals in the five major European markets reached $9.3 billion during 2004. This is expected to grow to nearly $17 Billion in 2009.

“Doubtless some major events – like the Olympic Games, the World Cup and the Super Bowl - will always attract mass audiences. These will continue to earn broadcasters astounding advertising revenues, as high as $80,000 per second. But even with these events, audiences are dispersing across a wide variety of media, content is being fragmented and some cases, time-shifted. If broadcasters hope to remain active players in the market in years to come, there needs to be serious consideration of how they will evolve their customer relationships alongside developing technologies and trends.”

In order to secure their place in the future of the sector, television networks need to move towards a services model, which delivers content-driven services that are re-packaged for a wide range of devices, media and consumer groups. Such offerings will include:

• On-demand content – Creating a virtual warehouse from which slices of audio and visual content can be sold for a wide range of uses, such as web-casts, radio airplay, mobile phone downloads, and video-on-demand. Professional applications include charging other networks – particularly those overseas – for access to content archives.
• Interactivity – participation, voting, purchasing, news and information, on-line games, questions and comment submission, and web-based chat.
• Events – generating revenue from tie-in events such as the concerts based around the Pop Idol and American Idol series.

“Offering a broader range of services is a powerful way in which television networks can nurture customer relationships and stay ahead of changing market needs. It also has potential to provide a reliable stream of subscription revenue and repeat business, which could help offset volatility in other areas of the business. Most importantly, content-oriented service models would allow networks to give consumers the control they demand – the key to customer satisfaction and loyalty in a disaggregated market,” concludes Shedd.

Ends

Notes to Editors

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.