Page last updated at 16:20 GMT, Wednesday, 18 February 2009

Media revolution: Tomorrow’s TV

By Laura Craig Gray
BBC Money Programme

A decade ago, the UK was a net importer of television programmes. Now we're one of the most powerful players on the international television stage, exporting more than half the world's TV "formats".

TV remote control
Consumers are changing the way in which they watch television
But a transformation in the way viewers consume television is turning the industry's business model on its head and threatening the long-term future of this, one of the UK's most significant creative industries.

In the UK, we're watching at least as much television as we've ever done: the average British adult is in front of the box for more than three-and-a-half hours per night.

But the amount of money coming into television from advertising is falling fast. The UK is particularly badly affected - here, it's plummeted by £100m in the past eight years.

As digital technology now allows viewers to choose from hundreds of channels and even skip the commercial breaks, and as advertisers switch to the internet, broadcasters are having to cut the fees they charge advertisers for airtime.

Steve King, the Global CEO of ZenithOptimedia, one of the world's biggest buyers of media time and space for advertisers, says: "The cost of reaching 1,000 adults is now roughly £4.50. The average price about eight or nine years ago was nearly £7.

"There's no other market anywhere in the world that has seen the cost of their TV advertising fall at that rate."

Worldwide versions

In this environment, securing income from abroad has become vital to the British television industry.

One of the most successful British shows abroad is the popular quiz show Who Wants to be a Millionaire? Staff from 2waytraffic, the company that owns the format, travel the world setting up local versions of the show.

When Millionaire became a hit in prime-time ABC, the whole thing changed
Peter Bazalgette

It's been on air in a staggering 107 countries and plans are afoot to bring it to Angola and even Afghanistan.

To ensure that the Millionaire brand is applied consistently, local productions have to conform to 2waytraffic's strict production "bible" that specifies everything from how to select contestants to how to build the set and how to use the lighting and music during the show.

The success of Millionaire has helped transform international attitudes to British television formats.

As Peter Bazalgette, one of the UK's leading television executives, says: "In the mid-1990s I personally came up with a few hit formats: Changing Rooms, Ground Force, Ready Steady Cook.

"When I first tried to sell those in the United States, the network bosses wouldn't take meetings with me. When Millionaire became a hit in prime-time ABC, the whole thing changed.

"Suddenly the bosses in America, the largest media market in the world were in Britain, knocking on our doors saying, 'What's your next idea, what have you got?'"

Product placement

British television shows now feature prominently in US television schedules, with programmes such as Celebrity Fit Club, Top Gear, Wife Swap, What Not to Wear and even Antiques Roadshow having regular slots in primetime.

Even the country's top-rating show, American Idol, originated in the UK.

Like many US programmes, the makers of American Idol receive some of their funding from product placement deals with manufacturers who pay money in return for seeing their products featured in the show.

HDTV set being carried out of a shop
Television is going through some profound technological changes

British programme-makers are not currently allowed to secure revenue for their programmes in this way, but many within the British television industry are calling for the rules to be relaxed.

As Ben Silverman, one of Hollywood's top television executives, says, "The deregulation has to happen, otherwise your commercial broadcasters will be out of business."

Another source of revenue that is becoming increasingly important to programme budgets on both sides of the Atlantic is merchandise.

Nowadays, when programme ideas are being developed, production companies often factor in money that can be earned by selling books, DVDs, online games, clothes, toys etc bearing the programme brand name, as well as the potential to sell the programme abroad.

Piracy problems

Anne Wood, of the production company Ragdoll, reveals how such revenue now plays a critical role in funding children's television programmes.

"When we did Teletubbies, which was mid-1990s, we would be able to get three-quarters of the budget from broadcasters," she says.

"Now it's the other way around. You're very lucky nowadays if you get a quarter and you have to go out and find three-quarters. We thought times were hard then, but they are impossible now. I don't think that I could have done it now."

Pirate merchandise and, in particular, the piracy of digital content are threats that the television industry is having to face up to.

The changes we're about to see as we move from analogue to digital are as profound as the changes in television 40 years ago
John McVay, Producers' Alliance for Cinema and Television

The proliferation of video-sharing websites means that viewers around the world are increasingly using their computers to download and view entire programmes illegally.

Because the makers of those programmes do not receive any money when viewers watch programmes in this way, it potentially threatens the whole basis on which programmes are funded.

But rather than simply concentrating efforts on closing these websites down, many senior figures within the television industry believe that the business model presented by piracy actually represents the future.

Ben Silverman says: "I don't look at it as piracy - I look at it as ubiquity of our content. And so if we can figure out a way to monetise that ubiquity, I'm bullish about it. Today is figuring out what the model is."

'Profound' changes

All the UK's major broadcasters have set up websites to allow viewers to watch their programmes via the computer, while social networking sites such as Bebo are carrying television content and even originating their own shows.

As the lines between television, the internet and social networking sites blur, this presents exciting but controversial new opportunities to bring advertising revenue into programmes.

Experts predict a future in which broadcasters gather substantial amounts of information about viewers and sell this data to advertisers who target their messages much more precisely than at present.

John McVay, chief executive of the Producers' Alliance for Cinema and Television, says: "The changes we're about to see as we move from analogue to digital are as profound as the changes in television 40 years ago, when we moved from black-and-white to colour."

Media Revolution: Tomorrow's TV. Broadcast 1930, BBC 2, Thursday, 19 February 2009.

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