Subscription television penetration rates are lagging but the channels claim they have programming right Ñ they just need to convince non-subscribers. The art of programming for subscription television is an entirely different kettle of fish to programming for broadcast television. Some would argue that current subscription penetration rates, which lag at around 25% of total households, suggest that subscription broadcasters are doing something wrong. Foxtel and Austar may offer more channels than free-to-air (FTA) television, but they havenÕt convinced the majority of the population that subscription television is worth paying for. But programmers at subscription channels are adamant theyÕve got a compelling offering Ñ they just need to get better at selling it. The point was made by John Porter, CEO of Austar, at this yearÕs Australian Subscription Television & Radio Association (ASTRA) conference in March. ÒNon-customers canÕt name any benefits; customers say they canÕt live without it. We need to get back into the entertainment pages and out of the business section,Ó he says. Subscription broadcasters are producing some of the most innovative programming on Australian television. The problem is that non-subscribers arenÕt always aware of it. Whereas free-to-air channels try to be all things to all people, subscription channels only need to meet the needs of well-defined groups of people, giving them the freedom and flexibility to do things differently. Bruce Mann, CEO of XYZ Networks, speaks more like a marketer than the chief executive of a production company when he speaks about subscription television. ÒOur channels are an environment. A lot of our people at XYZ come from marketing backgrounds. We make programming to match the brand promise,Ó he says. ÒWe have a dynamic relationship with our customers, we know where they live, they can pick up the phone and talk to us. The free-to-air guys put up a signal and someone gets it; they donÕt know who their audience is.Ó XYZ Networks views each of its channels as individual brands, which create an individual environment for advertisers. Viewers are driven to local programming, so XYZ is committed to producing local content, particularly for The Lifestyle Channel and Channel [V]. In fact, if you exclude sport, Channel [V] is the biggest producer of live television in the country, broadcasting 25 hours of live programming every week, and 10 to 15 hours of post-produced programming. The unique nature of subscription television is starting to resonate with advertisers. ItÕs not about numbers; itÕs about the relationship that subscription channels build with audiences. ÒWeÕre punching above our weight with advertisers at Channel [V]. We understand young people and we offer an integrated environment. We have a database of 250,000 people who we are in regular contact with on our web site or by SMS,Ó says Jacquie Riddell, general manager of XYZ music channels Channel [V], Music Max and the Country Music Channel. Each year, a Channel [V] bus travels around the country to 30 national locations to host free music events, drawing crowds of up to 5,000 people. The events not only provide material for local programming, but build awareness of the Channel [V] brand. They also provide unique opportunities for advertisers, with Billabong sponsoring vertical skating ramps at last yearÕs concerts. Interestingly, Channel [V] is one of XYZÕs lowest-rating channels, yet it generates the highest proportion of advertising revenue. The reason is that clients are getting something that they canÕt get out of a 30-second TVC. ÒWe work our asses off for clients,Ó says Mann. When Mitsubishi signed up to sponsor six live recordings on Music Max, it wasnÕt paying for eyeballs. The sessions feature live performances by musicians including Coldplay, Blondie and John Mayer, and go to air this month. ÒMitsubishi spent less than they would have spent on a free-to-air commercial, but they got something quite different from it. They werenÕt looking for CPMs; it was about fitting their brand with something,Ó says Riddell. SINGING ITS PRAISES At this yearÕs ASTRA conference, Porter called on the industry to address customer complaints about the number of program repeats, channel promos and advertisements being aired on subscription television. Deanne Weir, group director corporate development & legal affairs at Austar, says the problem is one of perception. She says churn rates are at their lowest levels, and program repetition is not a problem for subscribers, because it allows them to watch their favourite shows at alternative viewing times. ÒWeÕve got to get better at explaining the quality of our platform. Our churn rate is at its lowest ever and weÕre gaining subscribers in every market,Ó says Weir. To tackle the problem, the industry has ramped up its marketing activity this year. Austar launched a $5m television campaign by BMF in April, designed to show the impact that subscription television can have on peopleÕs lives. The campaign has helped Austar grow its customer base to more than 420,000 subscribers. ASTRA will launch the second phase in a series of commercials promoting the merits of subscription television, while Foxtel has also upped its marketing presence. INTERACTIVITY Viewers are no longer using television as a passive experience, and subscription channels are capitalising on this shift. Nickelodeon viewers voted online or by SMS to select the host of a new show. The channel received 20,000 votes within three days, showing that kids want to be involved with what theyÕre watching. Jane Gould, programming & research director at Nickelodeon, says the ability to communicate directly with audiences is part of NickelodeonÕs programming strategy. A survey conducted recently by Nickelodeon showed that 50% of 10 to 14 year-olds send an SMS every day, making kids a prime target for interactive television. Cartoon Network uses research to match its programming to the desires and interests of its audience. ÒWe focus on the same audiences around the clock and can therefore be very targetted in our scheduling and program acquisitions. We translate insights from our research to develop and fine-tune the networkÕs overall corporate direction, including programming strategy,Ó says Marc Buhaj, director of programming & acquisitions at Turner Entertainment Networks in Asia. XYZÕs Mann believes it is just a matter of time before penetration rates climb to more than 40%. The rate is 80% in the US and 40% in most Western markets, and thereÕs no reason why Australians Ñ who tend to be early adopters of technology Ñ wonÕt match the trend. If penetration rates increase, FTA networks will see a considerable downward shift in audience levels. ÒHats off to the free-to-airs for using a lot of influence in Canberra early on. ItÕs been very uncommercial; the anti-siphoning laws are obscene. But penetration [of subscription television] will come with time,Ó says Mann. ÒFree-to-airs have been crying every step of the way, but look at their profits. TheyÕre doing fine,Ó he says.
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