Under ordinary circumstances it’s quite simple to figure out whether a TV channel is performing well. Advertising revenues correspond to your share of commercial impacts (SOCI), so when your market share goes up you’re doing well, and when it goes down you’ve got a problem.
So it was with mixed feelings that UKTV CEO Marcus Arthur greeted the latest SOCI numbers to land on his desk. The seven broadcast channels in the business collectively accounted for over 8 per cent of total advertising impressions between March 16 and April 27, itself a relative increase of 8 per cent on the figures for February-March.
“My share is up but the share is only relevant to the size of the cake, and our estimates are for the next three to four months that that number could be down 50 per cent. It will get slightly better to the extent that the next year will average a 35 per cent decline, but that’s still a monumental hit in terms of lost revenues,” explains Arthur.
At first glance, you might assume a situation that forces the entire population to spend their free time in the living room would be rather good for a television company. It’s probable there will never have been more bums on seats than during the COVID-19 lockdown, but those people just aren’t spending, leading advertising revenues to spiral.
Arthur says that UKTV is relatively less affected than many others. About 40 per cent of its revenues are dependent on selling exclusive access to its channels, such as Dave, Gold, Alibi and Yesterday, to companies like Sky and BT - these revenues are in a sense fixed because they aren’t dependent on advertising spend.
It is also somewhat protected from the other great disruption the pandemic has brought to the industry - the fact that no one can actually produce TV shows if they can’t get on location or into the studio. (When the inevitable content drought hits later in the year, you too would be glad to own the licensing rights to broadcast the likes of Only Fools and Horses or Last of the Summer Wine.)
None of this is to say that Arthur considers his business unaffected. When he took over as CEO last year, following the acquisition of the business by its joint venture parent BBC Studios, he laid out a strategy involving an increase in original commissioned shows (“Seven out of 10 of my top viewed shows in the last six months were commissioned. You get much bigger spikes for these shows, and advertisers love them”) and making use of BBC Studios’ international distribution for that content.
Both of these are taking a hit, which, Arthur explains, requires buyers of content like UKTV to invest in protecting its ecosystem of independent production companies, both by continuing to pay for the development of shows and scripts, and through the wider BBC donation of £700,000 to The Film and TV Charity:
Arthur’s efforts to protect the business have also necessarily included cost reduction. “Just as in any manufacturing business, there’s an obvious set of cash outlays you won’t need to make because you’ve paused or cancelled the programmes. There’s also a degree of marketing money laid out against those commissions that you now don’t need to spend, plus the usual levers like office expenses. But they won’t fill the gap for the revenues not coming from advertising.”
Leading through the crisis
Arthur says one of the big challenges to get through this period has been to get people to remember there’s a broader strategy “when they’re worried about their mum, their dad or their grandma”.
“How do you get people to fit their work around their home life, when the whole texture has always been fitting their home life around their work? When we have video conferences and someone’s baby’s screaming or their kid wants to sit on their knee, we just get on with it. Our people must understand they are the most important thing.”
Here are Arthur's tips for remote leadership:
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