By Nigel Walley
Can you imagine if Heinz decided to open shops. I don’t mean big, mayonnaise-themed concept stores. I mean proper shops, in the high street, where you could buy only Heinz products. On top of that, can you imagine if they insisted on the creation of ‘Heinz-branded’ areas in Tesco stores, where all their products could be clustered on Heinz branded shelves. If Tesco refused, Heinz would restrict the products they let Tesco have. If they did, I can imagine we might denounce their folly.
What about if Heinz issued a press releases saying ‘our research shows that our consumers want a consistent Heinz experience irrespective of the retail environment in which they find our products’. It wouldn’t be long before Tesco came out with their own research showing ‘Tesco customers tell us that they want a consistent Tesco experience irrespective of the manufacturer whose goods they are buying’. The average person might side with Tesco on this.
‘Ah, but..’ Heinz might retort, ‘we believe our brand is equally important to the consumer as the Tesco brand, and we want to ensure equal billing in the high street’. At which point Tesco might reasonably respond ‘but you aren’t a retailer, we are’. And so on.
Mad? Yes, but how about, if the two companies weren’t Heinz and Tesco, but were Channel 4 and Sky? Or the BBC and Virgin, – with the products being on-demand TV programmes. This is a very real debate going on now. The TV platforms –Sky and Virgin – want the broadcasters to put their on-demand programmes into their platform-branded menus, which are designed in platform specific colour schemes, with little celebration of the broadcast brands (ie ‘Tesco-like’ TV environments). The broadcasters, for their part, want their own-branded menu pages, under their own control, and decorated to match their online players. While Virgin have let the BBC experiment with this in the current Virgin EPG, the platforms have decided not to allow it in the new generation of EPGs that are about to arrive. Hence the BBC’s recent announcement that they would not be syndicating their programming into the platforms’ on-demand areas unless they guaranteed that they were presented on BBC branded pages.
This comes down to confusion about the difference between customers and consumers, lets call them subscribers and viewers in the TV industry. TV platforms have customers – and have had to build huge customer service infrastructures to service them. Broadcasters don’t. They never have. Broadcasters have viewers, which is the same as saying Tesco has customers and Heinz has consumers. What has happened in the last 15 years, is that the platforms – large, powerful customer service organisations -have appeared between the broadcasters and their viewers to mediate the consumption experience, and its causing problems. There appears to be an industry wide reluctance on the part of the major broadcasters to recognise the change to their role in the value chain that has been brought about by the advent of digital TV.
We have been here before. When the Sky platform started gaining momentum, ITV was worried about the market power of Sky and so decided not to list its channel in the Sky EPG, assuming that viewers would switch back to analogue on their old TV set when they wanted to watch Corrie. The problem was that lots of them didn’t – and ITV lost audience share in Sky homes. The BBC seems to be betting that consumers looking for some BBC catch up programming, will turn off Sky and turn on their lap top. This may be true for a small number of PC-centric early adopters, but there aren’t that many of them. The BBC has about 1.5 M regular users for its online player. Sky has 30M regular users of its TV service. If the broadcasters restrict access to their VOD programming on the TV platforms they will lose market share to providers who do provide content.
This debate would be complicated enough if the broadcasters were insisting that it is their channel brands that get put into the VOD systems. But, for some reason, the broadcasters (or rather their VOD teams) are insisting that the brands they want in the platforms are their web player brands. This is why the BBC announcement actually said that they wouldn’t syndicate content unless it was presented via the iPlayer brand! It would appear that this is evidence of an internal battle at these broadcasters, and the fact that they have the wrong people negotiating with the platforms (see ‘Who gave the IT department a f*#cking brand to play with’)
We are a long way from a form of settlement that will satisfy all parties in this debate. However, it would be unfair to conclude that the fault lies entirely with the broadcasters, and this is where the shop analogy gets interesting. With the new on-demand functionality they are building, the platforms are in-effect creating a new kind of retail environment for TV. However, the first iterations of these platforms have clearly failed on most basic retail criteria. There is very little of the graphical richness that is crucial to selling TV, there is limited promotional capability for programmes or channels, and no sense that a user is entering on a retail journey once they turn on a TV interface. The failure has been in asking web software designers to create the interfaces. An old fashion shop designer might do a better job as they understand how to create retail ‘moments’ (surprise offers), how to build adjancency strategies (eg putting ties next to shirts) and how to entice consumers to buy things through promotion and reward. None of these things happens in the current TV systems.
On the broadcaster side, there is also the need to change their organisations to reflect the new commercial dynamic, and it’s not clear that many have understood the challenge. When Heinz introduce a new product to Tesco, they have long and detailed discussions about how it is to be retailed, and they then have sophisticated processes for checking that the deals are complied with, via their category managers. We continually meet people from the TV industry who have done deals to put content onto the on-demand platforms, but have never seen what it looks like once it is on there – whether it is in the right place, next to the right content and has the agreed promotion (..and we have seen some terrible snaffu’s in this regard!). We need category managers for TV who do the same job.
In all we need the industry to pause and reflect at this moment. These changes aren’t existential for TV but they are hugely significant and represent a subtle change in consumer behaviour and shift in market power. We could do a lot worse than reflect on how the industry could learn from the retail experience, before a retailer comes in and does the job for us.
Next week we look at the launch of Tesco’s new set top box – Tesco TV (DOH!!! and if you think we are joking look at http://www.itvt.com/story/6566/electra-deal-tesco-deploy-its-trove-interactive-tv-technology-freeview-devices