How to survive the digital crunch

'You wish. Nonsense. Wait and see.' That's what Martha Fusca, president and CEO of Stornoway Communications, has to say to anyone who thinks that digital indies such as iChannel and BPM are doomed. But she admits the last year has been trying. Digital penetration, though increasing, isn't what it was predicted to be, the buyers aren't exactly pouring money into the new channels and viewers aren't in a mad rush to subscribe. Stornoway, Alliance Atlantis and other companies have had to cut back on full-time staff, and all of the channel owners are finding themselves in a difficult position where there's less money than anticipated coming in, but all the more reason to spend money to get digital penetration and subscription rates back on course.

‘You wish. Nonsense. Wait and see.’ That’s what Martha Fusca, president and CEO of Stornoway Communications, has to say to anyone who thinks that digital indies such as iChannel and BPM are doomed. But she admits the last year has been trying. Digital penetration, though increasing, isn’t what it was predicted to be, the buyers aren’t exactly pouring money into the new channels and viewers aren’t in a mad rush to subscribe. Stornoway, Alliance Atlantis and other companies have had to cut back on full-time staff, and all of the channel owners are finding themselves in a difficult position where there’s less money than anticipated coming in, but all the more reason to spend money to get digital penetration and subscription rates back on course.

Andy Macaulay

partner and planner

Zig, Toronto

The big challenge, it seems to me, is that when you are talking about reaching a very targeted group of people, who are brought together by virtue of the common interest that they share, is that you are talking about a very different model than the traditional broadcast model.

With digitals, it’s more about the relationship of the marketer to the audience, rather than just bought time. It’s like sponsorship in an offline application: The best sponsorships are those where there’s complete congruence between the interests of the audience and the event itself.

And it’s those kinds of relationships that the advertisers are going to have with the programming and the properties that are on these digital channels. It’s not broadcast television, it’s more like, say, a baseball magazine for baseball lovers.

As a diginet you have to go to the marketers and ask them to think of the target audience for any given product or service as being a series of concentric circles. At the core, in the innermost concentric circle, are the evangelists for that product or service. In a perfect world, if the diginets have focused their offering tightly enough, then they are aimed at the evangelists for somebody’s product.

Then it’s just a question of saying: Well what are those products and how do we create a symbiotic relationship which first allows the advertiser to get at those evangelists, and secondly, allows, over time, the audience to expand into the next concentric circle, which contains the loyalists, the regular users, or whatever.

If the diginets don’t have quantity to offer, but do have quality to offer, then that offer is going to be of most interest to the real core, loyal user of a certain product.

Line up those two sets of interests and you’ve got a powerful relationship. Use the digitals as they’re meant to be used: As lasers, not shotguns.

Theresa Treutler

SVP, broadcast investment director

Starcom Worldwide, Toronto

You know the disappointing thing is that only a small group of the diginets have actually even signed up for the Nielsen service. In terms of the official reports that are available to us from Nielsen, all that we get is average daily reach and some average minute audiences, but just on some broad demos.

As buyers, when we look at the diginets, we need much more detailed target information. And let’s not even go into target group qualifiers. But even strictly by age and gender – when you look at it that way there’s an even smaller group of diginets that the data is available for.

What I’m saying is, how on earth can we consider all of the diginets when we only have relevant data for a small portion of them?

Why aren’t they signing up? I think some of it is financially driven. If you are a diginet that’s not part of a huge organization that can bear the financial burden of operating in the red, it’s probably very tough to afford a commitment to Nielsen.

But if there is no data, how is it conceivable that buyers will seriously consider a network? Without data there’s no way.

Not that the average minute audience is the number-one driver of a commitment anyway because really that argument doesn’t apply. Whether they are the first ranked or the last ranked, all of the audiences are small within the world of national television in Canada.

It’s more of an environment or target group profile-based decision. However, we still have a currency that we have to deal with, and that currency is cost per thousand viewers reached. And that’s part of our job, vis-à-vis our clients – we still have to demonstrate some kind of return on their investment. Even if you’re only investing $5,000, it’s still their money and we have to be accountable for that.

Marcia Martin

GM and VP of FashionTelevision and SexTV

CHUM Television, Toronto

As broadcasters we have to be smart about this. Because we’re losing money right now, there isn’t a whole lot of money we can throw at the channels.

So we’re in a challenging position: How can we let consumers know that they’re out there, and that they’re worth watching?

We’re waiting for the rollout of more digital boxes to more homes, number one. That will help. Of course, it’s not a guarantee, because consumers now really do have an à la carte, pick ‘n’ pay kind of choice – more so than they’ve ever had.

So, you have to just stick with it. And fortunately a company like Chum can afford to stick with it. Our business plan was modelled on a low penetration with few homes, so we’re O.K. We obviously would like it to be better, but we believe that eventually it will get better.

There’s obviously an advantage to being associated with a company that has other channels, because the best way we can get the message out there is to use our own airwaves, which we are doing.

But that too is a challenge, because we have our own conventional shows that we have to push, especially in the Toronto market. It’s a very competitive market, so we’re not going to get as much of our own airtime as we’d like for the digitals.

My feeling is that if I could have just one hit show, a show that people knew about, had heard about, wanted to watch, I’d be happy. It gets them to the channel, and once they’re there, they get a taste of what else we have. There’s too much out there to just say ‘Watch Fashion. Watch Sex. Watch Drive-in Movies.’

Wayne Sterloff

VP, specialty networks

Craig Broadcast Systems, Calgary

The first area a digital can work on is the quality of the product itself. The guys that came out and didn’t offer a quality product are really suffering. And one of the big problems is a high repeat factor. You’ve got to decrease the number of repeats. The audience has rejected that – the viewers are not the slightest bit interested in a bunch of repeat programming.

Part of that is working with the programming distributors to cut deals that allow you to do library sampling, or library dipping, that enriches the various dayparts of your schedule.

That, in turn, will lead to a couple of things. First of all, it will increase the interest of the BDUs (Broadcast Distribution Undertakings), the cable and satellite companies, and if you can increase your carriage rates, then you automatically stand to increase your subscriber rates. That then will lead to an increase in your advertising revenue.

The next area you have to look at is your relationship with the BDU. You’ve got to get involved in supporting – through co-op marketing – the work of the distributor.

If I were in a weak situation, one of the things I would do is to go to the BDUs and say ‘What can I do with your call centres to make my network more visible?’ For example, simply meeting with every employee of the call centre, even if you meet in small groups at a time. You give them a little incentive for being there, you take a little swag, and you get them for five or 10 minutes and you explain to them what your channel’s about. You explain to them the dayparts of the schedule and your programming strategy – basically the highlights that you want the CSRs talking about with potential subscribers on the phone.

That is the cheapest marketing that you can do, and I’m surprised that some of these weaker channels aren’t doing it.