Dog days for digital television

The digital television channel Granada Breeze will disappear from screens tomorrow, the latest victim of the advertising meltdown and the struggle to find audience ratings.

It is by no means the first: Granada's joint venture with Boots, the Wellbeing health channel, was so unwell at the end of 2001 that it closed with the loss of 160 jobs and a reputed £30 million, adding to a casualty list that includes Carlton's Food Network, Rapture and the Money Channel.

These closures, however, could just be the start. With advertising still in recession, industry analysts are now predicting a mass switch-off this year, with the loss of up to 50 niche channels. Their latest problems include cutbacks at BSkyB and the cash-strapped cable operators NTL and Telewest, which plan to slash the amount of subscription revenue they are prepared to split with the specialist channels. This is bad news for those like the Performance Channel and the Irish service, Tara, which rely on subscriptions.

The days of niche television may be numbered. "People experimented with different concepts which seemed good ideas at the time," says Simon Wallace, media analyst at the City broker Panmuir Gordon. "But unless you have a compelling option, you have no future. The niche operators are hit by a double whammy: increased rental costs and low advertising income. If you are not number one or two in your category, you have little chance of survival."

Granada Breeze, which grew out of the "woman's magazine" format of the Goodlife Channel in 1997, won only 0.4 per cent of viewing time in cable/satellite homes. Its rival, Living, had a 4.2 per share. "Breeze was competing in an over-crowded market," admits George Cronk, of Granada Sky Broadcasting sales. "Programmes about gardening, cooking and homes can be seen every afternoon on BBC and ITV. What was the point?"

Instead, Granada is switching resources into its Men and Motors channel, adding four hours to a schedule which will now begin at 5pm rather than 9pm. Cronk claims that Men and Motors has grown by 30 per cent over the past year, as the overall cable/satellite market grew by 17 per cent.

Even so, it will be difficult to know exactly how many are watching. The system for measuring ratings has been a continuing problem for all satellite and cable channels. BARB (the Broadcasters' Audience Research Board), which issues figures, has been using a "representative sample" of viewers in only 4,300 homes. In order to be more representative of the smaller channels, it has spent £12 million on enlarging the panel to 5,100 homes, but the new system will not be fully operational until the end of March. In the meantime, a handful of panellists can make or break a channel.

"A million viewers are represented by just 200 homes," explains audience analyst David Graham. "Some of the niche channels only get three panel members watching. If one pops off to make tea and another goes to the loo, the channel has lost two-thirds of its audience. They cannot possibly keep going on advertising revenue. Industry folklore says that you need at least 0.1 per cent share to survive."

David Peters, broadcast planning director at Carat advertising, agrees that advertising revenue (£30 - £50 for 30 seconds) will not keep the channels going. "You need subscription money and premium-rate telephony from on-air competitions to survive," he says. "And low production costs are vital. No more than £5,000 to £10,000 an hour." That compares to the £40,000 Granada is spending on each episode of its new "cut-price" soap Night and Day, or the "usual" £650,000 an hour for network drama.

But a further bombshell is about to hit even the most cheese-paring satellite channels that keep costs down with a mainly imported programme schedule. The BBC is coming. On 11 February the corporation launches two new dedicated children's channels: CBeebies for the under-fives, and the CBBC Channel for six to 13-year-olds. More BBC channels are to follow.

The commercial operators complain that the licence-funded BBC is distorting the market. "There are 14 kids' channels already provided by the market and the BBC are coming in with two new channels that are going to be pretty close to what is already offered," Paul Robinson, managing director of Disney, complained last week. "It is going to use public money to compete extremely vigorously with us and in my view that is an abuse of public-service broadcasting."

Yet even now, a never-ending stream of newcomers appears willing to enter this troubled market. Only this week, the Dating Channel - which has so few viewers that it does not register on Barb - announced it was opening three new niche channels aimed at Asian and gay audiences.

Patrick Bissert, telco and media strategist at KPMG Consulting, says: "While traditional broadcasters using traditional technology spending £30 million a year fail, niche operators with tiny audiences are mushrooming. Somebody like TVJobshop using a virtual studio can operate out of a loft for under £500,000 (a year)." The real surprise has been the growth of travel-related channels. TV Travel Shop took nine per cent of the holiday market last year, according to Bissert.

"In contrast, Wellbeing went down because - instead of promoting the Boots brand - it hid behind a façade," he adds. "I predict that we will see a number of high-street brand names entering the TV market. It costs just over £3 million a year to operate - a small price compared to a TV advertising campaign or a mailshot."

Martin Jackson is a former editor of Broadcast magazine.

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