Home Analysis Traditional TV warned it will not be able to withstand FAANG

Traditional TV warned it will not be able to withstand FAANG

Alex DeGroote speaking at Videoscape Europe
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Traditional broadcasters have had their work cut out defending their businesses from the rising tide of streaming services, but according to a leading media and tech analyst, it’s a battle they most likely won’t win.

“In 5-10 years, I will be very surprised if our TV and video landscape is not increasingly dominated by Apple, Facebook, Google, Netflix and Amazon Prime,” Alex DeGroote told our sister publication Mediatel Newsline at Videoscape Europe this week.

“It’s nice to think that traditional free-to-air would be able to withstand these massive companies, but in reality I think they’ll continue to take market share and make it a very difficult competitive environment.”

According to DeGroote, owner of DeGroote Consulting, the reality is that traditional broadcaster budgets cannot compare to the enormous content budgets of the big tech disruptors. Whilst ITV’s content budget for 2018 is £1 billion, Amazon’s budget is $5 billion and Netflix’s is $8 billion. “ITV is brilliant, but it’s working with limited resources,” he said.

Some commercial channels have also been held back by the “burden” of public service requirements, DeGroote said. Commercial public service channels (ITV, Channel 4, Channel 5) are limited to an average of seven minutes an hour of adverts throughout the day (rising to eight minutes between 6pm and 11pm) and are required to broadcast 15-minute local news segments four times a day – which, whilst not “onerous”, is now “irrelevant.”

“YouTube doesn’t have to meet public service requirements, nor does Netflix or Amazon Prime. We need to examine the regulatory structure behind these companies,” he said.

It’s not all doom and gloom, however, as DeGroote said there are still avenues available to broadcasters that offer strong opportunities for growth. “Alliances, alliances, alliances, and an intelligent approach towards original content production – which ITV has got good at in the last few years,” he said. But he added that to succeed, the sector will need help from the government, regulators, and supportive advertisers.

 

UK investors are too risk-averse

Meanwhile, DeGroote argued that UK and European investors are significantly more risk-averse than investors in the US and are less willing to fund losses for a long period of time – which means they are pulling the plug too soon on investments.

He cited the “savage cut-backs” currently taking place at Buzzfeed, Vox and VICE, as well as UK-based social video company, Brave Bison, which he said is “pretty unloved” by investors. “In terms of its operating performance, it’s actually doing really well. They’re growing their revenue – however, it is slightly loss making.”

According to DeGroote, U.S. investors are willing to wait to see profit returns, as they did during Amazon’s first 10 years. “[UK and European investors] have a slightly more short-term, profit-focused way of thinking about things. There is a cultural difference between investors in the two markets.”

If innovative new companies are to reach their full potential, investors will need to note the long-term planning that went into building the FAANG companies rather than demanding cuts too soon, he said.

Mediatel Newsline provides media and advertising industry news and some of the sharpest opinions in the industry. Check it out here.


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