Attentional turns attention to Freeview slot value

Attentional has released a background paper that focuses on how much a Freeview slot is worth to a channel operator and what sort of channel could get the best value from it.

The last time a Freeview slot went up for auction it sparked a bidding war between Channel 4 and Five that saw the former pay an estimated GBP10m a year for it.

Digital switchover is well underway, but Attentional's UK Television Forecasts predict that the number of people in Freeview-only households will rise by a further 7.6m by the time digital switchover is complete (from an average of 16.6 million in 2007 to 24.2 million in 2012).

This is an increase of 46 per cent, far outstripping the predicted growth of Cabsat households (estimated at 13 per cent).

However, while Cabsat households are predicted to maintain a relatively even distribution across different age groups, Freeview-only households are likely to become increasingly skewed towards older viewers.

A significant proportion of older people have yet to convert to one of the digital television options.

To illustrate this, 29 per cent of viewers aged over 55 still lived in analogue terrestrial households in 2007, compared to just 12 per cent of 16-34s.

Freeview is likely to be the popular choice among older viewers yet to convert to digital, and our forecasts suggest that by the time digital switchover is complete, 40 per cent of people in Freeview-only households will be over 55 (compared to 23 per cent of people in Cabsat households).

This makes the Freeview slot less attractive to channels with a younger audience skew, as they stand to gain fewer additional viewers.

Perhaps the most likely candidate for a move to Freeview would be one of the top performing entertainment channels currently only available on the Cabsat platform.

A major Cabsat entertainment channel can expect to earn between GBP20m and GBP30m a year in advertising revenue, but how much additional advertising revenue would such a channel get from Freeview? To answer this question we began by creating two hypothetical Cabsat channels, both averaging the same number of adult viewers and commercial impacts.

One of our channels has a younger audience skew (with one-third of its adult viewers being 16-34), and one is skewed towards older viewers (with only one-sixth of its adult viewers being 16-34).

On Cabsat only, trading on the Adults demographic, both channels were predicted to earn GBP25m in advertising revenue in 2008.

However, if both channels traded on the more expensive Adults 16-34 demographic, the younger skewed channel would be expected to earn GBP28m, while the older skewed channel would only manage GBP14m.

We then ran these hypothetical channels through Attentional's 2012 forecasting model, which is designed to test different scenarios for UK television, relative to a base-case, through to 2012.

The scenario featuring the older skewed channel launching on Freeview from January 2009 predicted that (trading on Adults), it would earn an additional GBP26m in 2009, rising to GBP30m by 2012.

As expected, the younger skewing channel was predicted to make fewer gains.

If it continued trading on Adults 16-34, it was forecast to make an additional GBP19m in 2009, rising to GBP20m in 2012.

If it started trading on Adults, it was predicted to make an additional GBP20m in 2009, rising to GBP22m in 2012 (albeit from a lower base of GBP25m rather than GBP28m).

In other words, a move to Freeview would significantly reduce the benefit of trading on the higher value 16-34 demographic.

Our forecasts therefore suggest that, depending on audience profile, a major Cabsat entertainment channel could expect to earn an additional GBP20 to GBP30m a year in advertising revenue if it were to launch on Freeview, with an older skewing channel likely to do significantly better than one skewed towards a more youthful audience.

Given these substantial margins, it becomes clear why Channel 4 was prepared to pay GBP10m a year to secure its sixth slot on Freeview in 2005, and it is entirely possible that this next Freeview slot could go for even more.

Back to top