Many of us remember when there were only three television channels and a new launch was a national event. But since the early 1990s the development of new techniques of distribution (satellite, cable and digital) has revolutionised the market. Many homes now have access to dozens of channels and the appearance of a new one, like the highbrow BBC4, can pass almost unnoticed.
The new diversity of choice has come, literally, at a price. Before the revolution, all the channels were free to air. Today many are available only on subscription. But clearly this choice is valued because subscription viewing has increased its market share at the expense of the free channels.
The new subscription channels, more lightly regulated and operating much more commercially than the incumbents, have been able to build a significant share of the nation's viewing time by buying cheap, popular program- mes. People will pay, it turns out, to watch their favourite shows if they are not available free to air. So popular content was bid away from free TV to pay TV, and paying audiences followed. The trend has been so strong that many have forecast the demise of free-to-air broadcasting.
That won't happen. Indeed, there are good reasons to believe that the period of such rapid subscriptions growth is behind us. The rise of pay TV has been based on the value of new subscribers. Large sums have been paid for premium programmes, notably key sporting events, because they guarantee a stream of new revenues from those who will pay the channel to watch those events. When subscription TV was on the steepest part of the growth curve, the number of new subscribers it could hope to attract in this way, and so the price it could pay for content, was relatively large. But as the market matures, the number of new people that can be attracted by a programme falls (because more of the target audience are already subscribers).
This means that the amount the subscription channel can bid for new content is less than before. The result is that it will lose more of the bidding wars for premium content.
In TV, the amount spent on content drives the size of the audience. Over the past dec- ade the subscription channels have enjoyed a virtuous circle. Increasing revenues enabled them to outbid their rivals for more popular programmes, delivering higher audiences and still higher revenues. As the market becomes saturated and these dynamic forces weaken, the battle will swing back in favour of the large free-to-air broadcasters.
In the final analysis, the market for TV channels is not so different from that for newspapers and magazines. The free-to-air channels, with universal access and very large potential audiences, are like the national daily newspapers. The new specialist subscriber channels are like the specialist magazines, where enthusiasts will pay a high cover price to read about cars or yachts or hi-fi, and advertisers will pay handsomely to reach a focused target audience. Yet nobody has ever suggested that these publications might drive the national dailies out of business.
The free channels, like the newspapers, enjoy huge brand awareness. Everyone knows where to find them. They reach large, general audiences. They play a role in our national life that the subscription channels can never match. That is why the audience share of the free-to-air broadcasters will not go on falling indefinitely. Far from facing inevitable further decline, the free-to-air broadcasters will at some stage enjoy a period of rising market share.