Eyes down for a fat profit

There are not enough ads to pay for all the new TV channels. But one network has discovered that bingo is the answer, says Alex Benady

Once upon a time, television was the magical goose that laid batch after batch of golden eggs. You only have to go back 21 years to find a time when ITV was the only commercial television station, sucked up roughly half of the total TV audience and enjoyed a complete monopoly over television advertising revenues.

Today, however, the outlook is less enchanting. There are 472 television channels licensed to broadcast in the UK by the Independent Television Commission. Not only are they are competing for the same audience, but, crucially, they are also fighting to attract the same advertisers.

With the average station audience now numbered in the thousands, and the vast majority of audiences lower even than that, the hunt is on for other ways to fund television. "The key question is how to make enough money to provide decent content when your audience is too small to pull in significant advertising revenue," says Kingsley Wilson, a media analyst at the investment bank Investec.

TV stations are experimenting with subscriptions, sponsorship, advertiser-funded programming and product placement as alternative sources of revenue. One company, however, seems to have solved the problem conclusively, despite having some of the smallest audiences on digital television.

This company is the Gaming Channel, and its flagship money-earner is Avago, a bingo station that launched on Sky last year. In its first year, the group, which also owns a female-oriented porn channel and an interactive horse-racing network, enjoyed a turnover in the region of £50m. And it didn't sell so much as a single ad.

Instead, it has relied on the interactive technology that comes as a free extra with digital TV. "The idea is to exploit the red interactive button [on viewers' remote controls] as the basis of a new business model. It was conceived of as a way to enhance editorial content and to allow for some home shopping. But I believe it has to be seen as a revenue earner," says Avago's Debbie Mason, who thought up Avago in what she describes as "a muscadet moment in a wine bar".

Often, Avago's audiences number just a few hundred, and they rarely exceed a few thousand. Yet it covered its £1m start-up costs within three months of opening and now claims to be making regular, substantial profits.

The secret of its success lies in its technology. At the heart of the Gaming Channel operation lies a piece of complex, browser-based software that is nonetheless simple to use. "It looks like we are using technology to sell sex and gambling. But there are loads of places people can go for that. What people really want and what we are really selling is a sense of belonging and connection," says Mason.

So, while a male-led operation might be tempted to lead with its technology, the Gaming Channel sets out to provide just that: belonging and connection. Avago, for instance, works by selling bingo cards. It currently has 125,000 registered members; to play, each of them charges up their account via their credit card and buys game cards for 25p each.

Prizes can be substantial. "Dogbone" is a game that can pay out £10,000 every hour, while "Superstar", with its £25,000 jackpot, takes place at 10pm every day. It looks for all the world like a conventional pitch to naked greed. Yet a few minutes in the control room at Avago's Wapping headquarters reveals that the quality of the relationship between the station and viewers is crucial to the channel's audience appeal. Wapping receives a stream of messages from viewers apparently under the impression that the station cares about the minutiae of their everyday lives. The weird thing is, it does - the chitchat is what keeps the punters coming back for more. So "PeteB" emails from Stoke to announce that he's "back from holiday with the wife and kids and feeling gooood." Seconds later, the presenter, Georgie, chirrups on air: "Glad you all enjoyed your holiday PeteB. Now let's play a new game of 'Spin to Win'."

"People develop relationships with the presenters and the presenters get to know the audience individually in many cases. We believe that's what keeps them coming back," says Mason.

And the other weird thing is, it isn't even really bingo at all: ITC rules forbid that, so the whole process is automated. You don't have to mark your own card, you don't even have to be watching the channel. The Avago computer does all the work for you. "Technically it isn't bingo, it's fixed-odds betting," Mason explains.

Mason is now trying to create a similar sense of involvement with XXXplicit and iSports TV. She talks of a future in which TV channels resemble internet websites, drawing in people with common interests from angling and stamp-collecting to flower-arranging.

"The red button works best when it is directly tied to what is on screen," Mason says. So when someone appears on screen using a new fishing rod, for example, the red button would allow you to learn more about that rod - and even to buy it on the spot.

It's a good way for television stations to sidestep the problems of having to sell advertising to non-existent audiences. But it effectively turns all their content into a sales pitch. Is that how we want the television of the future to be?