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Where have you been, Mr Gyngell?

In a hard-hitting speech last week, the ITV mogul Bruce Gyngell dismissed cable and satellite TV as 'also-rans'. Mathew Horsman introduces a response by Bruce Steinberg to Gyngell's gibe
Publicity generated by the TV executive Bruce Gyngell's "sleaze and violence" speech last week was notable largely for what the pundits ignored. Everyone had an opinion on his broadside against the ITV schedule, which too often "set out to regularly shock and offend by depicting the extremes of behaviour in our society", and his view that "so-called entertainment which once could only be found in the seedy cellars and basements of Soho clip joints is paraded on mainstream television as if it were respectable". But Gyngell, chief executive of Yorkshire-Tyne Tees Television, did more during his speech before the Royal Television Society than to decry falling standards. His message was about the future of ITV itself, and the prospects of greater competition from Channel 4, Channel 5, the BBC and cable and satellite TV. He said the future would be all about mainstream, terrestrial television, and that cable and satellite channels are "also-rans". He concluded: "There's a clear limit to the number of niche channels that people want - you can't go on inventing history channels, lifestyle channels, discovery channels forever."

His analysis did not go down well with the satellite and cable broadcasters, as Bruce Steinberg, chief executive of the UK Gold and UK Living channels, reveals below.

The other night I attended the RTS dinner. I don't normally attend these and now I realise what I have been missing out on. The company is excellent, the discussion lively and the drink plentiful (especially if your host is paying for it). But after listening to the dinner speech by Bruce Gyngell (his second speech there in five years) I realised that little has changed in the industry's staid view of the television marketplace over the past few years.

When Mr Gyngell began his soliloquy I found I absolutely agreed with his statement that terrestrial TV must get its act together if it is to stem the tide of viewers to alternative cable and satellite stations. As the chief executive of two of these multi-channel alternatives (UK Gold and UK Living), I started to worry that ITV, that huge, powerful behemoth of commercial TV, was awakening to the challenge of cable and satellite. My nightmares began to take shape - ITV would drastically increase its already tremendous programme budget (over pounds 600m) and schedule against us. It would unite all of its warring regional factions and market a single powerful identity to the viewers.

But then surprising Mr Gyngell categorically stated that "cable and satellite channels are also-rans". Certainly the individual viewing shares of the multi-channels are considerably smaller than ITV's. However, in multi- channel homes, old viewing patterns have disappeared and more than a third of all viewing is to the new channels. When you look at the total commercial viewing (excluding BBC), cable and satellite channels account for over 50 per cent. When a home installs either a satellite dish or cable, ITV's share of commercial viewing plummets from 76 per cent to 41 per cent immediately - a 46 per cent decrease. By any standards, that's a lot of eyeballs to be losing.

The speaker then went on to say that "all new media in the UK fails initially". Well, UK Gold was profitable in its third year, UK Living will achieve break-even soon and, for the year ended June 1995, BSkyB paid shareholders pounds 249m in dividends. And even those that started poorly such as LWT, Capital Radio and Channel 4 now have stellar performances.

We live in a world where consumer habits are changing rapidly and nowhere is this more true than in the 24 per cent of UK homes that now have cable or satellite TV. Among younger viewers, the picture is even clearer. Cable and satellite channels already reach 31 per cent of homes with children and 34 per cent of all UK men aged 16-34 - both key demographic groups. Advertisers and their agencies already understand and are exploiting the value of the multi-channel audience. In fact, for the first five months of this year, the multi-channel audience profile was both younger than ITV's (51 per cent vs 34 per cent under 35s) and more upmarket (40 per cent vs 36 per cent ABC1s).

When we started UK Gold in 1992, the UK cable and satellite universe was the same size as the Anglia region. Today, it is even bigger than London. By the year 2000, most conservative forecasts show multi-channel TV reaching 50 per cent of all homes and 65 per cent of all men aged 16- 34. Surely the TV landscape is changing.

In a viewing environment of 40 or 50 channels, with more to come this autumn and more still with the arrival of digital TV in autumn 1997, viewers will find themselves confronted with a vast array of channels. And with the advent of near Video on Demand, movies starting every 10-15 minutes, you will be able to watch your choice of film at your convenience.

Using Mr Gyngell's research figures, 75 per cent of video demand is for the top 40 movies. If these movies were available on near Video on Demand, would it signal the demise of cinema? Definitely not, but it might prove a problem for video stores and ITV.

As the number of cable and satellite viewers increases and as more channels launch, channels need clear identities. Viewing behaviour is changing rapidly, attention spans are becoming shorter, so it is essential for channels to establish their place with the viewer in order to mitigate channel surfing.

We have designed our channels, UK Gold and UK Living, with an awareness of all competition. We, and the other cable and satellite channels, are well adapted to building a brand and finding audience share in a crowded market. We make it easy for the viewer to find a reason to tune in. We already strip and strand our programming. For example, on UK Gold we have created a series of successful sub brands such as Bullet, Showtime, Comedy Cupboard and Masterpiece, showing upmarket drama.

The cable and satellite channels are used to compensating for lower programming budgets with innovation. High quality, low cost is like a mantra for us. Over the past two years UK Living's original programming, Agony Hour and Live at Three, often achieved shares of between 5 and 10 per cent of all adults, yet at a fraction of the per hour cost of a terrestrial channel.

In contrast, ITV still relies too much on the traditions of viewers who have grown up with only two or three channels.

Additionally, the attempt to create a brand in the current pounds 5m ad campaign seems confused and ineffective. The endemic problem faced by the ITV companies, the tension between viewing a national network and a federation of regional channels, is ever present. At the same time that the ITV Network Centre is trying to push a strong national brand, the regional ITV companies are equally concerned to protect and enhance their own identities. Some of these companies have even started their own branded channels on cable and satellite.

The cable and satellite channels here are gaining distribution and viewership every year. This allows them to put more money into programming and, therefore if done correctly, will win over more viewers, more advertising revenue ... thus allowing them to invest more in programming, and gain more viewers etc. This is exactly what happened in the US. Little niche channels started with small budgets and now command 47 per cent of all TV viewing. They spend more on programming than some of the terrestrial channels in the UK.

ITV, on the other hand, is in a vicious circle, with viewership eroding every year, revenue flat in real terms and costs escalating at outrageous rates. This will translate into reduced programme budgets, with more money focused onto an ever smaller number of flagship shows and an overall reduced importance for the channel in the viewer's mind.

ITV will always be a valuable, mass market channel. But in five million homes, the British public has already sent out a message to ITV - that it is enjoying many other cable and satellite channels better. Mr Gyngell, multi-channel TV is already a success and there's more to come with digital satellite!