Bye-Bye advertising?

How Generation Y will change the

business model of commercial TV in

Flanders

Author: Joren Lemiegre

Student Number: A4040228

Degree: MSc Marketing

Dissertation supervisor: José Scheuer

Date: 27 September 2012

ii

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Date…………………………………………………………….

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correction services have been used, the extent and nature of the correction is clearly marked in a

footnote(s).

Other sources are acknowledged by footnotes giving explicit references. A bibliography is

appended.

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iii

Summary of dissertation Title: Mr.

Surname: Lemiegre

Forename: Joren

Institution: London School of Business & Finance

Degree Sought: MSc Marketing

Title of Dissertation: Bye-bye advertising? How Generation Y will change the business model of

commercial TV in Flanders

Summary:

This research analyses the impact of generation Y on the business model of FTA-channels in

Flanders. By using both primary and secondary research, the study suggests that generation Y has

a significantly different way of TV-consumption than preceding generations. Due to the

introduction of iDTV-services in Flanders, the consumption pattern of millennials has changed

even more drastically and commercial TV channels encounter difficulties to maintain their

business model. The study argues that FTA-channels will have to adopt their business model to

the needs of this new generation in order to survive. This claim is backed-up by a survey

conducted among 309 respondents aged between 15 and 30 years’ old. The data were analysed

using structural equitation modelling. The results show that millennials do not watch less TV but

that their different way of consuming TV-content does affect revenues of commercial TV. The

study suggests that FTA-channels will have to offer more flexibility, avoid customer lock-ins and

focus on interactivity and less traditional advertising.

Keywords: FTA-channel, generation Y, millennials, commercial TV, business model, advertising,

convergence, Over the top TV, second screen apps

iv

Acknowledgements First of all, I would like to express my sincerest gratitude to my dissertation supervisor, José

Scheuer, who has supported me throughout the dissertation process with her patience and

knowledge. She has encouraged me to keep working on my subject while giving me the necessary

space to approach the subject in my own way. Without her knowledge and enthusiasm, I would

not have been able to finish this project successfully.

Very special thanks go to my student colleagues at LSBF. Whenever I had doubts or questions,

they were always there to help and support me. Furthermore, they have provided a stimulating

and fun environment to learn and grow.

I must also thank everybody who has helped me to spread my questionnaire and who took the

time to complete it. Special thanks go to Katrijn Ganne, Joke Bruneel, Pieterjan Boudry, Lut

Buseyne, Marijn Lemiegre, Lisa Buseyne and Maarten Kiebooms who have actively helped me to

distribute my survey and to reach the necessary people.

In my daily life, I could always count on my dearest flatmate Carlotta Quacquarelli. She may not

always have realised how much of a support she has been to me in the past year. Therefore I

would like to say a special thanks.

And last but not least I would like to thank my friends and family in Belgium for supporting me

through this venture in London. It was not easy to leave this people behind to study in London but

they were always there when I needed them the most. Thank you to my mother, my father and

sister to keep supporting me during this challenging adventure.

v

Abstract “Bye-bye advertising? How Generation Y will change the business model of commercial

TV in Flanders”

Joren Lemiegre, London School of Business & Finance

This research analyses the impact of generation Y on the business model of FTA-channels in

Flanders. By using both primary and secondary research, the study suggests that generation Y has

a significantly different way of TV-consumption than preceding generations. Due to the

introduction of iDTV-services in Flanders, the consumption pattern of millennials has changed

even more drastically and commercial TV channels encounter difficulties to maintain their

business model. The study argues that FTA-channels will have to adopt their business model to

the needs of this new generation in order to survive. This claim is backed-up by a survey

conducted among 309 respondents aged between 15 and 30 years’ old. The data were analysed

using structural equitation modelling. The results show that millennials do not watch less TV but

that their different way of consuming TV-content does affect revenues of commercial TV. The

study suggests that FTA-channels will have to offer more flexibility, avoid customer lock-ins and

focus on interactivity and less traditional advertising.

Keywords: FTA-channel, generation Y, millennials, commercial TV, business model, advertising,

convergence, over the top TV, second screen apps

vi

Table of contents

1 Introduction 1

1.1 TV industry in Flanders 1

1.2 Research Aim 4

1.3 Dissertation overview 5

2 Literature review 6

2.1 Defining TV 6

2.2 Generation Y 6

2.3 Television according to generation Y 8

2.4 Convergence: when it all comes together 21

2.5 Content as the eternal king 23

2.6 Evolution of the current business model 25

2.7 Alternative revenue models 31

3 Research Methodology 38

3.1 Research philosophy 38

3.2 An inductive approach 39

3.3 Quantitative research 39

3.4 Research challenges 41

4 Results 42

4.1 Consumption patterns 42

4.2 Alternatives for the TV-set 44

4.3 Attitude towards advertising 48

4.4 Attitude towards pricing 49

4.5 Pricing possibilities 50

4.6 Attitude towards TV-channels 50

5 Recommendations 51

6 Conclusion 55

7 References 56

8 Appendix 63

8.1 Appendix 1: List of TV-channels in Flanders. 63

8.2 Appendix 2: Questionnaire 66

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List of images Figure 1: The main categories of the business external actors (RANGONE, Andrea and Turconi,

Alessandro, 2003) 19

Figure 2: Multiscreening (own chart based on (GFK, 2012) 20

Figure 3: Types of industry convergence (STIEGLITZ, Nils, 2003) 22

Figure 4: Broadcast value chain showing the position of cable and satellite TV based on (VRM,

2011) and (MCGRAIL, Mike and Robert, Bob, 2005) 25

Figure 5: The new supply chain based on (KÜNG, Lucy et al., 2008) and (BOUWMAN, Harry et al.,

2008) 28

Figure 6: TV advertising spending in Flanders (own chart based on (SVR, 2011b)) 30

Figure 7: A comparison between evaluations and preferences with respect to conventional

advertising and non-spot advertising (NEIJENS, Peter C. and Smit, Edith G., 2003) 31

Figure 8: Theoretical model of customer engagement (VIVEK, Shiri D. et al., 2012) 34

Figure 9: Use of interactive services on iDTV amongst millennials (Source: the author) 42

Figure 10: Difference between men and women in the use of iDTV-services (Source: the author) 43

Figure 11: Percentage of people stating to skip advertisements while using iDTV-services (Source:

the author) 43

Figure 12: Reasons for using other devices to watch TV (Source: the author) 45

Figure 13: Differences between men and women on the use of alternatives for the TV-set (Source:

the author) 47

Figure 14: Attitudes of millennials towards pricing policies and piracy (Source: the author) 49

Figure 15: Preferred ways of generation Y to watch TV (Source: the author) 49

Figure 16: Generation Y's attitude towards FTA-channels (Source: the author) 50

List of tables Table 1: Devices used to watch TV (Source: the author) 44

Table 2: Services used to watch TV among generation Y (Source: the author) 46

Table 3: Public TV channels in Flanders (VRM, 2011) 63

Table 4: FTA-channels in Flanders (VRM, 2011) 63

Table 5: Private TV-channels in Flanders Part 2 (VRM, 2011) 64

Table 6: Local TV-channels in Flanders (VRM, 2011) 65

1

1 Introduction “Traditional media are not dead, they only smell funny” (CAUDRON, Jo, 2011)

This quote from Jo Caudron in his book “Media morgen” (Media tomorrow) perfectly illustrates

what is going on in the world of TV today. For generation Y, watching TV no longer means sitting

in the living room in front of the TV-set to make sure they do not miss anything from their

favourite TV-show.

Generation Y is a generation of digital natives, used to get everything they want, whenever they

want. Instant gratification is not only a fashion word; it is a way of life. According to McConvey,

“generation Y expects everything to adapt to their schedules and whims, rather than the other

way around” (MCCONVEY, Joel, 2009) It is a generation that still loves TV and watches more TV

content than ever. The traditional FTA1-channel however, is not the only way to access this

content anymore.

1.1 TV industry in Flanders Belgium is one of the most complicated countries in the world when it comes to politics and the

same is true for the Belgian TV market. Each region has its own TV channels, main players and

responsible minister. The problems are mainly the same in both Wallonia and Flanders, but

because of the complexity of the market, this dissertation will focus on the TV industry in Flanders

only. This does not mean that models used further on in this dissertation cannot be applied onto

the Wallonian TV-market. For the sake of clarity however only the Flemish TV-market will be

analysed.

1.1.1 The beginning of commercial TV in Flanders

When the first FTA-channel, VTM, aired back in 1989, accessing TV-content was very straight

forward. There were only 2 players in the market. VMMa2, which owned VTM, and the public

broadcasting company, BRT, owning BRT 1 (now called Eén) and BRT 2 (now called Canvas).

Watching the content on this channels implied people had to sit in front of their TV-set on the

time the program started. Programs where produced in-house or bought from foreign TV-

channels to be broadcast on Flemish television.

VTM, as a the first FTA-channel, paid for its content with the money it collected from selling

advertising space while BRT paid everything with the money it received from the government.

Because of this business model, consumers could watch these channels for free if they had cable

or satellite. The cable network was owned by Coditel (now part of Telenet) which only charged a

small yearly fee to maintain its network.

In 1995, SBS3 entered the Flemish market with VT4, a new commercial TV-channel. VMMa replied

with the launch of a new TV-channel Kanaal2 (now 2BE). In the following years, the advertising

budget for FTA-channels grew year by year and new FTA-channels where introduced.

1 FTA-channel: Free To Air

2 Vlaamse Media Maatschappij

3 Scandinavian Broadcasting System

2

At the time, alternatives to access TV-content in Flanders where mostly limited to media carriers

like VHS and data limits prevented consumers to download or watch TV-content using the

internet.

1.1.2 The digital switchover

In 2005, digital TV was introduced in Flanders. Two big companies, Belgacom and Telenet

launched their digital TV offer almost simultaneously and made it possible for consumers to add

extra paid channels to their basic package together with the possibility to rent movies and series

without leaving the house. Furthermore, Telenet and Belgacom started to bid on football

emission rights, thus driving up the price for traditional TV channels. (ZDNET, 2005)

While Telenet is using the cable, Belgacom offers IPTV or TV over the internet. Both providers

have an own set top box which decodes the digital signal and adds interactive content. As

mentioned before, one of the few methods to reach the consumer for FTA-channels is through

the cable owned by Telenet or the satellite. In this situation, Flemish TV-channels had no choice

but to broadcast their content through Telenet and Belgacom which were now directly competing

with the FTA-channels with their own products. Especially since Belgacom and Telenet together

serve almost 75% of the market, there is no alternative for FTA-channels. (IBBT- ILAB.O, 2011)

One year later, Telenet launched its Digicorder, a decoder which made it possible to pause live TV

and record TV-programs, followed by Belgacom later that year. By 2012, 15 to 20% of TV-

programs (depending on the source) are not watched live anymore. 80% of people indicating they

use TSV,4 also state they skip the ads when watching the programs. (WERBROUCK, Stefaan, 2012)

In April 2012, the Flemish FTA-channels joined forces to fight against these DVR-devices.

According to Christian Van Thillo, CEO of De Persgroep which owns 50% of VMMa, these devices

lead to a lower viewing share for commercials and lower prices that can be charged for

advertising space. An evolution threatening the business model of the Flemish FTA-channels.

VMMa even announced to stop producing telenovela’s because too much people where watching

these, generally early-programmed series, afterwards while skipping the ads. (DECKMYN,

Dominique, 2012a)

As if there was not enough pressure on this business-model, generation Y kicked in with its own

values and ideas about media and TV.

4 TSV: Time Shifted Viewing

3

1.1.3 The generation Y touch

The DVR5-devices from Telenet and Belgacom are so easy to use that everybody can use them.

And they definitely speed up the process of decline traditional TV will encounter.

There are however, some evolutions that will be started by generation Y that are a bigger threat

for FTA-channels than they can imagine. Christian Van Thillo states the following in an interview in

the Flemish newspaper “De Morgen”: “The set top box is a great device which is very easy to use.

The mechanism behind it however, is not fair. Selling these devices brings in a lot of money for

Telenet and Belgacom, but TV-channels cannot profit from this money while they account for a

great part of the success of the system” (DUMON, Pieter and Debackere, Jan, 2012)

However understandable, this point of view is debatable. Van Thillo makes no distinction between

watching TV and TV channels. In this point of view, TV-channels are the only way for consumers to

access TV-content which is currently not the case. This is the same mistake the music industry

made 10 years ago while they were fighting Napster and other services. In the world of digital

natives, TV-channels are no longer irreplaceable. It was generation Y that started the shift from

CD’s to MP3’s and it will most likely be generation Y that will start the shift from a traditional way

of watching TV to a new TV-era with other powerful content providers.

5 Digital Video Recorder

4

1.2 Research Aim This small introduction shows the approaching change in TV-consumption. The impact of

generation Y on the industry cannot be underestimated and the main aim of this dissertation will

be to find out how the changing media consumption of generation Y will influence the business

model of commercial TV channels in Flanders.

1.2.1 Research questions

In order to be able to firmly address this problem, the following research question will be the base

of this dissertation:

What is the effect of generation Y’s changing consumption of TV content on the income model of

commercial TV channels in Belgium?

This question can be divided in two sub-questions:

1. How is generation Y consuming TV content?

2. How is this behaviour influencing the business models of commercial TV channels and

what are the alternatives?

1.2.2 Hypotheses

First of all, the research questions are based on the hypotheses that generation Y has a totally

different way of consuming TV. This means that they are not only using the TV-set to watch TV,

but that also other devices like laptops and tablets are becoming more important. Furthermore,

this generation has been raised in a totally different way and is not as tolerant as other

generations when it comes to advertising and linear TV-viewing. They look for alternatives to

satisfy their needs and do not consider piracy as a problem while doing so.

Secondly, this will lead to a change of business model for FTA-channels. Commercial TV stations

will have to move from a linear TV-viewing experience to a more demand-driven model in order

to survive.

1.2.3 Objectives

By solving the research questions elaborated in paragraph 1.2.1, the author of this dissertation

hopes to determine how generation Y accesses TV content and what damage this causes to the

business model of FTA-channels.

Doing this will create opportunities to identify chances for an alternative media distribution and

to construct new business models for commercial TV channels.

5

1.3 Dissertation overview In order to make this dissertation easy to read and understand, it contains four main chapters.

The first important chapter is the literature review starting on page 6. This literature review tries

to define generation Y and to understand their values and dreams. Who is generation Y? Why are

they important? What is important to them? Only by knowing what drives this generation, a new

business model for FTA-channels can be developed.

Further on in chapter 2, the biggest threats for FTA-channels are listed and clarified. These threats

include new ways to access TV content by generation Y but also the future market players that

will eventually compete with FTA-channels. By understanding what makes these alternatives

attractive, the strengths and weaknesses of the current business model will be identified in

paragraph 2.6.

After this, chapter 2 discusses the importance of strong content and the convergence process.

Content from different types of media is becoming more and more interchangeable.

Understanding this process is indispensable to understand the future.

Finally, chapter 2 analyses the current business model of FTA-channels in Flanders. This is done

using several academic theories and models. To end chapter 2, alternative business models are

analysed. The focus lies on the current alternatives and their degree of success.

The next chapter, starting on page 38, describes the research methodology. This includes the

research philosophy, the applied approach, the research challenges and a profound explanation

of the used techniques in the primary research.

Another big part of this dissertation is the analyses of the results. Chapter 4 starts on page 42 and

gives an overview of the most important results of the primary research. This primary research is

thoroughly illustrated using charts and tables where necessary. One of the covered themes is the

way in which TV-content is consumed by generation Y. Furthermore, the primary research maps

the attitudes of generation Y towards advertising, pricing models and FTA-channels. Finally, the

possibilities to generate revenue are discussed.

The final and most important chapter of this dissertation treats the recommendations for FTA-

channels. Chapter 5 merges the primary and secondary research into strong and easily

understandable recommendations. These recommendations tend to summarise the possibilities

and threats for FTA-channels to survive.

Literature review

6

2 Literature review

2.1 Defining TV Defining TV used to be very simple. In the past, there was the TV-set, used to watch TV and that

was the only way TV-content could be accessed. Nowadays, there is plethora of possibilities to

access TV-content and watching TV is no longer the same as sitting in the living room in front of

the TV-set.

In this dissertation, TV will be used to refer to TV-content while the word TV-set will be used to

refer to the traditional device or way to watch TV.

2.2 Generation Y Over the years, there has been a need to classify and identify different generations of people. The

classification uses age and general cultural characteristics to describe them. This has resulted in

different groups like baby boomers, generation X and more recently, generation Z.

Generation Y is one of these categories and the term refers to those born between 1970 and

1996, depending on the used source. (NEUBORNE, Ellen and Kerwin, Kathleen, 1999) (PAUL,

Pamela, 2001). Generally however, generation Y is defined as those born between 1980 and 1995.

(VAN DEN BERGH, Joeri, 2011) In this paper, Van Den Bergh’s definition will be used to determine

generation Y, also often referred to as “Millennials” because they came of age during the new

millennium.

“They are armed. They are dangerous. They are our children.” (Thomas Hine as cited in (HOWE,

Neil and Strauss, William, 2000))

In the beginning of the century, millennials where regarded as a lost generation, a generation

which was known to be self-absorbed, pessimistic, distrustful and stupid. The future was going to

be dark and people’s own kids were to blame for it. The first real study on generation Y from

Howe and Strauss revealed the truth and opened the eyes of marketers who were targeting this

generation (unsuccessfully) before.

Millennials turned out to be more intelligent, more sociable and more optimistic than former

generations. (HOWE, Neil and Strauss, William, 2000) A study conducted by MTV Networks at the

end of 2009 amongst 7000 youngsters in 7 European countries further confirmed these results.

This study leads to “The ten commandments of youth” which are:

Have faith in yourself

Respect your parents

Be honest

Take responsibility for your own life

Live life to the full and be passionate

Keep your promises

Work hard to succeed but not to the

detriment of others

Be tolerant of others’ differences

Be happy and optimistic, even in

adversity

Create, don’t destroy

(ROSE, Helen, 2010)

7

These commandments illustrate the way in which generation Y thinks and behaves. Millennials

have a strong belief in their selves which is part of the way they were raised. “Two-thirds of

parents claim to ask the opinion of their children before making big decisions such as choosing

holidays. They have raised their children as coaches with one central notion: empowerment”. (VAN

DEN BERGH, Joeri, 2011) That is also the reason why respect for their parents is very important in

their life.

2.2.1 Generation Y as a market segment

“We thought the kids would go crazy for this and the kids couldn't have cared less…. They were

like, “Who is this guy?”” (Heather Keegan, Digital Research, describing a preschool test of a Kermit

the Frog toy as cited in (HOWE, Neil and Strauss, William, 2000))

Millennials are one of the biggest groups in the current population. In Flanders, there are roughly

1,2 million generation Y’ers which account for 19% of the total population.(own calculation based

on (ADSEI, 2012)) The oldest ones have already settled down, owning a house and children, while

the youngest are almost coming of age. This means that generation Y will soon be the leading

group of consumers, raising their own children and making decisions about their lifestyle and

media usage. According to Nickell, generation Y has been more involved than any other

generation in the buying decisions made by their parents. They have controlled a significant

amount of spending power on their own since they were young. (NICKELL, Stephanie, 2012)

Furthermore, they have been raised in a world dominated by brands and marketing and are more

aware of marketing tactics than previous generations. (HEANEY, J.G., 2007) (TSUI, B. and Hughes,

L.Q., 2001) This has however not prevented that “generation Y is the most materialistic

generation yet and forms of consumption are central to its sense of identity and the acquisition of

the status or “cool” through this acquisition. “ (FERGUSON, Shelagh, 2011) The big difference with

previous generations according to Pitta is the fact that millennials want their buying information

from trusted individuals. (PITTA, Dennis, 2012) This means that consumer ratings become more

and more important and that brands have to bond with their consumers.

Another big difference is the way generation Y wants their products and services. Several authors

confirm the fact that millennials need their products and services to be adapted to what they

want. “They expect everything to adapt to their schedules and whims, rather than the other way

round.” (MCCONVEY, Joel, 2009). “They want their products and services now, they want them

perfectly tuned to their taste and they want to buy them with comparatively little effort.” (PITTA,

Dennis, 2012)

All this combined makes millennials at the same time one of the most exciting market segments

ever and one of the most difficult market segments ever. Toggle the right buttons and one’s

product or service will be successful. Approach them in the wrong way, and one’s product or

service will be burnt down in seconds.

8

2.3 Television according to generation Y “Today’s kids believe in the future and see themselves as its cutting edge. They show a fascination

for, and mastery of, new technologies. (HOWE, Neil and Strauss, William, 2000)

This quote illustrates the danger traditional FTA-channels are in. TV-channels are now at the heart

of content distribution but this can change very quickly since millennials not necessarily use the

same technologies as their parents to access TV-content. They are quick learners and technology

is no longer a barrier to create a new way of watching TV. Peter Hinssen has made a good analysis

of this phenomenon in his book “The new normal”. He distinguishes digital natives and digital

immigrants. Millennials are digital natives and grew up with technology. It is part of their life,

while digital immigrants have learned to use technology while being older. He explains it using the

following example: “I like this simple test to distinguish between a digital native and a digital

immigrant. You put a camera on a table and just ask “What is this?” A digital immigrant will say:

“That’s a digital camera”, whereas a digital native will say: “It’s a camera”.” (HINSSEN, Peter,

2010)

Research from DearMedia and EHSAL management school shows that 60% of youngsters in

Belgium spend 1 to 3 hours a day in front of the TV. 42% of this time however is non-linear

viewing, which means that programs are not watched live and ads are skipped. More than 25% of

the millennials participating in the research stated that they skip advertising daily. (DEARMEDIA &

EHSAL MANAGEMENT SCHOOL, 2012) Thus can be stated that the way generation Y consumes TV

is really different than the way their parents do.

For this reason, the research in part two of this dissertation will focus on the likeliness that

generation Y will jump from the traditional TV-set to alternative content distribution. A shift that

is already happening very slowly. In the following paragraphs, different alternatives for the

traditional TV-set will be considered.

9

2.3.1 Time-shifted viewing

When Telenet and Belgacom released their Digicorders in 2006, millennials finally got what they

always wanted. Convenience, flexibility and a cheap way to watch missed programs. The

Digicorder offered the consumer more freedom and the Belgian population quickly embraced the

new technology. By 2010, only 16.9% of the households in Flanders did not have a product bundle

including digital TV. (BUSINESS MONITOR INTERNATIONAL, 2012)

One of the most used features was TSV or Time Shifted Viewing. This means consumers can pause

a linear program to continue watching it later or record it by pressing one button. The system

quickly became very popular and now FTA-channels are starting to see the consequences.

According to Christian Van Thillo, CEO of De Persgroep, TSV already accounts for 20% of TV-

programs watched. (DUMON, Pieter and Debackere, Jan, 2012) Figures from the newspaper “De

Morgen” even show that 15 to 50% of the most popular TV-programs are watched through TSV.

(DUMON, Pieter, 2011). Other research from IBBt also confirms this. In this research, 28.1% of

digital TV-owners states to record programs or movies daily while only 15.5% states never to use

this functionality.

Unfortunately for the FTA-channels, there is no way back. In Flanders, the CIM6 can measure

which programs are watched and how much are watched through TSV. This means that

advertisers can ask for lower prices, driving the revenue of commercial TV-channels down. The old

adagio from John Wanamaker, “Half of the money I spend on advertising is wasted, I only don’t

know which half” no longer applies on TV.

For this reason, VMMa has asked Telenet and Belgacom to compensate them. Belgacom has

renegotiated its tariffs with VMMa but Telenet refuses to pay anything for a service it offers for

free to its consumers. Furthermore, VMMa has taken steps and asked the government to think

about it.

6 CIM: Centrum voor Informatie over de Media: The Belgian institute that is responsible for TV figures

10

2.3.2 Piracy

Piracy is defined as the acts of producing, acquiring and/or consuming illegal copies of an

authentic product. (HO, Jason and Weinberg, Charles B., 2011). In this dissertation, piracy is all

about the consumption of TV-content in an illegal way. Generally, there are two ways TV-content

can be accessed through piracy. Downloading and streaming.

While downloading implies that content is stored locally on a hard drive or other storage device,

streaming is about watching the content while it is being loaded in the memory of the device that

is used to consume the content. YouTube is a good example of a website which uses streaming to

deliver content.

Buying DVD or Blu-ray copies can be considered as a third way to access TV-content through

piracy. The author of this dissertation however, assumes that since sales of DVD’s and Blu-ray

dropped by 44% in 2010 (ADWEEK, 2011), the impact of DVD-copies no longer has a significant

impact on the consumption of TV-content. Therefore, this dissertation will focus on streaming and

downloading.

Research conducted by Lightspeed research in 2010, showed that almost 58% of people had

streamed or downloaded TV-content in the last six months. (DAVIES, Jessica, 2010) The study

includes legal services like BBC’s Iplayer but demonstrates the readiness of the consumer to catch

up online and leave the traditional TV-set to access good content. In addition to that, a more

recent study in Belgium showed that 60% of young people in Flanders download TV-content

illegally. The main reason for doing so is the time it takes for series to be broadcast in Belgium

while they have already aired in other countries. (DEARMEDIA & EHSAL MANAGEMENT SCHOOL,

2012)

Piracy drivers

“If it’s crap, it’s no money lost. If I hear about a film in the day, it’s nice to be able to go home and

find it immediately. If I like it though, I will generally have a look on Amazon and buy it after”.

(Laura, 19 as cited in (ROSE, Helen, 2010))

Hennig-Thurau identifies 6 drivers for piracy based on their utility. Transaction utility, mobility

utility, storage utility, anti-industry utility, social utility and collection utility. (HENNIG-THURAU,

Thorsten et al., 2007)

The transaction utility is an economic driver and implies that by streaming or downloading

content, money can be saved. This is one of the main reasons for piracy and is confirmed in

several other studies. (SHEEHAN, Brian et al., 2010) (STOLZE, Jim, 2011) All these studies claim

people do not want to pay for content anymore. A recent study from Viacom and MTV however,

shows that generation Y wants to pay for content but that the main reason for not doing so can

be found in the fear to pay for something bad. In other words, millennials do want to pay for good

content but are afraid of buying something they do not like so they download or stream it instead.

Generation Y shows its appreciation for good content by buying it afterwards.

11

The mobility utility focuses on the portability of content. Hennig-Thurau’s study mainly deals with

motion pictures but the same portability problem can be applied on TV-content. Just like people

cannot watch Blu-ray movies on the move, it is currently very difficult to watch TV on the go in

Flanders. There are no portable DVB-T devices available, there are no services which support it

and the content providers are not ready to do so. The only way for consumers to watch TV on

their tablet or smartphone is to download the desired program and watch it while being on the

move. Just like people downloaded motion pictures to transport them, people download or

stream TV to watch it on the train, in the bus or in the park.

The storage utility is less applicable on watching TV. It implies that the storage space needed for

physical products boosts piracy. This utility does not apply on TV and will further not be

considered.

The anti-industry utility is all about the feeling people have about content-providers and TV-

channels. Advertising clutter is one of the main drivers for this anti-industry feeling. Clutter

describes the level of advertising and other non-programming material within a medium. (SPECK,

P. and Elliott, M., 1998). According to Speck and Elliott, an increase in advertising clutter increases

ad avoidance which, on its turn, results in lower prices paid for advertising space. Instead of

lowering the amount of clutter however, “it appears that the advertisers’ “solution” to audience

avoidance of their messages is to increase the number of messages, so even effort of commercial

avoidance becomes a source of audience frustration.” (ROTFELD, Herbert Jack, 2006) This leads to

an anti-industry feeling that motivates consumers to look for alternatives that do not make the

consumer feel like a milk cow.

Another important utility is the social utility. Having the knowledge to watch TV programs for free

compared with the ability to talk about the watched programs, enables consumers to “establish

social links with relevant others”. (HENNIG-THURAU, Thorsten et al., 2007) As mentioned before,

generation Y relates on its peers to buy or consume a product. Being the one that knows all about

piracy or TV programs easily enables millennials to become the centre of their peer group.

Combined with the instant-share culture, this makes the social utility very relevant.

The last utility as defined by Hennig-Thurau, is the collection utility. Piracy enables people to

collect large amounts of TV programs, movies and music without having to pay for it. No matter

how rich people are, they can collect these things without any effort. Some people just download

to have a collection and do not even watch or listen to this collection.

These piracy drivers are confirmed by several other studies. Jim Stolze for example, identifies 5

piracy-drivers. These are: instant access, a wide product offer, low price (free), ease of use and

the freedom to choose what you want, whenever you want. (STOLZE, Jim, 2011) Another source

merges the different piracy drivers into three main categories which are ‘Price’, ‘Immediacy’, and

‘viewing channel’. (HO, Jason and Weinberg, Charles B., 2011)

12

Content availability and advantages

But what exactly is available through piracy on the internet and what are the advantages of

accessing content on the internet for generation Y?

The first question is rather easy to answer. Almost everything is available on the internet after it

has been released in one or another way. This means that a TV-show airing for the first time today

at 7 P.M can be available online by 9 P.M. The so-called release-groups have thousands of

volunteers who record episodes of their favourite TV-program just to release them on the

internet. Every bit of content which has a consumer, is suitable to be uploaded and shared on the

internet. Up-loaders and release-groups don’t earn any money by uploading this content to the

internet but social acceptance and anti-industry attitudes are the main drivers to upload content.

(SHEEHAN, Brian et al., 2010)

Virtually everything is available online which partly answers the second question of what the

advantages of piracy are for generation Y. No matter if the consumer likes TV-shows from the

seventies or the newest episode of “Dexter”, it is right there and can be watched at the exact

moment desired by the consumer for free. De Kosnik identifies eight advantages of pirating TV.

- Single search

- Simple indexing

- Uniform software and interface

- File portability

- Access to global TV

- Freedom of pre-empting

- Personal archives

- Low-cost and commercial-free

Each one of these advantages can easily be linked to the piracy-drivers identified by Hennig-

Thurau. Low-cost for example, links to the transaction utility while commercial-free, links to the

anti-industry utility.

13

2.3.3 Online streaming TV

Piracy has always been a threat for the traditional FTA-channels but more recently, legal

alternatives are starting to pop-up. In contrary to illegal streaming websites, most services charge

a monthly fee to pay the content-owners a fair price. Netflix for example, enables consumers to

watch as many series and films they want for £6 a month. Other websites like Direct Movie, rent

movies and series for a fixed price. In this way, they offer a cheap and convenient alternative for

live TV and give the consumer a legal alternative for illegal streaming and downloading.

Even consumers who prefer to watch content on their TV-screen can be satisfied by using these

services. Today, Netflix can be accessed using several devices that are very common in every

family. This includes the Xbox, the PlayStation and several set-top boxes and media streamers. In

2011, 72% of families owned a game console in Belgium. (OIVO, 2011) That means that almost

three quarters of the Belgian population can access this content on their TV without the need to

buy new hardware.

Research from Nielson shows that, in the past year, the number of homes in the U.S with

television sets dropped. Partly because of millennials watching TV content on their computers or

mobile devices. “Forget about cord-cutting. These are people who never paid for TV -- or even

owned a television -- in the first place. They're accustomed to watching their favourite shows on

Hulu, Netflix, YouTube and other online video platforms.” (ADWEEK, 2012)

There are however, some problems that need to be solved for these services to become more

popular. In his research paper “Piracy is the future of Television, De Kosnik lists several problems

of these legal services. These include standardisation, global offers, premium service and prices

based on usage. (DE KOSNIK, Abigail, 2010) Especially the global offer is a problem. Most

streaming services are still not available in Flanders. Netflix, Lovefilm and Hulu all announced to

come to Belgium but at the moment of writing this dissertation, they are not offering their

services in Belgium yet. Considering the success of the launch of Spotify in Belgium which reached

300,000 users in merely three months’ time (DECKMYN, Dominique, 2012b), the assumption can

be made that these legal services will put even more pressure on the business model of

commercial TV channels in Flanders.

As for the standardisation, this could be a good solution to attract more customers on a whole.

For generation Y however, technical problems are less common than for older generations.

According to Howe, this generation is more tech-savvy and more prepared to try something new.

(HOWE, Neil and Strauss, William, 2000) Still, these services are improving every day and can

attract a larger public in the future.

14

2.3.4 Video on demand on iDTV

Since the introduction of digital TV in Flanders, consumers are able to watch missed programs

through video on demand or VOD. Research shows that the most important reasons for watching

VOD amongst digital natives are the possibility to watch missed programs, the opportunity to

watch a program without advertising and the ability to watch whenever they want. (DEARMEDIA

& EHSAL MANAGEMENT SCHOOL, 2012) In 2011, a Belgian family spent on average 12.7 EUR a

year on VOD-services. That is 21% more than in 2010 and the VOD-market continues to grow.

(IVF, 2012)

While this provides a new way of earning money for FTA-channels in the first place, it is also a

threat for the same FTA-channels. Consumers can not only catch up with their favourite soap

from their preferred TV-channel, they can also rent movies and series which are offered on the

digital TV platforms of Telenet and Belgacom. In this case, instead of watching a TV program from

any commercial TV station, consumers spend their time on watching VOD which can affect the

viewing figures from these TV channels. In 2011, 6% of watched TV-programs were VOD.

(DEARMEDIA & EHSAL MANAGEMENT SCHOOL, 2012) There can be concluded that VOD accounts

for a small amount of TV-time but time spent on watching VOD is increasing year by year.

2.3.5 Second screen apps

Since the introduction of the Ipad in 2010, tablets have found their way to the living room.

Together with smartphones, they are used more and more to consume media on the go. These

devices are often referred to as the second screen and introduce a new way of watching TV. In

Belgium, 13.1% of consumers own a tablet while 40.4% of the population owns a smartphone.

(IBBT- ILAB.O, 2011)

One of the possibilities of watching TV on these devices is mobile TV. Mobile TV is defined as “TV

on mobile devices that provides the same content as seen on traditional TV. In addition to live TV,

mobile TV also includes on-demand video that can be downloaded or can be broadcast to a

number of users. There are two forms of mobile TV: streamed mobile TV and broadcast mobile

TV.” (BAYARTSAIKHAN, Khulan et al., 2007). While streamed mobile TV uses the internet to

stream content to the consumers’ devices, broadcast mobile TV uses a technology based on DVB-

T7 to deliver content.

In Flanders, the two biggest distributors, Belgacom & Telenet, are both offering an app that makes

watching TV on smartphones and tablets possible. Telenet’s “Yelo” and Belgacom’s “TV overal”

offer live streamed mobile TV and both have the possibility to watch video on demand. At the

moment, it is not possible to use these apps outside of the distributors’ networks. For Telenet,

this means that watching TV out-of-doors is impossible while for Belgacom, only the distributors

own mobile network, Proximus, can be used.

7 DVB-T: Digital Video Broadcasting-Terrestrial: Technology used to distribute a digital TV-signal over the air.

15

Telenet is still testing its app and offers this service for free to consumers. As a result of the

problems with VMMa, it is not possible to watch the VMMa-channels on Yelo. Belgacom in

contrary has made a deal with VMMa and offers its service to all its consumers for 5 EUR a month.

This is the same price as is charged by Mobistar, a third provider of mobile TV which enables its

own customers to watch TV-on-the go for 5 EUR a month. Mobistar Mobile TV however, is more

limited. It cannot be used on tablets, it offers less channels and it does not offer any VOD-

services.

Exact figures of the use of these services are not yet available but Telenet claimed that merely

two months after its launch, more than one million programs had been watched on Yelo.

(TELENET, 2011) A clear sign that people are ready for a new TV experience. It is very likely that

the raise of the use of these apps will help consumers to watch less normal TV and use more

alternatives.

2.3.6 Over the top TV

Over-the-top is a general term for services that are used over a network that is not offered by that

network operator. It's often referred to as "over-the-top" because these services ride on top of a

service people already get and don't require any business or technology affiliations with the

network operator. (ITV DICTIONARY, 2012)

In terms of over the top TV, it means that consumers can watch TV programs without interference

of different content providers, distributors or aggregators. In the specific case of the FTA-

channels, it refers to the fact that consumers can watch TV programs bypassing the traditional TV-

channel. Piracy and online streaming video as mentioned above are all OTT8-services but the

catagory is very wide and this section will focus on other players competing with the Flemish FTA-

channels by offering OTT-services.

BBC Iplayer and similar services

“If we don't make content available, viewers will find it despite us. At the moment the global roll-

out is a pilot service to test proof-of-concept and explore demand.”( Jana Bennett, president of

worldwide networks and global iPlayer at BBC Worldwide as cited by ' (OSBORNE, Magz, 2011))

For the Flemish FTA-channels, competition by OTT is not limited to services like Netflix or Hulu.

Foreign TV-channels are also threatening their business model. This is because of the dependency

of Belgian FTA-channels on foreign programs to complete their offer. According to Jo Caudron,

buying foreign programs is way cheaper than producing local programs. When the BBC decides to

make their programs available worldwide, it means that consumers can watch these programs

online without needing a Belgian FTA-channel.

8 OTT: Over The Top

16

This is the most extreme form of OTT-TV. In this case, the content producer and distributor are

one and the same. It delivers its content straight to the consumer, eliminating all the middlemen

in the process. This model is only possible when the content producer can deliver an easy to use

platform. Another example of this type of content distribution is HBO Go. HBO produces its own

series and distributes them immediately to the consumer using their own online platform. An

HBO subscription is all it takes.

In the past, the impact of the worldwide introduction of BBC’s Iplayer would have been less

significant because of language barriers and data limits. Research from ESLC however, shows that

the knowledge of the English language of young people in Flanders improves year by year. In

2012, Flemish students shared the first place with Sweden and Malta in the “European Survey on

Language Competences”. (VLAAMSE OVERHEID, 2012) This means that language is no longer a

barrier for millennials to watch content using alternative channels.

As language barriers were disappearing, consumers were also calling ISP’s9 to remove data limits

on broadband connections. Just like on the TV-market, the broadband market in Belgium is

dominated by two large ISP’s, Telenet and Belgacom. The reason for this is their business model

which implies selling triple play packs to consumers including TV, internet and phone calls. Smaller

ISP’s cannot compete with this offer and are less attractive for consumers. Furthermore,

Belgacom and Telenet both own their own network, and at the moment, only Belgacom has to

share its network with other ISP’s.

For long, this led to a very rigid market with very small data limits. That didn’t change until 2009,

when Microsoft complained about the data limits which prevented consumers from renting

movies using Microsoft’s’ Zune platform on Xbox 360. (STOFFELS, Bart, 2009a) The case was

important enough for the Belgian minister of economics, Vincent Van Quickenborne, to ask the

competition commission to look into it. (STOFFELS, Bart, 2009b) In 2010, both Belgacom and

Telenet replaced data limits by a FUP10, implying people could download as much as they wanted

as long as they were not abusing the network. (TIBAU, Frederik, 2010)

As a result, Telenet reported in June 2012 that streaming video was responsible for about 40% of

internet traffic, double the amount of traffic used in 2010. By 2015, Telenet expects to process

more than 33.6 billion hours of streaming video a year. (GROMMEN, Stefan, 2012) A firm proof

that streaming video is becoming more and more important and that there is something moving

in the TV market.

9 ISP: Internet Service Provider

10 FUP: Fair Use Policy

17

From content producer to the consumer

While BBC and HBO are both TV channels making their own products available through the

internet, so-called core content producers are also eliminating the middlemen. These content

providers are agencies specialised in producing TV programs which are sold to FTA-channels to be

distributed. In Flanders however, two big content producers are taking their own products to the

screen.

This is the case for Studio 100 and Woestijnvis. Studio 100 is one of the largest producers of kids

programs in Belgium, The Netherlands and Germany. The company owns 5 theme parks in Europe

and is constantly looking to expand. Its TV products are sold to public TV channels and FTA-

channels but the company became big through merchandising. In 2008, Studio 100 launched their

own TV channel together with Telenet, later followed by Junior Channel which is available

through pay-tv in Germany, Austria and Switzerland. (STUDIO 100, 2012)

This evolution is also affecting FTA-channels. Studio 100 is an example of a strong content

provider starting its own TV-channel. Not only this content is very valuable, the fact that Studio

100 is distributing this content by itself is bad news for commercial TV-channels. It means that

they will have to look for high quality kids’ entertainment elsewhere while it becomes more

difficult to differentiate themselves from competitors with unique content. VMMa has already

partly solved this problem by partnering with Studio 100 for its own kids channel: VTM Kzoom.

(STUDIO 100, 2012) Yet the question remains whether Studio 100 will keep producing content for

other TV channels or will focus on its own channels.

While Studio 100 introduced one TV channel, Woestijnvis is even taking it further. Ask 10 Flemish

people which content provider they know and the answer will be “Woestijnvis” in 9 out of then

cases. The content provider has built an image of quality, humour and good TV with inventive and

unique programs. When SBS was selling its TV channels in 2011, the holding owning Woestijnvis

bought VT4 and VijfTV, making Woestijnvis the new owner of SBS Belgium. (DE MORGEN, 2011)

The impact of this acquisition cannot be analysed before the launch of the renewed channels

“Vier” and “Vijf” at the end of September, but the assumption can be made that it will influence

the remaining Belgian FTA-channels in every possible way.

18

Apple vs. Google: the final step

Probably one of the biggest threats for FTA-channels on the long term however, is the

introduction of the TV-platforms from Apple and Google. These platforms, based on ITunes

(Apple) and Play Store (Google), offer exactly what millennials are looking for and are the ultimate

form of over the top TV. This is because they integrate all OTT-services under one interface and in

one small box that can be connected to the TV-screen. Hempel has picked up this evolution and

explains it as following: “Thanks to streaming video services like Hulu and Netflix and new portable

devices such as the iPad, we've begun to expect that TV should be more like the web itself: social,

mobile, searchable, and instantly available.” (HEMPEL, Jessi, 2011)

And this is exactly what these services are. GoogleTV for example enables consumers to watch TV

from several content providers. All consumers need is a set top box or media centre which

supports GoogleTV. It integrates Google’s own Play store with Netflix, Amazon’s video store, BBC

Iplayer, YouTube and many more. People owning GoogleTV or AppleTV don’t need their cable

subscription. They can watch what they want, whenever they want with little effort and for an

affordable price. It offers them the freedom to have a product completely tailored to their needs.

Jo Caudron illustrates the danger of these services in his book by composing his perfect TV

package using Google TV:

- BBC Iplayer for documentaries and series - HBO-app for top series - Netflix for movies and series - Studio 100 app for his kids - Free app of the public broadcasting company to watch the news

(CAUDRON, Jo, 2011)

At the end of the month, this will cost him about 40 EUR. This package is completely tailor-made

and enables him to cancel his cable subscription and see everything he wants without the hassle

of traditional TV channels. However, at the moment, most of these services are not yet available

in Belgium and the question is how fast the Flemish consumer will be prepared to drop its cable

subscription in favour of other paid-services. Generation Y will definitely impact the speed of

adoption and the research conducted for this dissertation will help to see the possibilities.

The final step in this process is the creation of an own network for Google or any other

multinational. Google has taken its first steps in the United States with its own network called

Google Fiber. It integrates every possible TV channel with unlimited access to Netflix, gigabit

internet, online storage and unlimited internet access. (SCHIEVINK, Bauke, 2012) For 120 dollar a

month, Google delivers the ultimate entertainment experience, eliminating all other

intermediates in the process. While this project is still in a test phase, it might come to Europe in

the future and it will most likely blow away all existing TV business models in Europe.

19

2.3.7 An endless list

While this chapter has focused on the main threats for FTA-channels, there are many more

dangers to be considered. There are so many external actors in the TV-business and each of them

can become a danger in the future. Rangone and Turconi have made a model which identifies the

main players in the digital TV-market. Each of them has the possibilities and means to become a

potential competitor.

Figure 1: The main categories of the business external actors (RANGONE, Andrea and Turconi, Alessandro, 2003)

20

2.3.8 Stimulus-junks

Not only the channels millennials use to consume TV-content are different. Generation Y thinks

and processes information totally differently from their predecessors. According to Prensky,

“digital natives are used to receiving information very fast. They like to parallel process and

multitask. They thrive on instant gratification and frequent rewards” (PRENSKY, Marc, 2001)

This way of processing information, also influences the TV-viewing behaviour of millennials.

Instead of leaning back while watching TV, this generation is constantly busy doing other things.

Figure 2 shows that almost three quarters of TV viewers are browsing the internet or checking

their e-mails while watching TV. This means that people are less attentive and even more

distracted from TV when advertising starts. This simultaneous viewing of different devices, known

as second screening, is perceived to be an extra barrier to reach consumers. (GFK, 2012)

Since knowledge about this phenomenon is widespread, advertisers are less prepared to pay for

advertising space because of the low attention rate during commercial breaks. While people used

to go to the bathroom in the past, checking e-mails or Facebook has become the new distraction.

There are however, some opportunities in the use of this second screen which will be explained in

chapter 3.7.

Figure 2: Multiscreening (own chart based on (GFK, 2012)

74%

72%

59%

51%

20%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Browse the internet/check, send e-mails

Use a laptop/computer

Use a mobile phone/smartphone

Use social networking sites

Use a tablet computer

21

2.4 Convergence: when it all comes together In order to fully understand the radical change of the television business, knowledge about the

convergence process is indispensable.

Baran defines convergence as “the erasure of distinctions among media” (BARAN, Stanley J. and

Davis, Dennis K., 2011). Lind approaches convergence from the technical side and describes it as

“a discontinuity, a market and/or industry redefinition related to technological change.”

Digitalisation of cable TV, watching TV on a cell phone, the use of IT in telecom, it can all be

named convergence. (LIND, Jonas, 2005)

In 2004, Bill gates gave a speech at the CES where he announced that convergence was finally

here. “Convergence doesn’t happen until you have everything in a digital form that the consumer

can easily use on all the different devices. So, if we look at the three types of media of greatest

importance—we look at photos, we look at music and we look at video—the move toward giving

people digital flexibility on them is pretty incredible on every one of them. It’s been discussed for a

long, long time. And now, it’s really happening.” (Bill Gates as quoted in (BARAN, Stanley J. and

Davis, Dennis K., 2011))

It took a while before his vision became truly possible but today, because of mobile internet,

media are ubiquitous. Radio, internet, newspapers, TV and magazines are all available anytime,

anywhere on almost any device. In this context, Baran and Davis start wondering about the future

of all these media. They are asking “what becomes of the distinction between newspapers,

magazines, radio, and television when all can be accessed anywhere, anytime on a single

handheld device and when each medium can combine graphics, video, printed text, sound, music,

and interactivity to satisfy your entertainment and information needs?” (BARAN, Stanley J. and

Davis, Dennis K., 2011) It is very probable that some of these media will merge into one single

medium, possibly supported by different niche media.

2.4.1 Types of convergence

According to Küng, there are three different forms of convergence. Network-focused

convergence, product & service-focused convergence and industry focused convergence. (KÜNG,

Lucy et al., 2008) Network-focused convergence uses the technological approach from Lind and

implies that every network is able to deliver any content to any consumer. This is partly the case

in Flanders where the cable network and (mobile) phone network are all able to transport TV,

Radio and newspapers (using the internet). There are however still limits to the “any consumer”-

part since these networks are still not available for everybody at every moment.

These limits do not exist in the mind of the consumer. For the consumer, convergence is already

there. A tablet owner can now access radio, TV, newspapers, internet and magazines all from one

device. The fact that these media are delivered using several technologies does not make any

difference. This is called “product and service focused convergence”.

Finally, industry focused convergence is all about IT-companies starting to get involved in content-

creation and transmission.

22

Stieglitz approaches convergence from another point of view and suggests a model with four

types of convergence. The first type of convergence is “convergence in substitutes” and it means

that one technology can replace another. The second type of convergence is “convergence in

complements”. In this case, two different technologies work better together than they would

work separately. On the other side of the matrix, Stieglitz has added technology and product

based convergence. In this way, he produces a matrix with four different types of convergence.

(STIEGLITZ, Nils, 2003)

Figure 3: Types of industry convergence (STIEGLITZ, Nils, 2003)

The first type of convergence is technology substitution which is all about new technologies

replacing old technologies. A good example of this is the transition from Edge to 3G which made

mobile internet really useful for data transmission.

The next type of convergence is technology integration. In this case, two technologies work

together to become a new consolidated technology. An example of this is the digital TV-platform

from Telenet which integrates internet and TV in one new technology: iDTV.11

Product substitution is the third type of convergence and happens when two products from

different industries complete each other and eventually merge. In Belgium this is taking place in

the market for mobile internet and internet at home. Because of the constant need to access the

internet everywhere, the distinction between mobile internet and internet at home is vanishing.

Mobistar, initially an MNO12, now offers packages which bundle internet on mobile devices and

internet at home so the consumer does have internet access no matter where he goes.

Finally, the fourth type of convergence is product complementarity. This is the case when two

products can both deliver the services from the other product without the need to incorporate

the same technology. (LIND, Jonas, 2005) Examples of this are the PC and the smartphone which

can both deliver the same services while using a different technology. This technology, however,

is more and more coming together so in the future, this might become an example of product

substitution.

11

iDTV: Interactive Digtal TV 12

MNO: Mobile Network Operator

23

2.4.2 The role of millennials in the convergence process

Generation Y is more technology-driven than any generation before. (Cfr. Infra) They are the

group that speed up the process of convergence and desire more tailor-made TV.

In the first seven months of 2012, market research agency Gfk reported a growth of 244% in

tablet sales compared to the first months of 2011. Furthermore, more than 50% of mobile phones

sold in Belgium were smartphones. (GFK RETAIL AND TECHNOLOGY BENELUX, 2012) While these

evolutions may seem fairly unimportant for TV, they show how fast new technologies get adopted

by young people and how different their behaviour is from other people.

In the process of convergence, millennials will be the first ones to consume TV content on their

tablets and smartphones. In fact, a survey from iBBT-iLab shows that 19% of respondents are

already using their smartphone regularly to watch TV. 34% of respondents in the same survey

state they use their smartphone to watch movies. (IBBT- ILAB.O, 2011) Knowing that half of all

smartphone owners had a data subscription in 2010, convergence of services is closer than ever.

According to Küng, this implies that media companies will have to adapt their content to be used

on several devices. Smartphones demand a different screen resolution and technology than the

classical TV-set. Next to this technological barrier, the format of advertising will have to be

adapted to these new standards. (Küng as cited by (BERTE, Katrien, 2010)) On the long term, this

will create new advertising opportunities but will also generate additional costs for the –already

struggling- FTA-channels.

2.5 Content as the eternal king “Very few people buy technology per se; they buy it because of what that technology can do for

them. And they buy technology they don’t particularly like if it allows them to access certain

content. “(Lucy Küng as quoted by (HEGEDUS, Nathan, 2010))

While the former chapter shows how generation Y will change the future of TV, there is one

important fact that cannot be neglected. Notwithstanding the evolution of the way in which TV

content is consumed, the content itself remains king. A distribution channel without attractive

content is most likely doomed to fail. According to Mugullavalli, content is still the key-driver

behind the profits of content distributors. (MUGULLAVALLI, Satish, 2011) This is why good content

providers will remain important for the success of FTA-channels. A small amount of good content

is more likely to attract consumers than a large amount of bad content. Furthermore, research

shows that local content is still more appreciated than imported content. (BERTE, Katrien, 2010)

Proof of this can be found in the top100 of most-watched TV-programs in Flanders. The first

foreign program that can be found in this list is ranked at place 25. (CIM, 2011)

This is good news for the Flemish FTA-channels. It provides them with a way to bond the

consumer to their favourite TV-channel. Local content however, is more expensive to produce

and not always a guarantee for success. (BERTE, Katrien, 2010) In 2010, the cost of producing one

hour of TV content averaged 27,284 EUR. (VRT, 2010) Furthermore, some local content is so

important for TV-channels that it becomes even more expensive. Football emission rights for

example are very important to attract consumers. In Flanders, VMMa has partnered with Telenet

to buy these emission rights. The importance of this content is invaluable for FTA-channels and

prices break records, year by year.

24

Another evolution in the content-landscape is the rise of public content. The way content is

created, has slightly changed, and today, everybody with a good camera can make a great TV-

show without a large budget. An example of this is the film “Paranormal activity”. The film cost no

more than 15,000 dollars to produce but was aired worldwide in cinemas after 1 million people

voted for the movie on Eventful.com. (HAMPP, Andrew, 2009) In this case, the film got distributed

in cinemas, but there is no need for TV or cinema to distribute content. Nowadays, alternative

distribution channels like podcasts, YouTube or other video websites enable everybody to publish

and watch content for free. No more content distributors, TV channels or intermediaries needed

to share content with the whole world in one click.

25

2.6 Evolution of the current business model In 1989, the first FTA-channel, VTM, aired in Flanders. It was the first broadcasting company

which was responsible for its own income which it generated by selling advertising space to

advertisers. This business model was very linear as shown in Figure 4 which shows a supply chain

based on Porter’s theories. Each part of this supply chain is a different market player with its own

value chain. The different players in this chain add value to the product and if the overall value of

the product exceeds the sum of its parts, the company generates profit. (PORTER, Michael E.,

1985)

The first step in this process was content creation. Content creation was the work of independent

producers and Hollywood studios. They created the content and produced it together with the

production companies. These companies sold their content to the cable networks which bundled

it to send it to the network operators. The network operators on their turn transmitted the

content to the consumer.

In this model, there were two main income providers: consumers and advertisers. Advertisers

paid the cable networks and broadcast networks to distribute their advertisements and reach the

desired target group. This money was used to pay content creators and production companies.

On the other side, consumers paid the network providers a very small amount to access to their

network. In that way, all costs were covered. (VRM, 2011)

Figure 4: Broadcast value chain showing the position of cable and satellite TV based on (VRM, 2011) and (MCGRAIL, Mike and Robert, Bob, 2005)

Independent

producers

Hollywood

studios

Production

companies

Cable

networks

Broadcast

networks

Cable

providers

Sattellite

providers

TV

Advertisers

Content creation Production Packaging Distribution User

interface End user

TV-set

26

2.6.1 Content scarcity

This model was based on content scarcity. Programs ran once, in real-time with a possibility for

reruns months, or even years after the first airing. Viewers only had one chance to watch a given

program and advertisers only had one chance to deliver advertisements to these viewers. (SELES,

Sheila, 2009) This offer of linear viewing resulted in a healthy balance between advertisers and

FTA-channels which were able to survive on the money they received from adverts. If they

wanted to be sure to see the whole program, consumers had to watch the full TV block including

ads.

Küng also identifies three additional factors which helped to maintain this business model. (KÜNG,

Lucy et al., 2008) First of all, the strong regulatory framework prevented new players to enter the

market. Secondly, the European market is dominated by strong national players. In Flanders for

example, the public broadcast company, VRT, has a market share of 43 % (including Eén, Canvas

and Ketnet). (SVR, 2011a) On average, public broadcasting companies in Europe have a market

share between 30% and 35%. (EXPRESS.BE, 2012)

Finally, there was a stable technological base. The technology needed to distribute TV-signals was

almost the same for cable, satellite or antenna. All these factors contributed to the content

scarcity in the TV landscape. Following this strategy of scarcity, advertisers had no other choice

than to advertise on a limited amount of FTA-channels to reach consumers

2.6.2 From content scarcity to content abundance

Explosive growth of TV-channels

As mentioned in the introduction, until 1995, VTM was the only FTA-channel in Flanders. In that

year, SBS introduced VT4 followed by VMMa which introduced Ka2 (now 2BE). The TV-offer in

Flanders now included seven channels offering local content. This was further completed by a

couple of foreign TV-channels offering their own content like BBC1 or RTBF.

By September 2012, the number of TV-channels offering local content has grown to a whopping

73. (SVR, 2011a) A full list of these channels can be found in Appendix 1. This explosive growth of

FTA-channels in Flanders was mainly caused by the introduction of digital TV. This new technology

enabled distribution companies to offer more channels, using the same bandwidth. (BOUWMAN,

Harry et al., 2008)

Now consumers are offered a wide range of TV-channels which included niche-channels tailored

to everybody’s wish. This evolution can be explained using the long tail theory. In “the long tail”,

Chris Anderson describes Amazon’s strategy in selling a very wide range of different books. These

books are not sold in large numbers but nevertheless account for a big part of Amazon’s profit.

(ANDERSON, Chris, 2010) Just like the hundreds of books that are only sold to a couple of

consumers, small FTA-channels appeal to very specific consumers making it a profitable business.

Opposed to large FTA-channels appealing to a wide range of different people, it might be more

interesting for advertisers to run commercials on more focused channels.

27

New market players influencing the value chain

In chapter 2.3, the potential entrants and substitutes in the commercial TV market have already

been carefully discussed. Therefore, this paragraph will not focus on the abundance of new

market players, but on their effect on the value chain of the traditional FTA-channels.

There are two main movements which can be identified in the value chain of commercial TV. First

of all, there is a movement of disintermediation. (KÜNG, Lucy et al., 2008) This means that there is

a certain amount of fragmentation in the market which leads to the removal of certain companies

in the supply chain. An example of this can be found in Netflix, where content providers eliminate

cable companies and TV-channels by offering their content to the consumer using the internet.

At the same time, the Netflix example also applies to the second movement in the value chain:

reintermediation. In this case, content providers have a large catalogue of content they want to

offer to the consumer. This content however, is not easily searchable and Netflix offers the

platform to make that possible.

This makes the value chain less linear than it used to be. The value chain still includes different

intermediaries but they can easily be skipped or replaced by another one. For the end-consumer,

the product (TV) still remains the same, but the way in which it is delivered differs drastically.

28

This has also an effect on the financing of TV as a whole. In the old model, advertisers paid the TV-

channels while consumers paid the network providers. In the new model, advertisers pay

whoever they need to distribute their message. On the consumers’ side, consumers pay whoever

they need to access their beloved content. Or in the case of piracy, they don’t pay for the content

at all, but only pay for the network access.

Considering the different challenges, of all players in the supply chain, FTA-channels have the

weakest position. The packaging part of the supply chain is where competition will be the

strongest. Figure 5 clearly shows that the packaging stage can easily be removed or replaced.

Furthermore, the money flowing to this stage is split between the traditional players in this

segment and new entrants.

Content creation

Packaging

Distribution User

interface End user

Independent

producers

Hollywood

studios

User

generated

content

Cable

providers

Satellite

providers

Google

Netflix

Apple

…

Cable

networks

Broadcast

networks

Internet

providers

MNO’s

TV-set

PC

Mobile

devices

….

Advertisers

Figure 5: The new supply chain based on (KÜNG, Lucy et al., 2008) and (BOUWMAN, Harry et al., 2008)

29

2.6.3 Power to the consumer

The introduction of digital TV in 2005 not only caused an explosion of TV-channels, it also gave

more power to the consumer. Technologies like VOD or TSV enable consumers to actively manage

their TV-watching behaviour.

That is very different from the original business model of scarcity. In the past, TV-networks used

different strategies such as counterprogramming13, tent-poling14 and hammocking15 to attract

audiences and keep them tuned in for an entire block of programming. (SELES, Sheila, 2009) In

that way, consumers where stimulated to keep watching one channel instead of switching

channels.

With TSV, a consumer now can pause a live stream and continue watching it later. In that way, the

consumer does not need to miss anything from his favourite program while he can still do other

things while the program is running. Combined with the video recording function on set top boxes

and VOD, the consumer has more power on what he watches and when he watches it than ever.

This new way of watching TV has a positive effect on the time Flemish people spend in front of

the TV. In 2010, the average Flemish viewer, daily watched 9 minutes more than in 2009, totalling

at 2 hours and 57 minutes. (VRT, 2011) This evolution however, does not mean that there are also

more people watching adverts. Because of the possibilities to fast forward programs, ad

avoidance has never been so strong. 80% of people using TSV, state to skip advertisements.

(WERBROUCK, Stefaan, 2012)

In the past, ad avoidance used to be a lot more difficult. Speck and Elliot identify three different

ad avoidance strategies. The cognitive strategy, the behavioural strategy and finally the

mechanical strategy. (SPECK, Paul S. and Elliott, Michael T., 1997)

The cognitive strategy implies that people can avoid a TV commercial by not paying attention to

it. Related to this is the behavioural strategy where people can for example leave to room or start

talking to their neighbours. The most advanced of these strategies is the mechanical strategy. In

the past, this involved switching channels but nowadays, it also includes fast-forwarding

commercials while using VOD or TSV.

13

Counterprogramming: A technique used to attract viewers from another TV-station which is airing a major event 14

A programming technique where an established show is scheduled between two less successful shows. 15

A programming technique where an unpopular program scheduled between two popular programs

30

2.6.4 Pressure on revenue

The shift from content scarcity to content abundance results in new challenges for FTA-channels.

While in the past only a couple of private TV channels competed for advertising money,

advertisers now can spend their money on tens of different channels, each focused on a specific

type of consumer.

This is a big advantage for advertisers which can now better target their core consumer. More

channels also mean more available advertising space and cheaper prices. Figure 6 shows that

from 1993 to 2010, advertising spending on TV has grown from 185.8 million EUR to 941.2 million

EUR. Unfortunately for the FTA-channels, this amount of money now has to be shared between

more different market players.

Furthermore, these figures do not only include advertisements, but also alternative forms of

advertising like product placement or interactive content which may be more expensive to apply.

Figure 6: TV advertising spending in Flanders (own chart based on (SVR, 2011b))

2.6.5 A necessary shift

This chapter has clearly indicated that FTA-channels will have to change the way they earn money

if they want to survive. Pressure on revenue has never been bigger than today and alternatives to

watch TV require FTA-channels to become more flexible than ever.

Furthermore, the base of the business model, content scarcity, no longer applies because

consumers have never had so much means to do their own programming. If the generation Y-

factor is added to this situation, it looks even worse. Therefore, chapter 2.7 will focus on possible

alternatives while the research in chapter 4 will help to determine what really is possible.

185,8 210,8 248 264,1

321,3

420,4 441,3 489,2 509,8

545 605,3 623,3 615,6

689,8 744,1

787,1 820,1

941,2

0

100

200

300

400

500

600

700

800

900

1000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Amount (million EUR)

31

2.7 Alternative revenue models The former chapters suggest that it will become very hard for large FTA-channels to survive on

traditional spot-advertising. Niche channels may be able to survive but the largest players will

have to find alternative funding. This chapter will list the most important alternatives and identify

the opportunities.

2.7.1 Non-spot advertising

Karrh defines non-spot advertising as “the compensated inclusion of branded products or brand

identifiers, through audio and/or visual means, with mass media programming.” (KARRH, James A.

et al., 2001) Neijens and Smit narrow it down to TV and describe non-spot advertising as

“sponsoring of television programs with the aim to make the message of the sponsor better

known via the programs.” (NEIJENS, Peter C. and Smit, Edith G., 2003) In other words, it includes

all forms of TV-advertising except commercials.

Non-spot advertising is an interesting alternative for commercials since the commercial message

does generally not interrupt the program. Because the product is integrated in the program, it

also means that FTA-channels cannot loose advertising money of consumers skipping

advertisements.

Research conducted in The Netherlands shows that non-spot advertising has a positive effect on

sponsor recognition. On average 7% of the viewers, can name the sponsor spontaneously while

33% recognises the sponsor when it is presented to them. (NEIJENS, Peter C. and Smit, Edith G.,

2003)

The same research also shows a generally positive attitude towards non-spot advertising. In the

study, 42% of respondents had a negative perception of conventional advertising opposed to only

16% of respondents who had a negative perception of non-spot advertising.

Figure 7: A comparison between evaluations and preferences with respect to conventional advertising and non-spot advertising (NEIJENS, Peter C. and Smit, Edith G., 2003)

This study is backed by other studies conducted in other countries. In a study from Nebenzahl and

Secunda conducted among American college students, 70% of participants answered positively on

the open-ended questions. (NEBENZAHL, ID and Secunda, E, 1993) Another study from Ong and

Meri shows the same image. On a 7-point scale, with 1 = I totally agree and 7 = I totally disagree,

the average score for the proposition “I am opposed to product placement” equaled 5.1, showing

that most respondents did not have strong feelings against product placement.

32

In the next paragraphs, some of the most popular forms of non-spot advertisement will be

presented.

Product placement

Product placement is a form of non-spot advertising where products are featured during a

program. A good example of product placement in Flanders is the highly popular TV series

“Witse”. In this series, the main character drives a Lexus which is shown several times during the

program and even in the TV theme.

In Flanders, product placement used to be forbidden but has now been legalised. According to the

VRM, product placement is allowed in films, series, sports programs and entertainment programs.

It is not allowed to use PP in kids programs and informative programs. (VRM, 2012) Furthermore,

PP has to be communicated to the viewers by showing a logo.

In-script sponsoring

In-script sponsoring is a more developed way of product placement. It is also known as product

integration and in this format, a brand or product is an integral part of the program. It is not just a

car that can be replaced by any car brand, but it is completely integrated in the story.

Advertising funded programming

AFP is the most extreme form of product placement. In the case of branded entertainment, the

whole program focuses on one product or brand. An example of such a program was “Onder

hoogspanning (Under high voltage), a program designed by Ogilvy to promote the Belgian power

supplier Electrabel. The program focused on energy consumption and how to use less energy.

(TEMMERMAN, Wouter, 2007)

Billboarding

Billboarding is an advertising format in which the name and/or logo of a sponsor is shown at the

end or the beginning of a program. Generally the product or brand has a clear link with the

program and a billboard can be both static and dynamic.

Title sponsorship

Less frequently used than billboarding is title sponsorship. This happens when a TV program

incorporates the name of a product or brand in its name. An example of such a program in

Flanders is the “Jupiler Pro League”, the national football competition, which is very popular and

airs on TV.

Overlays

Overlays are commercial messages that can be shown during the program and they are

comparable to banners used on websites. (BERTE, Katrien, 2010) The banner is shown while the

program is running and can promote any product. At the moment, this format is not very popular

in Flanders but if advertisers want to, they can use it anytime.

33

2.7.2 Second-screen apps

While second-screening is considered to be a threat for FTA-channels in chapter 2.3, it also offers

a lot of opportunities. This is illustrated by Matthew Kershaw from Bartle Bogle Hegarty: "The

reality is that if 30% of tablet usage takes place whilst people are watching TV, this means that

they are not watching TV. On the one hand, it is a silent killer. On the other hand, it is a massive

opportunity because TV advertising is incredibly powerful in terms of moving people and shifting

emotions." (Matthew Kerhshaw as cited in (MCCLELLAND, Stepehen, 2012))

According to GFK, consumers want a more “engaging and immersive” consumer experience. (GFK,

2012) They want a unique viewing experience and second screen apps are perfectly fit for the job.

Second-screening can differ from using a twitter hashtag, over voting for someone’s favourite

candidate, to actively participating in a TV-quiz. Possibilities are sheer endless and the market is

only starting to grow. With 75% of TV-viewers stating to surf the internet while watching TV (GFK,

2012), it should not take too much effort to involve people in a second-screen experience.

In September 2012, “VT4” transformed into “Vier” and not only the name changed. Vier is actively

using second-screen apps to engage viewers. During the commercial break of “De slimste mens

ter wereld”, a highly popular quiz, they stimulate consumers to watch the commercials by making

them participate in a small quiz. After each advertisement, the viewer is asked a question which

can be solved on a tablet or smartphone. In this way, the viewer has to watch the commercials if

he or she does not want to miss the questions. At the same time, the app stimulates people to

watch live TV since it does not work with TSV. At the end of the program, the fastest player wins a

prize. Future opportunities can lie into forming alliances with partners to produce second screen

apps and earn more money through these apps. This can be done by selling products that appear

in the program, but also by special offers tailored to the consumer.

The biggest risk in the use of these second-screen apps lies in the fact that the second screen can

easily turn into the primary screen. (CASTILLO, Jose, 2011) While receiving more information

about a TV-show, people are easily distracted from the TV-show itself. The biggest challenge for

content providers will be to merge both screens while directing the consumers’ attention to the

desired screen. Next to the risk of distracting viewers, these second screen apps are also

expensive to produce. Research in the UK shows that play along gaming attracts 12% of the TV

audience on average in developed market. (MCCLELLAND, Stepehen, 2012) It is still not sure if

that is enough to justify the costs.

Even so Vier has just started with second-screening, the advantages are immediately visible. In

this case, consumers are motivated to watch the advertisements and stay focused on the TV-

screen. This enables Vier to charge higher prices for advertising space and keep earning money

using a refurbished business model.

Furthermore, customer engagement can make the bond between viewer and TV channel

stronger. Chances are that the research in chapter 4 will show that millennials are more loyal to

content than to TV-channels. Engaging viewers and offering them a unique viewing experience

could solve this problem.

34

Figure 8 shows Vivek’s theoretical model of customer engagement.

Figure 8: Theoretical model of customer engagement (VIVEK, Shiri D. et al., 2012)

In his research, Vivek identifies several advantages of customer engagement that can be applied

to the situation of FTA-channels.

First of all, actively engaging with the consumer will lead to a higher perceived value for the

consumer which on his turn, will get more involved and will participate more with the offering or

activity of the company.

Secondly, customer engagement enables the consumer to build a strong engagement with the

company or brand. The more engaged consumers are with a company, the bigger the chance they

will pass along positive word of mouth.

Another advantage of this connection is the increase of the likelihood of a positive behavioural

response toward the brand or organization (Jacoby and Chestnut 1978 as cited in (VIVEK, Shiri D.

et al., 2012)). It means that consumers will become more loyal to the brand when actively

engaged. Since FTA-channels will have to keep their consumers close, this could be a winner.

Finally, second screen apps can help to build and maintain a brand community. The same research

from Vale shows that engaged consumers are more likely to join a brand community and to

become brand advocates.

So while second screening is still an unexplored area, the advantages for both the consumer and

FTA-channels are already there. Future research will hopefully deliver more insights about the

effect of second screen apps on advertising effectiveness.

35

2.7.3 Video on demand services

Near linear TV

While second screen apps can motivate people to watch more live TV and make them more loyal

to TV-channels, they do not offer a solution for people who want to watch programs whenever it

suits them.

In that case, near linear TV could offer a solution. Near Linear TV is all about the flexibility to view

TV programs earlier or later than they are programmed. (CAUDRON, Jo, 2011) As an alternative to

offering a rigid programming, FTA-channels could offer their programs to be watched in a certain

timeframe. Instead of waiting until 10 PM, one’s favourite series can then be watched a couple of

hours before or after 10 PM.

In this way, TV-channels are still responsible for the programming while consumers have the

flexibility to choose when to watch their desired program. Instead of driving away consumers,

FTA-channels with good content can attract consumers who otherwise would watch a recorded

program while skipping the advertisements. In short, FTA-channels can make viewers more loyal

by offering them more flexibility without losing the advertising money.

According to Jo Caudron, ads could be removed from the programs if consumers pay for the

service of near-linear viewing. In Flanders however, this is probably not going to work since

people are already accustomed to recording programs. It offers them the same service for free

while they can skip the ads.

TV on the go

In chapter 2.3.5, Telenet Yelo, Belgacom TV Overal and Mobistar’s TV Everywhere have been

discussed as platforms which enable consumers to watch TV on the go. At the moment, only

Telenet offers this service for free but that is probably going to change.

The revenue from these applications however, is mainly for the distributors and not for the FTA-

channels whose programs can be watched using these apps. An evolution that has already caused

VMMa to prevent people from watching their TV-stations on Telenet’s Yelo.

In the current market, these apps are a threat for traditional FTA-channels. However, nothing

prevents these channels to make a paying app offering the same service themselves. While the

distributors have a very strong position when it comes to the distribution of FTA-channels on the

cable and IPTV, they cannot prevent commercial TV channels from distributing their content

through alternative channels.

That is exactly what the three major players in the Flemish TV-market are planning to do. At the

end of august VRT, VMMa an SBS announced they are going to offer a new mobile TV platform

called Rumble. The service will enable consumers to watch all TV programs from the big three

when and where they want up to three days after the program has aired. (DECKMYN, Dominique,

2012c) Furthermore it will also offer life TV without any interference of distributors.

36

According to “De Standaard”, the platform will cost around 5 EUR a month, exactly the same as

Belgacom is charging for its TV Overal service. By dropping the distributors and making their

content available through alternative channels, the biggest three market players may have found

a new way to capitalise on their own content and earn some money. The impact of this service

cannot be measured yet, but the assumption can be made that this is a formula that will work. It

offers all generation Y desires: flexibility, ease of access and portability for an affordable price.

Pre-runs

Jo Caudron identifies as new market segment: Pre-run TV. In a pre-run business model,

consumers pay to view a new series or program before it airs on TV. In this model, the more

recent the program is, the more expensive it will be to view it. (CAUDRON, Jo, 2011) People not

wanting to wait to see the new season of their favourite series can be served in this way.

The model has already been applied in Flanders on “Quiz me quick”. This series first aired on

Prime, a pay-tv channel, in April and will air on Eén, a public TV-channel, in November. The model

worked very well and people who have seen the program recommend people who haven’t to

watch it when it airs on TV.

The biggest problem for this way of watching TV however is the price consumers are willing to pay

to access a program before it airs. And maybe even more important, do people want to pay to

access this content? The research further on in this dissertation will try to answer that question.

2.7.4 Freebie-model

Another model that can be used is the freebie-model. Rudzki and Shaomei define the freebie-

model as “the provision of free goods and services at no cost to the end-user.” (RUDZKI, Romuald

E.J. and Shaomei, Li, 2007) In this business model, a certain product is given away for free in order

to increase sales of another product. Good examples of this are razors which are generally given

away for free while the razor blades have to be bought and are fairly expensive.

Considering the fact the millennials want to see a movie before they buy it (cfr. Infra), this is a

model that can work. For example, within three months after Monty Python had made all of their

videos available on YouTube for free, Monty Python’s DVDs had climbed to No. 2 on Amazon’s

Movies and TV best-sellers list. (ANDERSON, Chris, 2009) Another confirmation that this model

works is from Smith and Telang who conducted research on piracy in the DVD-market. They

discovered that giving away content in one channel can stimulate sales in a paid channel if the

free content is sufficiently differentiated from its paid counterpart. (SMITH, Michael D. and

Telang, Rahul, 2009)

Since this model has worked to increase DVD-sales and lower movie piracy, it can also be applied

to FTA-channels. FTA-channels could offer the first three episodes of a new TV-series for free and

then charge a small amount of money for the next episodes. Other possibilities include offering a

TV-series for free and making extra content (cut scenes, interviews with actors, the making of)

available for sale. Real fans are very likely to pay for this content and can help to increase

revenue.

37

2.7.5 Line extensions and merchandising

Merchandising and line extensions have always been very important for media companies. One of

the merchandising champions in Flanders is Studio100 which has several theme parks and has

become one of the largest content producers when it comes to kids programs in the Benelux.

Their strategy is to create a one-stop shopping model and the company creates music, book,

feature films and theatre productions. (LICENSEMAG, 2010)

FTA-channels can learn from this business model and line extensions have already proven to be a

solid revenue generator. VTM has some experience in this world with the “SOS Piet” books. SOS

Piet is a highly popular cooking program and the books selling with the same name are a success.

Year after year, they are topping the book charts in Flanders and by 2012; more than 3.2 million

books were sold. (VANKERSSCHAEVER, Sarah, 2012)

Research shows that a positive attitude towards characters in a TV series results in a positive

attitude towards merchandising. (SZU-YU, Chen, 2012) The respondents in the survey were

positive towards the TV merchandising which is good news for TV-stations wanting to extend this

business.

38

3 Research Methodology However this dissertation is written to complete a master’s program in Marketing, the research is

not completely aimed at marketing alone. This dissertation tries to merge business studies with

marketing, more specifically advertising management, and social sciences. The aim of this

research is to establish a connection between the business model of the struggling FTA-channels

in Flanders, the changing media consumption of millennials and the role of advertising.

Therefore, the research conducted in this dissertation is both primary and secondary research.

The secondary research is mainly used to verify the results of the own research and to identify

generation Y and the evolutions currently going on in the market. According to Gorard, this mix

between primary and secondary research is “a key element in the improvement of social science,

including education research”. (GORARD, G., 2004)

The Secondary research mainly existed out of academic journals, reports and books. Because of

the fast-changing media environment, some newspaper websites and websites of media-related

companies have been used to provide up-to-date data. Before incorporating this data in this

dissertation however, sources have been thoroughly checked and the websites have all been

checked on their reliability. In order to make solid recommendations in chapter 5, the secondary

research will be combined with primary research.

The core of this primary research is data obtained through quantitative research. Current research

on generation Y mainly focuses on what millennials want and like but fails to address the real

problem of how they behave and what they really do. Is what they say also what they do and is

there a future for FTA-channels in the media-consumption pattern of this generation? The

literature review has proven to be a profound base to build on, but solid facts are needed to

identify new opportunities and strengths.

3.1 Research philosophy Because of the beliefs of the author, this study will be conducted from an interpretivist

perspective. According to Saunders, Lewis and Thornhill as cited by Flowers (FLOWERS, Paul,

2009), this means that the focus of the researcher lies on understanding the meanings and

interpretations of ‘social actors’ and understanding the world from their point of view.

Each person is unique and therefore, it is not considered sensible to approach individuals as part

of a group with the same behaviour. Every person will respond differently to a situation and

therefore it is very important to understand what drives these people.

This study focuses on business studies and social sciences. Behaviour cannot easily be predicted

by a model. (SAUNDERS, Mark et al., 2004) It requires far deeper analyses of the individual to be

able to more or less predict what he or she is going to do. Therefore, the environment of the

respondents has been researched in the literature review. If this study would be conducted in

China, results would probably be totally different.

39

3.2 An inductive approach The research for this dissertation has been approached in an inductive way. This dissertation

starts from an observation and tries to move from this observation to broader generalisations and

theories.

For this dissertation, the author observed that less millennials watch linear TV in favour of TSV,

WebTV and several online (il)legal content services. At the same time, FTA-channels were

communicating about their problems to earn enough money through their traditional business

model.

Starting from this observation, research has been conducted to identify patterns in the media

usage of generation Y. These patterns have been used to produce a tentative hypothesis about

the possible damage this behaviour can cause to the business models of commercial TV channels.

Finally, at the end of this dissertation, a theory has been formulated on how commercial TV

channels have to adapt their business models to be able to cope with generation Y.

3.3 Quantitative research The heart of the quantitative research is a survey focused on generation Y in Flanders. Generation

Y is the generation born between 1980 and 1997 and are currently aged between 15 and 30.

According to ADSEI, the organisation responsible for statistics in Belgium, there were 1,203,155

people belonging to this category on 1 January 2011. (ADSEI, 2012)

3.3.1 Validity

To ensure the validity of the research, the sample size has been calculated using the percentage

method. Therefore, the following input has been used:

Confidence level: 95%

Desired Margin of error: 5%

Estimated proportion: 50%

Population size: 1,203.155

The formula used to calculate sample size is based on De Pelsmacker and Van Kenhove. (DE

PELSMACKER, Patrick and Van Kenhove, Patrick, 2006)

After applying this formula to the population and other variables, the desired sample size for a

representative random sample was 385 people.

The survey was conducted during one month and 348 people participated in the survey. After

removing the invalid entries, there were 309 valid entries left. This is not enough to ensure the

sample is a representative random sample, but it can surely be used as a solid base for

conclusions.

40

3.3.2 Questionnaire

Input for this dissertation has been collected using a questionnaire. This questionnaire comprised

22 questions and was distributed using e-mail, Facebook, Twitter and WOM. The full

questionnaire as used can be found in appendix 2.

Questionnaire type

Respondents for this research have been surveyed using the CAPI16-method. Depending on the

answers given on certain questions, questions were skipped or added to the survey. This was

done to prevent people from seeing questions that did not apply to their situation. This also

prevents people from quitting with the questionnaire halfway through it.

This form of a web-based self-completion questionnaire offers some advantages. These are the

most important ones according to Brace:

- the possibility for respondents to complete the questionnaire in their own time

- going away when interrupted and continuing later

- allow complex routing

- ability to rotate questions and responses

- ability to build links between questions

- no data entry needed

- Fast analysis possible

(BRACE, Ian, 2004)

Questions

All measures have been taken to make questions as easy to understand and solve as possible.

Before the questionnaire was made public, it has been pre-tested on 5 different people from

different age groups. Each individual had the chance to comment on questions and identify the

problems. In the end, this resulted in a very clear and easy to understand survey.

Most of the questions in the survey are of the closed type. This is done to ensure that input from

one person can easily be compared to the input of another person. Open questions are only used

in the survey as input for numbers.

16

CAPI-method: Computer Assisted Personal Interviews

41

3.4 Research challenges Researching a topic is never easy and just like for any topic, there were some bumps in the road

which needed to be avoided to reach the final destination.

3.4.1 Social desirable answers

One of the main problems of surveys is that respondents not always say the truth but simply

provide answers that make them look good. (STEENKAMP, Jan-Benedict E.M. et al., 2010) This is

called socially desirable responding and can be a problem for the accuracy of the conducted

research.

To prevent this, respondents have been assured that it is impossible to track the survey-results

back to one person. Furthermore, questions that are considered to be too personal or steering

towards a socially desirable answer have been avoided as much as possible.

3.4.2 Generalisation

One of the challenges of this dissertation is to approach the subject in an objective and unbiased

way. Being a member of the millennial-group, it is easy for the author to generalise and project

one’s own beliefs and behaviour onto other people. Therefore, the author tries to stay as neutral

as possible.

3.4.3 Recent data

The declining business model of FTA-channels is a hot topic at the moment. Newspapers are

writing about it and the topic is all over the internet. There are however, not a lot of academic

sources which report about this topic. Academic articles take some time to be published and at

the moment, solid information about it is scarce.

This problem has been solved by combining several academic journals touching the topic.

Therefore, more keywords have been added to the search in order to produce an accurate image

of what is going on in the world of FTA-channels.

42

4 Results This chapter will focus on the results of the market research. In order to make the results

accessible, charts have been used were appropriate. For more detailed information, the full

dataset is available from the author upon request.

4.1 Consumption patterns The hypotheses in the introduction are based on the observation that millennials watch TV in a

totally different way, using other devices or services with a more technical approach. Therefore,

the study will be compared to other studies conducted in Flanders.

4.1.1 Digital TV

In the survey, owning digital TV has been defined as being subscribed to one of the following

services: Telenet Digital TV, BelgacomTV, Scarlet TV, MobistarTV or TV Vlaanderen. What they

have in common is that they all offer a form of iDTV17. Solutions without the interactive element

are not considered to be “digital TV” in this dissertation.

As for the ownership of digital TV, this study shows a slightly different image than former studies

conducted by iBBT. While in the study from iBBT, 75.9% of the population owns digital TV, (IBBT-

ILAB.O, 2011) digital TV ownership in this study exceeds 83%. This confirms the results of a study

conducted by business monitor. (BUSINESS MONITOR INTERNATIONAL, 2012)

Interactive services appear to be highly popular amongst generation Y. More than 76% of the

respondents regularly use the recording function on their set-top box. TSV is less popular with

only 58% of respondents stating they use this function. The least popular is Pay-tv where only 13%

of respondents say they use it. As expected, millennials have embraced iDTV and its functions

with only 4% stating they have never used one of the questioned interactive services.

Figure 9: Use of interactive services on iDTV amongst millennials (Source: the author)

17

Interactive Digital Television

0%

10%

20%

30%

40%

50%

60%

70%

80%

Time shiftedviewing

Recording TVprograms

TV on Demand PayTV None of these

43

Generally, fewer women stated to use interactive services than men. VOD and TSV are both more

popular with men that with women. Recording is the only function that is used more by women

than men.

Figure 10: Difference between men and women in the use of iDTV-services (Source: the author)

On average, millennials use TSV 3.6 times a week. Recording TV programs however, seems to be

more popular than ever. Respondents stating they record regularly, average 4.5 times a week.

Even more important though, is the number of respondents that stated to skip advertisements

while using these services. Exactly 70% of respondents say they always skip advertising when

using these services and only 8.60% state they never skip advertisements when using interactive

TV services.

Figure 11: Percentage of people stating to skip advertisements while using iDTV-services (Source: the author)

While FTA-channels suspected that somewhat 25% of people using iDTV –services skip

commercials, millennials are even worse and are doing it almost automatically. Ad avoidance

among this generation seems to be a widespread phenomenon. This indicates that millennials are

less tolerant towards advertising than other generations. Paragraph 4.3 further investigates this

subject.

52%

48%

55%

48%

52%

45%

0% 20% 40% 60% 80% 100%

TSV

Recording

VOD

Men

Women

Always; 70%

Often; 11,60%

Sometimes; 9,90%

Never; 8,60%

44

4.2 Alternatives for the TV-set

4.2.1 Devices

One of the hypotheses stated that millennials use more alternatives for the normal TV-set to

consume TV content than other generations. This paragraph will test this hypothesis.

First of all, it is very clear that the traditional TV-set is still the number one device to watch TV. A

little more than 86% of respondents state to use the traditional TV-set multiple times a week.

Another 7% state to do so at least once a week.

Except for the computer, most devices are not very popular to watch TV. While 13% of the

population owns a tablet (cfr. Infra), 86% of the millennials in this study states never to use a

tablet to consume TV-content. The same pattern is visible for smartphones, media players and

other devices. The traditional TV-set remains king.

Never Less than once a month

A couple of times

per month

Once a week

A couple of time

per week

TV 0% 3% 4% 7% 86%

Computer 11% 16% 19% 8% 45%

DVD-player/Blu-ray player/DVR 28% 35% 25% 7% 5%

Media-player (IPod, Walkman…) 89% 4% 2% 1% 4%

Tablet 86% 4% 3% 3% 4%

Smartphone 83% 7% 5% 3% 2%

Game console 86% 7% 4% 1% 2%

Apple TV, Google TV 98% 0% 1% 0% 0%

Media centre (Boxee Box, Popcorn hour)

97% 2% 1% 0% 0%

Table 1: Devices used to watch TV (Source: the author)

The computer however, is also doing a good job. 45% of respondents state to use their computer

more than once a week to watch TV. Only 11% indicates they never use a computer to consume

TV content. While it is still not used as much as the TV-set, it illustrates the readiness of

generation Y to use other devices than the traditional TV.

There are no significant differences between men and women when it comes to the amount of

people using a computer. Men however, tend to use it more frequently while women stick with

the traditional TV-set.

45

The main reason for using alternative platforms to watch TV is the freedom to watch any program

at any time. 54% of respondents have selected that option. Ease of access, less advertisements

and the ability to catch up with a program are also very popular. 44% of respondents agree with

the statement that they use the computer to access content because it is free. Respondents also

had the possibility to add options to the list if their choice was not available. The most mentioned

reasons were discovering new programs and using the laptop because family members were

watching another program on the TV-set.

Also 34% of respondents do not like to wait for the next episode of their favourite program to be

broadcast on TV. On average, consumers want to wait approximately two months for a new

episode from their favourite foreign TV show to be broadcast on the Flemish FTA-channels.

Figure 12: Reasons for using other devices to watch TV (Source: the author)

54%

48%

45%

45%

44%

34%

16%

Freedom to watch whenever I want

Ease of access

No or less advertisements

Catching up with a programe

It is free

I don't want to wait for the next episodeof my favourite program to be…

Cheap

46

4.2.2 Content delivery platforms

The popularity of the computer would be non-existing without content. One of the questions of

the survey was developed to determine which content platforms are used by millennials to access

content.

The most popular way to access TV content on a computer is YouTube. 20% of respondents use

YouTube more than once a week to watch TV programs. YouTube is closely followed by illegal

streaming websites. These websites have been thoroughly discussed in the beginning of this

dissertation. The ease of access and wide offer definitely appeal to young people. Not less than

18% of respondents state to visit these websites multiple times a week. In addition to that,

downloading TV-programs through torrents also seems to be highly popular.

Paid alternatives do not seem to be very popular. Since Netflix and Hulu are only accessible for

tech-savvy people in Flanders, the low amount of people using these services is not surprising. For

VOD-services, iTunes, second screen apps and physical media carriers however, there is no real

explanation. All these services are fully available and easy to access. Paying for content seems to

be uncommon among young people. An explanation for this will be given in paragraph 4.4.

Never Less than once a month

A couple of times

per month

Once a week

Multiple times a week

YouTube 29% 26% 18% 7% 20%

non-legal streaming video sites 49% 15% 13% 6% 18%

Torrents 52% 12% 16% 5% 15%

Online platforms from TV channels18

48% 18% 17% 6% 11%

iTunes, Google Play, Amazon store

78% 9% 6% 2% 4%

Second-screen apps 81% 8% 6% 2% 3%

DVD, Blu-Ray, VHS 22% 46% 23% 6% 3%

VOD-services on iDTV 68% 23% 7% 2% 1%

Netflix, Hulu 98% 0% 1% 0% 1%

Table 2: Services used to watch TV among generation Y (Source: the author)

18

VRT video player, BBC Iplayer,…

47

When analysing gender differences, the proportion of men using these content platforms is

slightly bigger. The proportion of men to women in the use of YouTube and the online platforms

from TV channels is almost equally divided with men using these platforms slightly more than

women. When looking at torrents and non-legal streaming websites however, it is pretty clear

that men are more likely to use illegal ways to access their content than women. Only 35% of

people stating to use torrents in the research were women.

Figure 13: Differences between men and women on the use of alternatives for the TV-set (Source: the author)

53%

61%

65%

53%

47%

39%

35%

47%

0% 20% 40% 60% 80% 100%

Youtube

Non-legal streaming websites

Torrents

Online platforms from TVchannels

Men

Women

48

4.3 Attitude towards advertising Millennials are used to have their products customised to their needs and wishes (cfr. Infra).

Therefore, it is understandable that the majority of this group skips advertisements and is using

other platforms to access their favourite content.

In order to analyse and explain the behaviour of millennials, the survey included some statements

where participants could indicate whether they agreed or not. The statement “I switch channels

when the commercial break on TV starts” proved to be a real winner. 84% of the respondents

agreed with this statement. Another part of the respondents stated they concentrate on

something else while the commercials are being shown. This is nothing new but combined with

the amount of people using another device while watching TV (cfr. 2.3.5), it really indicates that

the majority of young people do not watch advertising at all.

Less extreme but also very important to know is that 40.33% of respondents state to choose a

program in function of advertising. This means that when there are two programs that the

respondents equally like, they choose to watch the program with the least advertising.

The reason for this can be found in the growing amount of advertising clutter as mentioned in

2.3.2. Furthermore, almost 71% of respondents stated that they find advertising on TV disturbing.

When asking if they prefer to pay for a program instead of watching it for free with advertising

however, only 5% indicates they prefer to pay.

On the other side, product placement is not considered as a threat. Only 8.7% states to find

product placement disturbing.

49

4.4 Attitude towards pricing The main problem for FTA-channels is that generation Y does not seem to be prepared to watch

TV programs with advertising or to pay for exclusive content.

This is clearly visible in the preferred platforms from millennials to access content in paragraph

4.2.2. In the survey, 45.84% of the respondents agree that piracy is not a problem when it is not

possible to access the content otherwise. When asked if the source of the content matters, 65.9%

states that they do not care who delivers to content as long as it is accessible for free.

TV users have never paid to access content and free is still considered to be normal. Only 18% of

respondents do not mind to pay for good content and more than 55% is convinced that TV has to

remain free. Only 5.70% does not agree and acknowledges that TV does not has to be free.

Figure 14: Attitudes of millennials towards pricing policies and piracy (Source: the author)

In order to see what consumers prefer, one of the questions asked the respondents to rank the

way they prefer TV programs are financed. Analysing the results, the image remains the same as

in the other questions. People prefer the free options. Paying a monthly fee to have unlimited

access to all content, appears to be the least popular option. On the other side, watching

programs for free with non-spot advertising is the most popular.

Figure 15: Preferred ways of generation Y to watch TV (Source: the author)

18,75%

6,64%

5,70%

50%

35,42%

27,43%

18,86%

31,82%

45,84%

65,93%

55,31%

18,18%

Piracy is not a problem if it is not possible to accessmy favourite content in another way

The source of my content does not matter as longas I can access it for free

Watching TV has to remain free

I do not mind paying for good content

I do not agree Neutral I agree

23%

5%

51%

5%

16%

Watching for free withadvertising

Paying per episodewithout advertising

Watching for free withnon-spot advertising

Paying a monthly fee tohave unlimited accessto all programs

50

4.5 Pricing possibilities While the results in the former paragraph may look rather negative, other input in the survey

suggests that there are still some opportunities to earn money with TV-content.

At the moment, Netflix is not yet available in Belgium. After having explained the price level and

the business model, 40.2% of respondents say they would be prepared to pay 7 EUR a month for

unlimited access to this service. Another 41.9% indicates that they would maybe be prepared to

do so. Only 17.9% stated not wanting to pay for such a service.

Another question that was asked dealt with the problem of pre-runs. Here, 10.1% of respondents

indicated being ready to pay for so-called pre-runs while 64.3% indicated never going to do so.

The price these respondents would pay for one episode averages 2.10 EUR.

The same question was asked about catch-up TV. Respondents had to indicate how much they

would pay to access their favourite program the day after it has aired on TV. Answers for this

question are almost the same. Here 11.2% indicates to be willing to pay for a program the day

after it has aired on TV while 64.7% indicates not to do so. The desired price averaged 1.90 EUR.

The difference between the average value of a pre-run and catch-up TV indicates that people are

willing to pay more for premium or exclusive content. Watching a program before it airs, is worth

more than watching a program after it has aired.

4.6 Attitude towards TV-channels One of the elements that could make a difference when it comes to survival or extinction for FTA-

channels is the attitude of the consumer towards these companies. The question is whether these

players are irreplaceable or not in the mind of the consumer.

When it comes to loyalty, it does not really look good for the Flemish TV-channels. Only 40.1% of

respondents indicate to be loyal to his or her favourite channel. When respondents are asked to

choose between their favourite program and their favourite TV-channel, an overwhelming

majority of 74.56% chooses for their favourite program.

Only one of the three statements delivers a positive outlook for TV-channels. 55% of the

millennials think that FTA-channels are imperative with only 15.5% disagreeing on this.

Figure 16: Generation Y's attitude towards FTA-channels (Source: the author)

40,09%

15,48%

5,70%

33,48%

29,20%

19,74%

26,44%

55,31%

74,56%

I am loyal to my favourite FTA-channel

FTA-channels are imperative

I am more loyal to my favourite program thantowards my favourite FTA-channel

Disagree Neutral Agree

51

5 Recommendations In the preliminary chapters, all facts and figures about generation Y, FTA-channels and

alternatives to watch TV have been described. As dark as the future may look for commercial TV,

it is as bright for FTA-channels wanting to innovate and turn their business model upside down.

The future of commercial TV is not about more advertising or about protecting content by limiting

access to it. The future of commercial TV is all about an open and transparent business model.

The consumer will pay for some services, but most content will paradoxically have to remain free

to earn money. One thing can be taken for sure: there is no easy solution for FTA-channels and

surviving is not going to be a walk in the park. The next paragraphs give some recommendations

on what to do.

Move from content packaging to content providing

The line between content packaging and content providing may not be very clear but the

difference lies in the execution. The content-packaging model is dead. Generation Y is not waiting

for yet another FTA-channel. To be successful, a commercial TV-channel will have to move from

being a content-wrapper to being a real content provider. Content is still the key to success. The

ultimate goal has to be to become the one-stop shop for the consumer to access all his or her

desired content.

In Flanders, this can be done by working on two different foundations. The first base is creating

and offering outstanding and relevant local content. Paragraph 2.5 has shown that people value

local content and that it helps to create a bond with the consumer.

The second foundation is becoming the main distributor for high quality foreign content. While

the knowledge of foreign languages is still growing, a very large group of consumers still not has

the knowledge to watch foreign programs without subtitles. In the current model, Telenet and

Belgacom are buying the rights on foreign TV-series and FTA-channels are lagging behind. If they

want to bond consumers to their brands, they have to come with a strong content offer, which

does not lag too far behind compared to other countries. The research has shown that generation

Y does not want to wait to see the newest episode of their favourite series. Two months seems to

be the maximum.

Offering strong content is the keystone to build the brand equity to become consumers’ favourite

source for entertainment. If FTA-channels want to survive, they need to become a real media

company with a strong content offer. It will however, take more than only offering linear content.

Make all content available, anytime, anywhere

In order to be able to attract millennials. Watching TV will have to be more flexible as discussed

before. If people state in the research to use TSV on average 5 times a week, it is because they

need more flexibility. Therefore, making content available, anytime, anywhere is essential. Before

analysing how this service can generate revenue, the ideal platform to make all this content

available will be described.

52

The Rumble-platform as proposed by VRT, VMMa and SBS looks like a good start. If the platform

wants to become the heart of TV in Flanders, the ideal way of consuming content as discussed in

paragraph 2.3.2 can help. A successful platform will need to offer the following attributes: instant

access, a wide product offer, a low price, easy to use and the ability to get everything,

everywhere.

Everything everywhere has to be taken quite literally. For the platform to become a success, it will

need to be accessible from as much devices as possible. Smartphones, TV-sets, iDTV, tablets,

computers, game-consoles, etc. The more platforms it can be used on, the better.

This content-platform will have to be supported by traditional TV-channels. In this way, TV-

channels will drive users towards this integrated content platform. Series and TV-programs will be

available on TV for free through a near-linear model or a scarcity model. Once the opportunity to

watch a program (semi) live is gone, consumers can watch the program using the integrated

platform. Together with the linear TV-stream, this integrated platform can become an extra

income-driver.

40% of respondents in the survey stated that they would pay €7 a month for a Netflix-like service.

Assuming that 20% of the survey population would effectively pay for such a service, it can

generate 1,684,41719 million a month. That equals the production cost of approximately 62

hours20 of content. This is not the cash-cow needed by FTA-channels to survive, but it is a good

start. Extra revenue on this platform can be generated by partnerships, specials, merchandising

and much more.

Alternatively, the content on the platform could be offered for free and be paid by using

traditional advertisements or interactive ads. When advertising clutter becomes too strong

however, consumers will turn away and look for alternatives as seen in paragraph 2.3.2.

Add interactivity through second screen apps

The advantages of second-screen apps have already been discussed in paragraph 2.7.2. People

can be motivated to watch the advertisements and second-screen apps can help to make the

bond between brand (the FTA-channel) and consumer stronger. While not everybody might be

interested in helping to solve a murder in CSI, the interactive second screen can generate extra

revenues.

Second screen apps are not cheap to produce. Since the majority of people are already using a

second device while watching TV however, it would be a shame not to take advantage of this.

Second-screen apps can be incorporated in the integrated platform discussed earlier. Consumers

will probably not like to download 50 different apps to add interactivity to their TV-experience.

Therefore, one strong platform is indispensable.

Once this platform has been established, it can be used to entertain beyond the TV-screen.

Merchandising, play-along TV, social TV. The possibilities to generate revenue are endless.

19

20% of 1,203,155 (ADSEI, 2012) X 7 = 1,684,417 20

1,684,417/27,284 (VRT, 2010)

53

Partner with brands to reduce advertising clutter

The research is pretty clear. Generation Y does not like advertising and considers it to be outright

annoying. There are however quite some alternatives like product placement which are not

considered to be threatening. The majority of millennials does not mind about product

placement.

When carefully implemented, product placement is one of the non-spot solutions discussed in

paragraph 2.7.1 which can be used to generate extra revenue. Therefore, it is advisable for FTA-

channels to partner with several brands while producing programs. Brands can sponsor programs,

provide the necessary attributes (furniture, cell phones, food…) or support the TV-channels while

organising events.

Do not try to lock in consumers

The commercial TV channels in Flanders have asked Telenet and Belgacom to make skipping

advertisements impossible while recording, or to receive money for recorded programs.

This will however, drive consumers away instead of motivating them to watch TV. As shown in

different paragraphs along this dissertation, generation Y is ready to move from FTA-channels to

other platforms. They are not loyal to their favourite TV-channel and they will do everything to

access their favourite content. Millennials will try to get their favourite content from every

possible source. If their favourite channel does not comply with their beliefs and standards, the

internet is only one click away to access whatever they want.

Therefore, it is not advisable for FTA-channels to lock content away or to restrict access through

pay walls and other techniques. It has been thoroughly illustrated in paragraph 2.3.3. Generation

Y has never paid to access content and will never do so. They are prepared to pay for services, not

content. Every restriction or difficulty encountered by consumers will drive them further away

from the traditional media companies. That is exactly what has happened with newspapers once

people had discovered online news content.

Act now

With Telenet and Belgacom constantly looking to expand their offer, FTA-channels cannot wait

any longer. If they do not decide to become the key content providers, Telenet and Belgacom will

do so. Both already have a wide offer of VOD, Pay-tv-channels and niche-products. Consumers are

focusing on these companies to get their content instead of getting it from FTA-channels.

Basically, the market can evolve in two directions.

One direction is that Telenet and Belgacom become more than just distribution channels and

become the main content providers in Flanders making the FTA-channels obsolete. In this

ecosystem, traditional FTA-channels do not stand any chance to survive.

The second option is that FTA-channels act now, start being the main source for good TV content

and start investing in an integrated platform to watch TV. If they do so, consumers will see them

as indispensable to access content and Telenet and Belgacom will become no more than the

service-hatch to connect to the internet using cable, fibre wire or other techniques.

54

Collaborate with new market players

“If you can’t beat them, join them”. New players on the TV-market are here to stay. Netflix,

Google, Apple and Microsoft will all have their part of the TV market. FTA-channels are afraid of

these new players but instead of trying to defeat them, they should work together with them.

Making content available through different platforms is the perfect way to reach as much

consumers as possible. While distributing content through Netflix or AppleTV might not be as

profitable as distributing it on an own platform, it offers the opportunity to reach a far wider

public which might otherwise be too expensive to reach.

Nobody knows for sure if these services will still exist in ten years, but in the meantime, they can

be an advantage instead of a threat. Furthermore, since they are completely legal services, they

can reduce the amount of piracy currently going on in the world of TV-series and movies.

55

6 Conclusion Generation Y will change the face of TV but that is not necessarily a threat for FTA-channels. If

they are prepared to turn their business model upside down, they can (again) become the

epicentre of TV. The recommendations in chapter 5 show that it will be hard but feasible.

The key to success is moving towards a more flexible TV-model where content is free and

instantly available while consumers will pay for additional services. It will become extremely

important to bond with consumers and to turn them into real brand-enthusiasts. Therefore, an

integrated platform offering every possible service is indispensable. The new business model can

easily be described in five words. The future of TV is all about flexibility, accessibility, interactivity,

content availability and acting now.

Advertising will still be one of the main income-drivers but it will have to evolve from commercials

to more subtle forms like non-spot advertising, program-sponsoring, second-screen apps and

partnerships. It can still be used, but millennials are doing everything to avoid advertisements.

FTA-channels are facing a difficult period and will need to be quick in order to survive. The rise of

FTA-channels will reduce the role of distributors like Belgacom and Telenet but in the long run this

will lead to a more competitive and healthy market environment where commercial TV will

flourish and consumers are more involved than ever.

Millennials have special needs and wishes but there is no generation more generous towards the

brands they love than generation Y. By applying the recommendations mentioned before,

consumers will love FTA-channels and the future of commercial TV, will be brighter than ever.

56

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8 Appendix

8.1 Appendix 1: List of TV-channels in Flanders. Table 3: Public TV channels in Flanders (VRM, 2011)

Table 4: FTA-channels in Flanders (VRM, 2011)

64

Table 5: Private TV-channels in Flanders Part 2 (VRM, 2011)

65

Table 6: Local TV-channels in Flanders (VRM, 2011)

66

8.2 Appendix 2: Questionnaire The survey has been conducted in the Dutch-speaking part of Belgium. Therefore, the

questionnaire attached to this document is in Dutch.

Alternatieve businessmodelllen voor commerciële TV in Vlaanderen

Voor mijn masterproef aan LSBF voer ik een onderzoek uit naar de toekomst van commerciële TV in Vlaanderen. Door het invullen van deze enquête kunnen jullie mij helpen om van deze thesis een prachtig te werk te maken. Alle antwoorden zijn anoniem en de resultaten worden enkel gebruikt in het kader van mijn thesis. Alvast bedankt!

1) Hoeveel uur per dag spendeer je aan TV-kijken?

Minder dan 1 uur

Meer dan 1 uur en minder dan 2uur

Meer dan 3 uur en minder dan 4 uur

Meer dan 4 uur per dag

2) Beschikt uw gezin over digitale TV? ( Telenet, BelgacomTV, MobistarTV, TV Vlaanderen of

Scarlet)

Ja

Nee

3) Heb je ooit gebruikt gemaakt van de volgende services? (Meerdere antwoorden mogelijk)

Time Shifted Viewing (Pauzeren van live-programma's om later verder te

kijken)

Opnemen van TV-programma's

TV on Demand (Het huren van een film of programma via de set-topbox

PayTV of betaalzenders zoals Prime(Telenet), Boeketten(Belgacom),

67

Basic+(TV-Vlaanderen), Plus (MobistarTV)

Ik heb nog nooit gebruik gemaakt van één van deze services

4) Wanneer je gebruik maakt van Time Shifted Viewing (Pauzeren van live-programma's om

later verder te kijken) of de opnamefunctie, spoel je dan de reclame door?

Altijd

Vaak

Soms

Nooit

5) Hoeveel keer per week maakt u ongeveer gebruik van de volgende services? Als u geen

gebruik maakt van deze services, typ dan de waarde "0" in het veld.

Time-shifted viewing (Pauzeren van live-programma

Opnemen van TV-programma

6) Maak je soms gebruik van de volgende middelen om TV-programma's te kunnen kijken?

Nooit

Minder

dan één

keer per

maand

Verschillende

keren per

maand

Eén keer

per week

Meerdere

keren per

week

Youtube

Streaming video websites zoals watchseries,

megavideo,tvduck,...

Telenet Yelo of Belgacom TV Overal

Torrents (downloaden van programma's via

bv. thepiratebay)

68

Netflix, Hulu

VRT Videozone, BBC Iplayer of andere online

zenderplatformen

Iwatch, Netgemist, Ooit gemist, C-more

Itunes (inc. Apple TV), Google Play

(inc.GoogleTV), Amazon Store, Xbox Live

DVD, Blu-ray, VHS

Tablet of Smartphone applicaties anders dan

"Telenet Yelo" of "Belgacom TV Overal"

7) Indien u bij bovenstaande vraag hebt aangegeven gebruik te maken van één van

bovenstaande middelen, kruis dan hier dan aan waarom. (Meerdere antwoorden mogelijk)

Gebruiksgemak

Ik wil niet wachten tot een nieuwe episode van mijn favoriete programma wordt

uitgezonden op TV

Geen of minder reclame

Om een gemist programma alsnog te kunnen bekijken

Vrijheid om te kijken wanneer ik wil

Het is goedkoop

Het is gratis

Er was geen TV-toestel aanwezig op de plaats waar ik TV wou kijken

Ik heb nog nooit gebruik gemaakt van één van bovenstaande middelen om TV

te kijken

Andere (vul aan)

69

8) Welke van de volgende apparaten gebruik je om TV-programma's te bekijken?

Nooit

Minder

dan één

keer per

maand

Verschillende

keren per

maand

Eén keer

per week

Meerdere

keren per

week

TV

Game-console (Xbox, Playstation, Wii)

Tablet (Ipad, Android-tablet, Windows tablet)

Smartphone

MP3-speler/mediaspeler

Computer

DVD-speler/Blu-ray speler/DVR(Digital Video

Recorder)

AppleTV, GoogleTV

Mediacenter (Boxee Box, Popcorn hour

player,...)

9) Hoeveel dagen ben jij bereid om te wachten voor een nieuwe aflevering van je favoriete

buitenlandse programma wordt uitgezonden in België nadat het is uitgezonden in het

buitenland? Geef het aantal dagen in. bv. twee maanden = 60

10) Geef aan in welke mate je akkoord gaat met de volgende stellingen over TV

1 Helemaal

niet

akkoord

2 Niet

akkoord 3 Neutraal 4 Akkoord

5 Helemaal

akkoord

Ik verander van kanaal wanneer reclame start

op TV

Piraterij is geen probleem als er geen andere

70

manieren zijn om toegang te krijgen tot wat ik

wil

Tijdens de reclameblokken op TV ga ik iets

anders doen

Mijn programmakeuze wordt niet beïnvloed

door de hoeveelheid reclame op een bepaalde

zender

Ik verkies te betalen voor een programma in

plaats van het te bekijken met reclame

Ik kijk nooit TV via illegale kanalen (streaming,

downloaden,...)

Ik vind het niet erg om te betalen voor goeie

content / TV-programma's

Product placement (bv. Witse die rijdt in een

Lexus)stoort me niet

Ik kijk meer TV via alternatieve kanalen zoals

Youtube, streaming,.. dan op de gewone TV

11) Zou je bereid zijn om een nieuw TV-programma te bekijken rechtstreeks bij de producent

(Woestijnvis, Studio 100, HBO, Warner,...), dus zonder tussenkomst van een TV-zender?

Ja

Nee

Misschien

12) U gaf aan bereid te zijn om een TV-programma te bekijken rechtstreeks bij de producent.

Op welke manier zou je dan verkiezen om het programma te bekijken? Plaats in de volgorde

van uw voorkeur waarbij 1 uw eerste keuze is en 5 uw laatste keuze.

Het TV-programma gratis bekijken met reclame

71

Betalen per aflevering zonder reclame

Gratis kijken met product placement (bv. Witse die rijdt in een Lexus)

Een maandelijks bedrag betalen om alle programma's van die producent

ongelimiteerd te kunnen bekijken

Gratis kijken naar een gesponsord programma (programma wordt betaald door

een merk)

13) Voor omgerekend 7 EUR per maand kunnen gebruikers in het Verenigd Koninkrijk

ongelimiteerde toegang krijgen tot films en series op Netflix. Zou u bereid zijn om hiervoor te

betalen wanneer deze service beschikbaar komt in België. Ter informatie, Netflix werkt net

zoals Spotify maar kan ook gebruikt worden op de Xbox, Wii, playstation of Mediacenters.

Ja

Nee

Misschien

14) Zou je bereid zijn om te betalen voor een TV-programma de dag nadat het voor het eerst

werd uitgezonden in het buitenland?

Ja

Nee

Misschien

15) Indien u op de vorige vraag "Ja" of "Misschien" hebt geantwoord. Hoeveel zou u dan bereid

zijn te betalen voor één aflevering. Vul een bedrag in tot twee cijfers na de komma. bv. 3 EUR

= 3,00

Gebruik de cijfers bovenaan op het toetsenbord voor input. De cijfers rechts op het numeriek

klavier blijken niet altijd te werken. Sorry voor dit kleine ongemak

72

16) Geef aan in welke mate u akkoord gaat met de volgende stellingen.

Helemaal

niet

akkoord

Niet

akkoord Neutraal Akkoord

Helemaal

Akkoord

Ik ben bereid om te betalen voor goeie TV-

programma's

Ik ben loyaal aan mijn TV-zender

TV moet ten allen tijde gratis blijven

TV-zenders zijn onmisbaar

Lokale programma's zijn heel belangrijk voor

mij

Het maakt mij niet uit wie mijn favoriete TV-

programma aanbiedt. Ik wil het bekijken via

elke mogelijke weg

Reclame op TV stoort mij

Ik ben loyaler ten opzichte van mijn favoriete

programma dan mijn favoriete zender

Ik zou met plezier betalen om toegang te

krijgen tot de volledige catalogus van een

goeie producent (Studio 100, Woestijnvis,...)

17) Zou je bereid zijn om te betalen voor exclusieve toegang tot je favoriete TV-programma

voor het beschikbaar wordt op TV?

Ja

Nee

Misschien

18) Indien u op de vorige vraag "Ja" of "Misschien" hebt geantwoord. Hoeveel zou u dan bereid

zijn te betalen voor één aflevering. Vul een bedrag in tot twee cijfers na de komma. bv. 3 EUR

73

= 3,00

Gebruik de cijfers bovenaan op het toetsenbord voor input. De cijfers rechts op het numeriek

klavier blijken niet altijd te werken. Sorry voor dit kleine ongemak

19) Ik ben

Man

Vrouw

20) Tot welke leeftijdsgroep behoort u?

15-16 jaar

17-18 jaar

19-20 jaar

21-22 jaar

23-24 jaar

25-26 jaar

27-28 jaar

29-30 jaar

boven de 30 jaar

21) Wat is uw hoogste opleidingsniveau? Indien u nog studeert, kruis dan uw huidige

opleidingsniveau aan.

Lager onderwijs

Secundair onderwijs ASO

74

Secundair onderwijs TSO

Secundair onderwijs KSO

Secundair onderwijs BSO

Hoger onderwijs - niet universitair

Hoger onderwijs - universitair

Andere (vul aan)

22) Ik ben momenteel

aan het werk

aan het studeren

werkloos

werkzoekend

zelfstandig

Andere (vul aan)