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Why have Sky and C4 created a content-sharing partnership?

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In February 2018, the three traditionally rivalled big broadcasters, Channel 4, ITV and Sky came together for the first ever Big TV Festival. At this two-day event, they brought to life the power of TV for advertisers, by presenting to both marketers and media agencies.

This move stemmed from an ever-developing video world, where TV is consumed on a much more on-demand basis. Consumers can choose what they watch, whenever they want, especially with online rivals such as Netflix and Amazon Prime very slowly, but surely, shifting viewership away from traditional TV. The traditional TV broadcasters are therefore challenged with how they tackle this shifting viewership and keep consumers engaged with their content and services. In fact, at the festival, the three broadcasters promised more collaboration between them moving forward.

It seems that this is materialising, with Channel 4 and Sky so far sticking to their promise. Both have teamed up on a media first cross-platform content deal. A step in the right direction possibly, in its initial stages, where viewers of Channel 4 can watch the Sky-owned highlights of Formula 1 and the first season of Sky produced drama “Tin Star” will be available to watch on Channel 4 this year. Additionally, Sky subscribers are now able to watch Channel 4 content through their on-demand service, with the first being a series of drama “No Offence” which is now available. Sky aren’t stopping here and want more deals of this kind moving forward with other broadcasters.

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These are the very first stages of the big broadcasters working together. But why are they doing it?

We know that audiences are declining slowly through live TV and shifting towards the subscription giants Netflix and Amazon Prime. Is it that Sky, C4 and ITV recognise this threat and are attempting to get on the front foot to adapt to this change by making their own on-demand platforms more diverse by sharing content? It seems that this is Sky and C4 “dipping their toe in the water”, perhaps a low-risk test with more in the way of collaboration to come further down the line. In decades to come, we may well see broadcast TV become one unit since it seems clear that broadcasters firmly believe that working together is the right move.

Secondly, great content is vital for drawing in viewers. We’re in an era of binge watching. Shows that people can talk about with their friends and family, those shows that you just don’t want to miss out on. The subscription services have shed loads of money to spend on content. In fact, according to the New York Times, Netflix is set to spend up to $8bn on content and JP Morgan has estimated that Amazon Prime is expected to invest $5bn on content in this year alone. On the other hand, it was reported that ITV has spent c. £1bn on content in 2018. It’s no surprise then why increasingly, people are shifting to these services. Thus, by sharing content across broadcasters, it’s a cost saving exercise on original content expenditure. Of course, this doesn’t take away from the importance of investing in exclusive, original content but is certainly a fix for keeping viewers engaged.

What does this mean for advertisers? In short, nothing yet. It’s important to remember that subscription and broadcaster VOD only accounts for 10% of our video day vs. live TV, which is still dominant at 56%. In the long term, however, if eyeballs continue to shift away from live TV, pricing may increase for advertisers. But advertisers may also reduce TV spend in turn if they think viewers are going elsewhere which would of course balance the books.

Either way, it’s clear that the broadcasters want to mitigate these potential effects by working together. If there is an eventual monopolisation of broadcast TV (potentially decades down the line), there will be less competition in the industry which is likely to have an adverse effect on the price to enter the TV market. Of course, this is all speculation. For now, a very first step has been taken to stick to the promise the broadcasters made back in February 2018 to collaborate more and time will tell what the future of broadcast TV holds.