Its innovated autumn programme schedule should help Prima to increase its ad capacity and market share, says Marek Singer, Prima’s CEO, in an interview.
The unexpected growth in the TV ad market in the first half of this year resulted in the increased attention that Prima paid to its autumn programme schedule. In the following months, Prima expects growing interest from its advertisers and will seek to satisfy their demand through the boosted programme. It is also interested in the introduction of a new thematic station although an archive channel Prima Star was launched this spring. In addition, it will prepare the introduction of a paid video content service. Its form should be decided this autumn. “In the autumn, we want to prepare a concept of paid video offering and its general solution. According to the autumn market development, we will consider the options for new thematic stations,” says Marek Singer, Prima’s CEO, in an interview for MediaGuru.cz.
Prima’s autumn schedule that will start with a pre-premiere of its series 1. mise on Sunday includes several new shows. The offering has changed more visibly compared to previous seasons. Covid impacted nearly the entire first half and your direct competitor, TV Nova, increased its investments in the programme after the entry of the new owner. What effect did those facts have on your autumn programming?
The overall social situation affected by the Covid-19 pandemic has impacted our considerations of the autumn schedule. We did not expect that after the winter lockdown, the market would recover so markedly and the demand for TV advertising would grow. We had to reconsider our autumn plans and included more new shows in the programming to respond to the increased demand. It is costly but we believe that investments in programmes will pay back through ad income. We always take our competitors into consideration, it is nothing exceptional. Any TV group wants to come up with the best position for its programmes as part of the positioning game. For example, we reflected that ČT1 and TV Nova run detective stories on Monday evenings and that is why we come up with a new romantic comedy series from the country Hvězdy nad hlavou.
Three new series of various genres bring new elements to the structure of the programme schedule. And the question is how they will catch on. Isn’t it too risky?
Any piece of news or any change has a certain level of risk. But the changes are inevitable from time to time. I think that the period of soap operas will not recur. Viewers’ preferences and interests are much more fragmented than before. In general, people watch more video content but the available offer has been growing as well. Viewers have a lot to choose from and they use the opportunity. In terms of stability, it would be better to have two or three long-term series but this model was popular in 1990s and is no longer in. If we talk about a long-term series these days, we plan it for two to three years. It is also due to the fact that there are not so many teams of scriptwriters to work on a series.
With the increased volume of original content in your programming, the financial requirements for its production are likely to grow as well. From the outside you seem to spend more and more money on programming…
It seems to be a correct observation but I cannot disclose the precise figure. It relates to Covid making people return to their TV sets. Some have learnt to use the offer of video services. It increases the level of expected quality. People compare our production with foreign content and we need some budget to be able to compete. It is not a matter of broadcast hours. I do not think that we have increased their number but the requirements for content quality are growing, resulting in higher prices for production. This applies to all broadcasters and it will result in our seeking new sources of income. We will make some form of online video to support other sources of income but we will release the programming costs to a wider portfolio of sources.
What do you expect from the autumn programme in terms of viewership?
It is very tricky to estimate the numbers as we and our competitors make more changes in our programming. We would like to build a better position than our competitors this autumn compared to last autumn. With the help of the autumn schedule, we aim at increasing the advertising capacity and the market share. We will see how the TV rating will develop. There was lockdown last autumn and TV ratings were growing. If the TV market maintains the same levels of viewership as last autumn, it will be success.
The average daily viewing time was four hours and fifteen minutes for the first seven months of this year. It means that this year the time spent in front of a screen is higher than a year ago.
Figures show that in the Czech Republic and in Europe people have not left their TV screens. On the contrary, they spend more time watching TV. The viewing of linear TV and relating catch-up services is higher now than before Covid.
You have mentioned that in the first half of the year you did not expect advertisers’ great interest due to Covid. What is your explanation of the increased demand? Are there any new advertisers?
Consumer demand for some products and services seems to go up after the decline in the Covid period. And it does not seem to be a short-term development. In the summer, the unusual pressure continues as advertisers want to promote their services and products more than in previous years. Summer campaigns are intensive this year and the demand does not seem to go down. New advertisers appear but I do not think it is a post-Covid phenomenon. Our advertiser base changes continuously as new firms emerge on the market and want to expand. The entry of new clients results more from structural changes and it does not relate to TV as such.
But according to all forecasts and predictions, it should be vice versa, demand was expected to fall.
This was exactly what we were expecting all year. But it is not happening just in the Czech Republic. We can see it in the US and in some European states. At the beginning of the year the situation was entirely different and there were speculations as to a rapid slump in global economy or stagnation at the best. This is why it is difficult to make any predictions looking ahead.
Given the development you have described and due to the growth in consumer prices, can we expect the prices for the TV ad space to go up in 2022?
We can see now that in general, inflation will range between 3 and 5% and it is one of the factors we need to take into consideration. It is a big difference compared to previous years. TV inflation may see two-digit figures. We discuss with clients what to do if a plant’s production is not sufficient. There are two options. Either a new plant is built or prices go up. We are doing both.
Can you comment on how the first half was reflected in Prima’s total revenues?
Given the significant recovery of the advertising market, the revenues were higher than expected. And they are higher than in the first half of 2019, i.e. before Covid.
You have indicated that you want to develop income sources arising from the sale of content to subscribers. Are you considering your own paid streaming service?
It shows that Covid has accelerated people’s habits and their readiness to pay for professional Czech video content. If there is demand why not make supply. We are talking about a joint video offering of Czech operators, i.e. about an option to introduce a ‘Czechflix’. We will see what the discussions will lead to. We are successful in exploiting the TV series Slunečná in our video rental store on iPrima.cz. Many people pay to watch the series before it is broadcast on TV. But this is something different from a comprehensive offer that would make people pay monthly subscription. That is more demanding but we are considering it. It will be one of the monetisation instruments we will work with in future.
Are you considering expansion of the video rental shop on iPrima.cz to include something we can all, for example, Prima+?
Yes, it is a possible direction. We will have to make a decision soon to either join a common project or launch our own. However, we have to work on both scenarios at the same time. But we will definitely have to redesign our existing video service on iPrima.cz to reflect viewers’ expectations. At the moment we follow the direction of exploiting individual titles.
Can you estimate the share of income from subscription in the total sales in future? For example within five years?
If we calculate net subscription directly from end customers under a Czechflix scenario, the share could be about ten percent. But it may be an ambitious estimate if we consider the existing level of penetration of video on demand in the Czech Republic and a possible development trend. We can see now that Covid has significantly increased demand for VOD. But the question is whether the trend will be long-term. If it continues I think that ten percent would be realistic.
But the question is how income from TV ads will develop as the interest in paid VOD services is likely to grow with time. This could lead to the reduction of advertising space and fall of GRP.
On the US market where the development is faster we can see that operators gradually leave the plan to offer pure subscription services such as Netflix or Disney+ and introduce new types of subscription: more expensive subscription for ad-free video and cheaper for ad-supported video. I think that this model will prevail. Disney also indicated considering this approach. For example, Hulu profitability data showed that a subscription package with a lower amount of ads, i.e. the cheaper subscription, generates a higher profit than the “pure” subscription. I think that hybrid models have good prospects because advertisers will require video ads. Viewers are still ready and willing to consume video advertising, more so with the classic video content rather than short-form video. We respond to this by adjusting sales of TV ads. This year, we have introduced the so called e-GRP combining the value of TV and digital ratings.
Is there any other financing option to develop apart from advertising and subscription?
In principle, it is a synthesis of the options we have talked about. There is some omitted potential of operator payments. Historically, we allowed operators to create a premium service sold for a standard price. It was partially due to the growth in the TV ad market. The service is based on the fact that in time-shifted viewing ads can be skipped but this is not reflected in the viewer prices. We are trying to explain this to operators and optimise the value of the premium product.
Do you think that you will succeed in negotiating better prices with operators?
I believe so. Operators are aware of this and they are playing this game with one another. But we have no other alternative. People watch TV and use the time-shifted viewing option, they skip ads and we lose the advertising space that supports us. If there is no advertising there will be no original production. This will result in a lower quality of products for operators.
If you succeed in negotiating price optimisation, would you consider a new paid thematic station? In the past, you planned to launch paid thematic channels only.
At that time, we could not imagine that there would be more TV ads. Introduction of a paid channel is an alternative but it depends on market development. New paid channels would have to make sense to operators. They would compare them with international channels and consider the arguments to include our channel. For example, Prima Zoom is an equivalent to global documentary channels and it is successful in its segment. We could impose a fee on this channel. But if there is high demand for ads in the market and we need Prima Zoom to satisfy it that is not realistic.
The market situation is favourable to free-to-air channels that might help satisfy the advertising demand. You have already launched the archive station Prima Star this year and the news channel CNN Prima News last year. Will there be any other new thematic channel?
We have launched Prima Star this year and now I am not able to tell whether it is the end. We may make some surprise this year. We have some ideas.
Has the introduction of Prima Star met your expectations?
Yes, it has. We have used our archive works that are no longer suitable for our other channels. The old content could have been either stored in the archive or sold to somebody. We have decided that it is better to make our own channel using the content. Any increase in the ad capacity is good.
As Prima Star offers mainly Prima’s older shows, the channel addresses older audiences. Can you reduce the age of viewers of your main channel this way?
It is our plan to some extent, we want to continue working on affinity with younger viewers. But as a result, older audiences that do not like the content offered might leave the main channel. We prefer retaining them on one of our other channels than letting them move to any other provider.
One more question on thematic stations. Nova is going to launch its female-focused channel Nova Lady. Will you respond to this?
We already have our channels in the segment that Nova seems to target through the new station. And I do not think that we need any new channel in that segment.