The UK and US TV markets - how they differ and why that matters, by Nigel Walley
The UK’s television trade press seem to go into waves of ‘TV apocalypse’ hysteria every time Reed Hastings of Netflix makes a comment.
Most confusing is that his thoughts are immediately ascribed to the UK as though the US and UK markets worked in similar ways. In Decipher we have never thought this was the case. The US market is uniquely vulnerable to the encroachment of OTT operators like Netflix and Amazon in ways that the UK market just isn’t. So we thought we would lay out why.
The UK is a single timezone
Firstly, in the UK we are a single timezone so big broadcasters are still able to create national moments and use social media to drive people back to live TV. Last year’s EastEnders ‘live’ episode is witness to that fact. However, it’s almost impossible to deliver a ‘live’ experience in the US with anything other than live sport as everything is broadcast on a rolling release schedule across the day. Reality shows can’t even run live voting and results shows as they have to wait till everyone has voted. As a result the American Idol final has a far lower social media profile and a higher incidence of timeshifted viewing than the UK X Factor final.
Huge national soap audiences
The US also has no equivalent of the UK’s national, year round, daily soap culture where EastEnders and Coronation Street drive large parts of the national audience to watch live linear every day at a specific time. Soaps in the US are perceived as second tier content; their provision is fragmented and targeted at sub-groups (e.g. the Hispanic housewife) rather than used to set a national dialogue. The idea of using a soap to push a national issue (e.g. the domestic abuse storyline in Hollyoaks or Peggy Mitchell’s breast cancer) is inconceivable in US television. The US only comes together as a ‘national’ TV audience for the Superbowl or Presidential elections, whereas in the UK we have the soaps, Britain’s Got Talent and Bake Off doing it on a weekly basis.
The UK has an EPG
This difference is compounded by the differing role of the electronic programme guide (EPG). In the US there are no rules on where the channels are situated, and the position of the major networks differs on every EPG in the country. In the UK, the public sector channels are guaranteed the first five slots on every EPG.
This positioning is hugely important as the process of finding channels and programmes is part of a national ritual. Even in the multi-channel era, everyone in the UK understands the phrase ‘Channel 3’ to mean ITV so the top of page 1 of every EPG is a recognisable ‘base-camp’ for all UK viewing.
The UK has higher quality, lower volume TV advertising
The pervasiveness of poor quality, but high volume TV advertising in the US means that channels are often their own worst enemy in encouraging a flight from linear to VOD. The strict rules on volume and placement of commercial messages in the UK, and our high-quality advertising culture, has meant we don’t feel such a strong imperative to get away from linear. The role of the BBC is also hugely important. Being freed from having to include advertising has meant that they have set a broadcast benchmark that the commercial channels move away from at their peril. Having an ad-free ‘base-camp’ at the top of all UK EPGs, helps keep the UK viewer in the habit of using linear.
Less risk of cord-cutting in the UK
One of the major reasons that the UK should not be concerned about ‘cord-cutting’ (giving up a pay TV subscription) is that the UK market is effectively ‘pre-cut’. Most of the people who would be likely to ‘cord cut’ in the UK have probably never had pay TV to start with. In the US, 86% of households pay for a full TV service compared with 54% in the UK. The US could suffer a 32% drop in subscribers and still only get back to the situation that the UK currently finds itself in.
The UK has high quality free to air platforms
The strength of the free-to-air (FTA) platform offering compounds this. US TV execs are often astounded by the quality of the UK FTA boxes and services they see when they visit Decipher’s iBurbia studios, where we have all the kit. They just don’t have an equivalent set of free TV boxes or services in the US and our ‘free’ ones are better than many US ‘pay’ boxes. It is very hard to recreate our free to air culture in the US because there is no Freesat equivalent, and their DTT service is under-powered and not really usable outside of the major conurbations. This explains why the US manufacturers like Apple never think about launching a Freeview Apple TV box with broadcast and VOD combined.
The US actually has the opposite problem with a glut of low quality set top boxes. TV platforms tend to be fragmented and regional in the US where the process of consolidation of cable has only happened patchily. There are a few big providers (Comcast, TimeWarner etc.) but lots of smaller, under-funded ones whose set top boxes have low grade EPG, digital recorder and on demand functionality and weak content. For many people in the US, moving from cable to Netflix (and therefore from linear to VOD) is a quality improvement.
Poor picture quality in the US
As well as poor box functionality, the US struggles with poor signal quality on the standard definition (NTSC) linear channels. HD has only rolled out patchily, so consumers also drift from linear to OTT in search of better picture quality. A good Netflix stream backed up by their quality content delivery network looks much better than most network broadcasts as they appear through their pay TV boxes.
The UK has a poor Netflix catalogue
The US Netflix catalogue is far superior to that of its British counterpart and it acts as a full domestic TV platform for a lot of US consumers. In the UK, Netflix is more of a top up movie service and is being co-opted by the TV platforms and bundled into their boxes. As these services become integrated with Freeview and Freesat in the supposedly FTA content landscape, we see free and pay content co-existing without one cannibalising each other.
As we said at the outset, much of the industry commentary we hear and read at Decipher about UK television is coloured by lazy, often misleading, glances over the shoulder at our American cousins. This doesn’t mean that we don’t face change and generational challenges in the UK television industry. It does mean we can plan for a future with a balance between linear and on-demand that puts broadcast channels at the heart of the TV experience. It is not clear that the US can say the same.