Going Dutch

 

The comment one hears again and again from professionals in the Dutch market is that the Netherlands is a small country. Whether it’s added explicitly or not, the second part of the refrain is that there are too many channels to support. Dutch broadcasters are looking to new media to change the picture, not with fewer channels but with more ways to generate revenue from their content.

 

The Dutch television market may be the most competitive in Europe, not only in terms of free-TV channels chasing 15 million potential viewers aged 6-plus, or pay programmers seeking subscribers, but also in terms of competing media platforms. And there is a full raft of those with cable, IPTV, digital terrestrial (DTT), DTH satellite and fiber-to-the-home (FTTH) providers trying to enlist customers for triple-play packages (including TV, broadband and telephone).

 

The Netherlands became the first nation in the world to switch off free-to-air (FTA) analogue signals, at the end of 2006. But the reality is that even then it was already a digital market. Fewer than 75,000 households depended on FTA antennae in order to watch TV.

 

The fragmentation of the free-TV audience is pronounced, with no fewer than 11 different channels achieving audience shares of 2 percent or more in all homes during July 2009. That far exceeds the fragmentation in neighboring Flanders or any of the five biggest Western European markets.

 

The public channel Nederland 1 was the comfortable market leader with a 22-percent share, followed by RTL 4 at 12.4 percent and SBS 6 at 10.5 percent, according to the national audience-research group SKO (Stichting Kijk Onederzoek).

 

The others were the public channels Nederland 2 (6.2 percent) and Nederland 3 (5.7 percent), followed by Net 5 (4.8 percent), RTL 7 (4.5 percent), RTL 5 (3.7 percent), Veronica (3.3 percent), Nickelodeon (2.4 percent) and ORN TV (2.1 percent).

 

For the three public channels, the Netherlands continues to operate a unique democratic public-broadcasting system in which air time is allocated to more than a dozen different groups nominally representing segments of society (such as church groups). The future of this setup is always under discussion, but there are no signs that it will fundamentally change. A different allocation of participating organizations is pending with a couple of new ones coming into the picture, and perhaps others dropping out. The government is likely to decide on the new lineup of public-broadcasting organizations by the end of this year.

 

The public broadcaster holding the system together is NOS (Nederlandse Omroep Stichting), which makes news and sports programs for the public channels.

 

Despite the presence of so many channels, the jumble of contenders for Dutch television advertising is slightly misleading. In fact, competition in the free-TV market is between three big broadcast players—public television; the Luxembourg-based RTL; and Germany’s ProSiebenSat.1, which completed the acquisition of SBS Broadcasting in 2007 along with its three Dutch stations, SBS6, Net 5 and Veronica (they remain under the SBS banner).

 

The upshot of the situation is that competition is between groups of broadcast channels rather than individual channels—Nederland 1/2/3 versus RTL 4/5/7/8 versus SBS6/Veronica/Net 5.

 

“We have four channels that are fully complementary and enable us to reach all the relevant commercial target groups,” says RTL Nederland’s CEO, Bert Habets. “Last year we worked hard at positioning our stations. The profiles are clearer and we have invested in programs that are characteristic for the specific channels. RTL 4, for example, is our flagship and targets consumers aged 20 to 49. It is our family-oriented station and known for the best entertainment and strong thematic evenings on topics such as cooking, lifestyle and spirituality. RTL 5 is our younger and more edgy station targeting the 20-to-34 age group.”

 

In years with major events, sports programming tends to dominate Dutch broadcast ratings. The European Football Championships on Ned 1 accounted for 16 of the top 20 shows in 2008 and more than half of the top 50. Holland’s own special national sport, speed skating, also appeared several times in the top 50, also on Ned 1.

 

Take away sports and Ned 1 still took 14 of the top 20 places and 47 of the top 70. The top program last year was a true-crime special, Peter R. DeVries Crime Reporter, on SBS6, which placed four shows in the top 20. RTL 4 made it once with an episode of the music competition Idols. Those three channels accounted for all the programs in the top 70 with the lone exception of a music show on Ned 3.

 

Television advertising revenue in the Netherlands in 2008 amounted to 856 million euros, up only 0.7 percent from 2007. That performance was very weak compared with other European markets, including neighboring Belgium, which was up 6.4 percent.

 

In the fourth quarter of last year, ad revenue plummeted by 7.4 percent, again worse than elsewhere. In 2009, TV advertising is expected to be completely flat, according to the World Advertising Research Centre, while ZenithOptimedia has forecast 2.8-percent growth.

 

With the advertising market dropping, the broadcast networks have opened their vision up to other platforms.

Public television, which considers offering more digital choice as part of its remit, launched HD in 2006 and already has about 20 digital channels. Now for the first time a commercial broadcaster, RTL, has teamed up with a cable company, UPC, to launch new digital channels—an RTL HD channel plus on-demand and thematic channels. SBS has not moved yet, but the smart money says that that will happen too before the end of the year. The commercial broadcasters have waited to make this digital push and it has come in the tough economic climate as ad sales have shrunk.

 

“There has been a shift of attitude,” says Paul van Niekerk, the managing director of the television advertising association SPOT (Stichting ter Promotie en Optimalisatie van Televisiereclame), which represents all broadcasters. “Instead of fearing new media, they are seeing it as the area where they are strongest, because of all the content they have. They no longer see a challenge but a big opportunity.”

 

The broadcasters are looking to high-definition television to give a value-adding big push to their move into new platforms. RTL Nederland plans to launch four HD channels (high-def versions of its current portfolio) later this year. Because of the cost of the upgrade, RTL expects competing platforms to pay for the HD signals. SBS has indicated that it will charge as well when it rolls out its HD offer. The three main Dutch public channels became available in HD in July.

 

The new channels are usually part of cable packages that require additional money from the consumer, and so potentially they can generate revenue. In this way, some of the cost burden is being shifted from the advertising market as programmers start to charge distribution partners for their content. The advent of high definition is helping the push in that direction.

 

In terms of how consumers receive their television content, the Dutch market is a platform jungle. Ziggo, the largest Dutch cable provider, was formed by a merger between Multikabel, @Home Network, and Casema that was completed last year. Ziggo has nearly 1.2 million subs, while number two UPC Nederland sits at about 670,000. UPC is part of the U.S. group Liberty Global, which also owns Chellomedia Benelux, the dominant pay-TV company in the market.

 

Canal Digitaal is the national DTH satellite provider. The DTH market is still small, but it has a new vitality. Originally DTH was viewed as a platform for people outside urban areas who could not get cable—a rural option. Now that has begun to change somewhat as more people see it as an alternative to other platforms. But penetration is still only 7 percent to 8 percent. DTH may have reached a plateau and could even recede.

 

Cable will no doubt continue to lose share, but it has a long way to go from its current 90 percent of homes. “The reality is that for years people had no practical alternative,” says Jeroen Bergman, the managing director of Chello Benelux and managing director of programming for UPC Broadband across Europe. “Now there is DTT for half the price. There is satellite for people who want loads more channels, including German channels. And there is IPTV for the technology-minded who want more interactivity.”

 

The jury is out as to whether IPTV growth will come via DSL or fiber-to-the-home, the latest contender in the platform market. FTTH is not an adaptation of cable or DSL but a completely different network. The service is presold to consumers in an area or building development. If sales hit a 60-percent or 65-percent threshold, then the system is laid in.

 

FTTH was pioneered by the construction entrepreneur Dick Wessels. He sold a minority stake to KPN last year. Since the financial crisis hit, building has slowed. Tele2 started the rollout of FTTH last year.

 

Chellomedia has both a pan-European and a localized presence. In Holland, pan-European channels are offered in Dutch. Chello Benelux serves the rest of the Netherlands and Flanders. Chello has five channels plus an HD channel. In 2008, it launched a subscription VOD service on the UPC platform.

 

Chello has about 350,000 subs at present. That is double the 175,000 level it had in February 2006, at the time of the Canal Plus takeover. But it is still only about 5-percent penetration in a market of 6.5 million to 7 million homes.

 

The biggest development in pay TV and the television- channel market in general has come from elsewhere—the launch of a new pay football channel by the Dutch league in partnership with Endemol called Eredivisie Live (the Eredivisie is the national Premier League). This is distributed on a wholesale basis to all platforms. It’s the first time a league has launched its own channel as the exclusive live window, though the same idea has been talked about for several years in various countries. Highlights are still on NOS.

 

The football rights used to belong to Chellomedia, which acquired the Dutch version of Canal Plus in 2005 and after that had a monopoly on the pay scene. The football rights still belonged to Canal Plus when Chello took over. Then they moved to Tele2, which was launching a DSL platform. Originally the football was supposed to be platform-exclusive. First a deal was done with Canal Digitaal for DTH and then cable was added. That changed in August 2008, with the launch of Eredivisie Live.

 

But Chello is still alone in pay movies. “The competition for us is with free-to-air TV,” says Bergman. “In addition to about ten commercial broadcast channels, there are two more from Flanders. On any given night there are four or five films in the Dutch language on at the same time.”

 

For the free-to-air broadcasters, the most important development is probably the growth of online video. “Broadcasters are in a very good position to be big players in this area and they are already using online to improve their overall market share,” says SPOT’s van Niekerk. “Online gives broadcasters the potential to sell across platforms, offering advertisers mass reach through their main networks, experiential reach through sponsorship of programs and one-to-one contact through online content.”

 

In the past year, RTL has embraced new media with such enthusiasm that it has also launched three mobile websites and a cooking portal and revamped its catch-up TV website with a doubling of the video streams. The company has even launched an online gaming platform called Spelsalon.nl.

 

“Making programs for conventional television is not the same discipline as making them for new media that offer interactivity,” says Geert Paul Slee, the former managing director of the Hilversum-based production house Presteigne Charter, who is launching his own company, Broadcast Rental. “Of course you can distribute any program on new media, but in order to be a real new-media product you need interactivity. The creation of television programming that is truly digital in the sense of being right for conventional viewing, as well as inter­activity, may be an emerging trend.”

 

As to the transition the Dutch market has been undergoing, he adds, “A lot of the time we are first with innovations in Holland, but Dutch people tend not to want to pay for things.”