VIMN’s David Lynn

To grab viewers’ attention in a free-TV market that already offers some of the best programming in the world is no easy feat. But that’s exactly what Channel 5 in the U.K. did when it launched in 1997. The channel was noisy and boisterous, using movies, football matches and more to attract an audience used to watching BBC One, BBC Two, ITV and Channel 4.

Through the years, Channel 5’s programming evolved and settled on a schedule that was strong in factual entertainment, factual and imported programming. Channel 5 changed ownership twice: first, in 2005, when RTL Group upped its stake and acquired the whole company, which had rebranded the channel’s name to Five, and then again in 2010, when the RTL Group sold Five to Richard Desmond, owner of the publishing concern Northern & Shell. The management team under Desmond changed the name back to Channel 5, and the names of its sister channels to 5STAR and 5USA. In May 2014, Viacom acquired Channel 5. David Lynn, who today is the president and CEO of Viacom International Media Networks (VIMN), was instrumental in the acquisition. He saw the free-TV channel’s potential to complement VIMN’s pay-TV services in the U.K., a portfolio that includes MTV, Nickelodeon and Comedy Central. Lynn was already boosting the amount of programming that was coming out of VIMN’s U.K. hub, and he saw Channel 5 as a valuable addition to original production and the portfolio’s advertising revenues.

As Lynn explains, the acquisition has been a success. Channel 5’s ratings, particularly among younger viewers, have increased significantly; so has profitability. And both Channel 5 and the VIMN pay networks have benefited from sharing programming.

TV EUROPE: Would you give us some background to the Channel 5 acquisition? What potential did you see in Channel 5 and its digital channels 5STAR and 5USA?
LYNN: Even before the Channel 5 acquisition, we had embarked on a strategy to increase our production of original content. That was a great driver of the Viacom business in the U.K. leading up to Channel 5. That changed our whole model of operating in the U.K.; it helped our ad-sales partnership with Sky and led to strong revenue growth. Channel 5 has been an acceleration of the strategy that had already been successful for us. I like to say Viacom has transformed Channel 5’s business and equally Channel 5 has transformed the Viacom business in the U.K.

Channel 5 is now on a sustainably profitable path. Channel 5 had record profits last year of £58 million. We feel the acquisition has been a major success.

TV EUROPE: How did the acquisition benefit your strategy to increase original productions?
LYNN: We were already originating content in the U.K., but this brought us to a whole new level. We have increased five-fold the amount we are spending on origination out of the U.K. as a result of acquiring Channel 5. We’ve also increased Channel 5’s annual content spend by 20 percent since we bought the business. Channel 5 was already undergoing a process of creative transformation under the programming leadership of Ben Frow, and we gave Ben the extra resources to accelerate that transformation. He has been broadening the factual output of the channel and bringing in new genres like sports and more entertainment, investing in factual entertainment, and that has driven a lot of the success that Channel 5 has had in the last three or four years. In addition to that, we then started sharing content between Channel 5 and our pay networks in the U.K. and also internationally. We shared more than 300 hours of content last year between Channel 5 and the other Viacom brands. The fantastic news is that it has been driving ratings success on Channel 5. Its ratings were up in the younger demos by 11 percent last year, but we had record ratings and shares for the pay brands as well. So the acquisition has lifted the success of both sides of the business—Channel 5 and the Viacom pay channels. That was the strategy on the content side. On the business model side, we also changed our Channel 5 business. We extended our partnership with Sky to include Channel 5 as well. [Sky not only carries Channel 5, 5STAR and 5USA on its pay-TV platform, it also sells commercial airtime for all these services.] That led to a significant increase in our performance financially as well. Channel 5’s ad revenues were up 18 percent last year on the back of Viacom’s new relationship with Sky.

TV EUROPE: Has Channel 5’s popular children’s block, Milkshake!, helped Nickelodeon? Have the two services been working together?
LYNN: Yes, there has been content sharing between Channel 5 and Milkshake! Among the big Viacom properties that have gone to Milkshake! are titles like PAW Patrol. That helps Milkshake!’s ratings but it equally lets our top franchises become bigger franchises in the market, and that has helped our consumer-products business. Digby Dragon and Wissper are other titles that we have shared. We are sharing expertise between the channels as well, and that has been driving success. Alison Bakunowich, who is the head of Nickelodeon U.K., also has strategic oversight of Milkshake! and is tapping into Nickelodeon expertise to help drive the success of Milkshake! On the back of that, we’ve had our best results on both channels. Milkshake! had its highest ever share of viewing in 2016 and Nickelodeon was the number one kids’ pay-TV network in the U.K. for the first time in ten years.

TV EUROPE: How has Channel 5 helped other channels in the Viacom U.K. portfolio?
LYNN: In several ways. First of all, through the sharing of content that has driven our ratings across the other networks. Spike was a true partnership between both sides of the business, and we were able to launch Spike quickly in the U.K. because of Channel 5. We used the Spike international pipeline, of course, but we also tapped into Channel 5 programming to make a really strong, compelling channel. Spike has been on the air now [since April 2015] and it has continued to grow rapidly and is doing extremely well.

TV EUROPE: Can the Channel 5 acquisition be used as a model for growth for other areas of the Viacom businesses?
LYNN: We acquired Telefe, which is the largest free-to-air broadcaster in Argentina. That deal was done on the back of the success of Channel 5. Telefe gives us a scale position in the market in Argentina and on top of that it’s going to be another content engine for our Latin American business.

TV EUROPE: Do you see best practices or programming from the U.K. market that can be used in other areas of Viacom’s international footprint?
LYNN: We were already using the U.K. as a content hub for the international pay services, whether it’s Geordie Shore on MTV, I Live with Models on Comedy Central or a number of Nickelodeon titles. Channel 5 gives us the opportunity to do even more in that area and offers greater potential to share U.K. content across our international businesses. A couple of examples would be Nella the Princess Knight, our first co-production between Milkshake! and Nickelodeon U.K., which will air across all the Nick international channels and the U.S. channel. We’ve also aired a number of other Channel 5 titles across the Viacom portfolio internationally, Police Interceptors, Lip Sync Battle UK and Tattoo Disasters: U.K., for example. So yes, there is already a good amount of sharing happening with the international networks.

TV EUROPE: The U.K. market is a very important part of VIMN’s business. No one can know what the impact of Brexit will be, but at this point, what is your view of the U.K. market and what are the advertising forecasts for this year?
LYNN: We have experienced some softness in the ad market in this quarter, and this continued a trend we saw from the last quarter of 2016. Most forecasters are downgrading the full year and forecasts for 2017. However, given what I mentioned earlier, I do think that Channel 5 and Viacom are in a unique position and I still see a lot of growth opportunities, and we’re seeing that this year. Our ratings continue to climb. I do think that our business is in a very healthy position despite some short-term softening.

The U.K. has been a very successful market for us, and I’m optimistic about the future as well. The integration of Channel 5 into the Viacom family really has been transformative for our business and for Channel 5.