Network Ten: Victim of horse-and-buggy syndrome?

There has been much written about the parlous state of Network Ten’s financial performance this year, and most of it comes hot on the heels of the resolution of Channel 9’s brush with financial demise.

In Ten’s 2012 annual report, the relatively newly-appointed managing director, James Warburton, provides critical insight into what he is thinking with regard to the future of Network Ten. His response is what all boards and investors would expect: reduce costs and improve revenue.

The overrun on costs has already been attended to; the newsroom has been “centralised” and selected senior executives replaced. In looking for ways to increase revenue Warburton announced a “creative renewal process” to apply to ongoing investment in its programming schedule.

“Ten is the destination for family entertainment with a focus on viewers aged 18 to 49, and is the home of ‘big event’ TV,” he wrote. “In January, we started the process of resetting our prime-time program line-up, with a particular focus on the early-evening, or 5pm to 8pm, period. The programming highlights of 2013 will build on the company’s reputation for providing smart, different and authentic content …”

And there we have the nub of the problem.

From a strategic perspective, Network Ten has fallen into the same trap that has been the undoing of many CEOs and business unit general managers.

It is the error made when strategy is centred on shoring up market positions of today using business models of yesterday, as opposed to a strategy for the business of today and, more importantly, a plan of transformation towards a business model for the future. Examples of similar forms of entrapment include:

> Makers of horse-pulled buggies who saw no future in the iron horse (cars)

> Companies that missed the online revolution: book retailing (Borders)

> Retailing in general (David Jones and Myer).

So what should Network Ten – and indeed our other two free-to-air TV networks – be focusing on to deliver future prosperity?

Lower costs and more revenue is only half the story. A clear perspective of a future business model that lies at the heart of a short-term transformation agenda must be understood. Otherwise Network Ten and the other networks will be caught up in a race to the bottom, rather than the development of a sustainable platform for growth.

In a world where free-to air-television faces an onslaught from alternative media and entertainment offerings, nothing short of a vision for reinvention is required.

In the case of digital television, few industries are better placed to leverage the value of converged technologies.

On technology, Warburton notes: “We know viewer behaviour is changing and our audiences are multitasking. Ten has formed a partnership with the British company Zeebox Ltd to launch its world-class TV app in Australia.”

But Warburton is only scratching the surface – and it is someone else’s business model.

The competencies and resources that TV networks can leverage to find their way forward are:

> Ownership of a very strong brand

> Direct access to the living rooms of every family in Australia

> Legitimate access to a global supply of content that most other mediums would die for

> A licensing system ensures there is zero risk that new free-to-air market entrants will appear

However, instead of looking for new ways to leverage its competences, TV networks are draining their cash cows of milk through endless commercials while clinging to a business model that is frankly obsolete.  Just as TV networks try to focus more on the diminishing volumes of segmented market positions and engage in never-ending cost reduction exercises, telecommunications companies have stolen the high ground in mobile entertainment.

They are learning to dictate play in the delivery of news, sport and other forms of social information. Internet start-ups deliver content from sources around the globe, and pay TV continues to steal direct market share.

Then there is the internet in general, which promises to take more and more attention from television, especially through social networking sites such as Facebook, Twitter, YouTube, LinkedIn and many more.

So giddy up channels Seven, Nine and Ten: the writing is on the wall. The horse has bolted. The time for reinvention is now.