Speech to Birmingham Breakfast Clubby Ed Hall on 09/18/13
I was asked to post the speech I gave in Birmingham this morning somewhere, and this seems the logical place. The views are mine, not those of Comux UK or Canis Media. I was also asked to leave the jokes in: I apologise in advance.
Birmingham Business Breakfast Club Speech
18 September 2013
Last night I visited a Chinese restaurant in Birmingham. They gave me a fortune cookie.
I normally ignore the wisdom of fortune cookies, but I was on my own, I was a bit bored, and my Kindle was running low on batteries.
So I opened it.
To my immense surprise it said,
'People will travel many miles to hear you speak'.
Thank you for the opportunity to come and speak to you this morning. I don't normally write my speeches down, but then I don't normally speak at this time in the morning!
I'm Ed Hall, the founder and Chief Executive of Comux UK. I have created and managed a series of television and broadcast businesses, and had the good fortune to sell several of them.
I used to describe myself as an entrepreneur, but in the post-Dragons' Den world that has come to mean self-promoting nutter, so I'm now happy to stick with businessman.
This morning is a chance to find out more about one of the biggest developments in British broadcasting: the launch of local TV. And to talk about why we chose to launch in Birmingham.
Some years ago, the Government noticed that local TV was a valuable type of broadcasting in many countries and said that it was worth having another go at making it work here.
Ofcom research agreed that there is a huge demand for local content, in particular news.
The BBC was asked to commit 40M of funding to help, 25M of that is to build the infrastructure, and 15M goes to Robert Thompson here, the Editor of Midlands Today.
Well not all of it, but over three years the BBC's regional newsrooms will spend up to 15M on content from the network of local TV stations.
The business that I created two years ago, Comux, won the licence from Ofcom to build the infrastructure to make it happen. And that's what we are doing.
We are spending the 25M on creating a new broadcast network and an operations centre to support local television in the UK. It's an impressive and exciting project.
But there are many who are cynical about the commercial viability of local television: not least here in Birmingham.
Many examples over the last twenty years have showed that the business models for local TV didn't stack up. So I thought I would take you through my journey and tell you why I think, that this time, it is different.
Ten years ago I watched local TV face challenges it couldn't overcome. I was running my company, Canis Media, providing a wide range of broadcast commercial services.
And we dealt with most of the local TV channels. And we watched them close.
There were many reasons:
The cost of technology. The cost of tape. The tape issue is a major one: even now a professional video cassette can set you back over 20 pounds for a half hour.
The machines that view, record and play them can cost you 30,000 pounds, and they have limited life.
To install a proper video editing suite running professional standard tape machines in 1999 or 2000 would have set you back more than 100,000 pounds - even if you spent the money carefully.
Then came the big numbers, transmission technology and platform access costs. Half a million a year to be a satellite channel - before you even made a programme.
And if you were a terrestrial channel? The dizzying costs of analogue transmission - and then the need for retuning.
The result was always the same: tiny audiences.
Perhaps it's worth me talking for a moment about the business model of television. It often appears to other more prosaic businesses to be a crazy creative and mysterious undertaking. TV people are weird, though not quite as odd as web people. I think we are placed half way between the grey suits of the industrialists and bankers and the facially-pierced blue hair of Silicon Valley.
Well it isn't really like that. TV channels are at a basic level simply factories that make viewers.
It's a commodity business: the more viewers you can make, the more you can sell. The cheaper you can make them the more productive and profitable your business becomes. The measurement system is a standardised one, and buyers and sellers negotiate around standard pricing models.
In 2012, 4.5 Billion pounds were spent in this commodity market.
But on the old local channels advertising was being sold without measurement and without accountability. They had no commodity to sell.
The largest station that failed had a potential reach of a million homes, the smallest tens of thousands.
What percentage of that tiny, fuzzy, mistuned analogue audience did they expect to sell?
It didn't work.
So why do I say that this time it's different?
Costs of producing TV have plummeted. No tape, no expensive machines, no need to hire expert editors whose technical skills have been learned as a craft over decades.
Today I can buy Adobe Premiere from John Lewis for 79.95 (although not of course in Birmingham until the new store opens in 2014). That one software package can do most of what the edit suites of old could do, if not more.
I can buy a professional edition of Adobe Premiere (that is way more advanced than an editor in 1999 could dream about) for 510 pounds. On Monday at a TV technology conference in Amsterdam I watched an editor take an audio clip, right click on it, automatically open the clip in an audio editing package, edit out a police siren from a noisy sound-track and then replace the audio clip back into the main video edit.
When I began in television in 1991 you could not have done that.
Ten years ago you could have made decent job of it in a specialist audio suite at the cost of hundreds or thousands of pounds.
Today you can do it with a right click in about two minutes.
With a decent home computer, a video card, and plenty of memory I can now set up a professional edit suite with audio and graphics capability for a couple of grand.
As a consequence our raw material costs have been slashed.
TV programmes are now for sale at international markets for as little as 2 or 3 hundred dollars an hour.
But the demand side has changed too. Advertising buyers have learned to look at new platforms and fragmented audiences.
The internet has taught buyers that audiences can be bought in smarter and more precise ways.
There has been a wholesale shift from TV only, to TV AND Web.
They now roughly split the market for ad spend down the middle - though the web-spend is now winning. But they are both growing - expect advertising spend in the UK to top 17 billion pounds this year.
And most interesting to me is that the area of growth in internet advertising spend that is growing fastest, is video. However you deliver it, television businesses are still creating and delivering the most powerful medium.
So we can make our product cheaper, and our buyers are smarter. But how do we distribute our product more cheaply and more effectively?
Well that's where Birmingham comes in.
Local TV will launch on Freeview Channel 8 in England, and the signals will be compiled into television channels and sent to the transmitters from our new operations centre here in Birmingham.
Our network centre is at the heart of a new fibre network linking every local TV studio, to every major TV mast in the country.
Last time local TV launched each home had to manually tune in to a new, weak, analogue channel.
This time 12 million UK homes in 19 cities will mostly light up automatically with a new high-profile channel.
These are predominantly urban homes that have premium advertising value.
Here in Birmingham most homes will have access to their new local channel, and they will find it very hard to miss City TV stuck between BBC3 and BBC4.
The Comux business model has a positive impact as well.
We are using the BBC's money to support the centralised buying of technology and infrastructure to reduce the costs of launching and operating a local TV channel.
Our network centre here at the Aston Science Park, Innovation Birmingham Campus, is replacing many of the systems that each licensee would have to buy individually.
We are their cloud.
By November we will be able to launch the first local channel - in Grimsby - and light up the rest of the network.
Every local TV station that launches will link to the operations centre here in Birmingham.
Advertising will be inserted here in Birmingham.
Video streams for mobile phones and tablets and other devices will originate here in Birmingham.
The staff and skills that we need to operate and develop a network centre will be developed, here in Birmingham.
So, why did we come here?
Well it wasn't because of HS2!
Honestly? Well the City Council offered to support us with a rent-free period.
What an easy obvious simple way to attract new business.
The team at the Innovation Birmingham Campus could not have been more friendly and helpful.
And they have stayed helpful as our start-up model has inevitably changed and altered its requirements over several iterations.
Lastly, but most importantly, the workforce.
A few cynical industry observers told me that I would not find the expert staff we needed to operate a broadcast network centre here in Birmingham.
They were wrong. We now have a qualified, cheerful and committed core team working at Innovation Birmingham, and we will be recruiting more.
In fact, apart from the weather, it's been a very easy City to do business with.
Last night I was so impressed by the Fortune Cookie that I asked for another one.
I opened it and it was just as prescient. It said,
'You will be hungry again in one hour'