1. Bye-Bye advertising?
How Generation Y will change the
business model of commercial TV in
Flanders
Author: Joren Lemiegre
Student Number: A4040228
Degree: MSc Marketing
Dissertation supervisor: José Scheuer
Date: 27 September 2012

2. DECLARATION
This work has not previously been accepted in substance for any degree and is not being
concurrently submitted in candidature for any degree.
Signed………………………………………………………...(Candidate)
Date…………………………………………………………….
STATEMENT 1
This thesis is the result of my own investigations, except where otherwise stated. Where
correction services have been used, the extent and nature of the correction is clearly marked in a
footnote(s).
Other sources are acknowledged by footnotes giving explicit references. A bibliography is
appended.
Signed………………………………………………………...(Candidate)
Date…………………………………………………………….
STATEMENT 2
I hereby give consent for my thesis, if accepted, to be available for photocopying and for inter-
library loan, and for the title and summary to be made available to outside organisations.
Signed………………………………………………………...(Candidate)
Date…………………………………………………………….
ii

3. Summary of dissertation
Title: Mr.
Surname: Lemiegre
Forename: Joren
Institution: London School of Business & Finance
Degree Sought: MSc Marketing
Title of Dissertation: Bye-bye advertising? How Generation Y will change the business model of
commercial TV in Flanders
Summary:
This research analyses the impact of generation Y on the business model of FTA-channels in
Flanders. By using both primary and secondary research, the study suggests that generation Y has
a significantly different way of TV-consumption than preceding generations. Due to the
introduction of iDTV-services in Flanders, the consumption pattern of millennials has changed
even more drastically and commercial TV channels encounter difficulties to maintain their
business model. The study argues that FTA-channels will have to adopt their business model to
the needs of this new generation in order to survive. This claim is backed-up by a survey
conducted among 309 respondents aged between 15 and 30 years’ old. The data were analysed
using structural equitation modelling. The results show that millennials do not watch less TV but
that their different way of consuming TV-content does affect revenues of commercial TV. The
study suggests that FTA-channels will have to offer more flexibility, avoid customer lock-ins and
focus on interactivity and less traditional advertising.
Keywords: FTA-channel, generation Y, millennials, commercial TV, business model, advertising,
convergence, Over the top TV, second screen apps
iii

4. Acknowledgements
First of all, I would like to express my sincerest gratitude to my dissertation supervisor, José
Scheuer, who has supported me throughout the dissertation process with her patience and
knowledge. She has encouraged me to keep working on my subject while giving me the necessary
space to approach the subject in my own way. Without her knowledge and enthusiasm, I would
not have been able to finish this project successfully.
Very special thanks go to my student colleagues at LSBF. Whenever I had doubts or questions,
they were always there to help and support me. Furthermore, they have provided a stimulating
and fun environment to learn and grow.
I must also thank everybody who has helped me to spread my questionnaire and who took the
time to complete it. Special thanks go to Katrijn Ganne, Joke Bruneel, Pieterjan Boudry, Lut
Buseyne, Marijn Lemiegre, Lisa Buseyne and Maarten Kiebooms who have actively helped me to
distribute my survey and to reach the necessary people.
In my daily life, I could always count on my dearest flatmate Carlotta Quacquarelli. She may not
always have realised how much of a support she has been to me in the past year. Therefore I
would like to say a special thanks.
And last but not least I would like to thank my friends and family in Belgium for supporting me
through this venture in London. It was not easy to leave this people behind to study in London but
they were always there when I needed them the most. Thank you to my mother, my father and
sister to keep supporting me during this challenging adventure.
iv

5. Abstract
“Bye-bye advertising? How Generation Y will change the business model of commercial
TV in Flanders”
Joren Lemiegre, London School of Business & Finance
This research analyses the impact of generation Y on the business model of FTA-channels in
Flanders. By using both primary and secondary research, the study suggests that generation Y has
a significantly different way of TV-consumption than preceding generations. Due to the
introduction of iDTV-services in Flanders, the consumption pattern of millennials has changed
even more drastically and commercial TV channels encounter difficulties to maintain their
business model. The study argues that FTA-channels will have to adopt their business model to
the needs of this new generation in order to survive. This claim is backed-up by a survey
conducted among 309 respondents aged between 15 and 30 years’ old. The data were analysed
using structural equitation modelling. The results show that millennials do not watch less TV but
that their different way of consuming TV-content does affect revenues of commercial TV. The
study suggests that FTA-channels will have to offer more flexibility, avoid customer lock-ins and
focus on interactivity and less traditional advertising.
Keywords: FTA-channel, generation Y, millennials, commercial TV, business model, advertising,
convergence, over the top TV, second screen apps
v

6. Table of contents
1 Introduction 1
1.1 TV industry in Flanders 1
1.2 Research Aim 4
1.3 Dissertation overview 5
2 Literature review 6
2.1 Defining TV 6
2.2 Generation Y 6
2.3 Television according to generation Y 8
2.4 Convergence: when it all comes together 21
2.5 Content as the eternal king 23
2.6 Evolution of the current business model 25
2.7 Alternative revenue models 31
3 Research Methodology 38
3.1 Research philosophy 38
3.2 An inductive approach 39
3.3 Quantitative research 39
3.4 Research challenges 41
4 Results 42
4.1 Consumption patterns 42
4.2 Alternatives for the TV-set 44
4.3 Attitude towards advertising 48
4.4 Attitude towards pricing 49
4.5 Pricing possibilities 50
4.6 Attitude towards TV-channels 50
5 Recommendations 51
6 Conclusion 55
7 References 56
8 Appendix 63
8.1 Appendix 1: List of TV-channels in Flanders. 63
8.2 Appendix 2: Questionnaire 66
vi

7. List of images
Figure 1: The main categories of the business external actors (RANGONE, Andrea and Turconi,
Alessandro, 2003) 19
Figure 2: Multiscreening (own chart based on (GFK, 2012) 20
Figure 3: Types of industry convergence (STIEGLITZ, Nils, 2003) 22
Figure 4: Broadcast value chain showing the position of cable and satellite TV based on (VRM,
2011) and (MCGRAIL, Mike and Robert, Bob, 2005) 25
Figure 5: The new supply chain based on (KÜNG, Lucy et al., 2008) and (BOUWMAN, Harry et al.,
2008) 28
Figure 6: TV advertising spending in Flanders (own chart based on (SVR, 2011b)) 30
Figure 7: A comparison between evaluations and preferences with respect to conventional
advertising and non-spot advertising (NEIJENS, Peter C. and Smit, Edith G., 2003) 31
Figure 8: Theoretical model of customer engagement (VIVEK, Shiri D. et al., 2012) 34
Figure 9: Use of interactive services on iDTV amongst millennials (Source: the author) 42
Figure 10: Difference between men and women in the use of iDTV-services (Source: the author) 43
Figure 11: Percentage of people stating to skip advertisements while using iDTV-services (Source:
the author) 43
Figure 12: Reasons for using other devices to watch TV (Source: the author) 45
Figure 13: Differences between men and women on the use of alternatives for the TV-set (Source:
the author) 47
Figure 14: Attitudes of millennials towards pricing policies and piracy (Source: the author) 49
Figure 15: Preferred ways of generation Y to watch TV (Source: the author) 49
Figure 16: Generation Y's attitude towards FTA-channels (Source: the author) 50
List of tables
Table 1: Devices used to watch TV (Source: the author) 44
Table 2: Services used to watch TV among generation Y (Source: the author) 46
Table 3: Public TV channels in Flanders (VRM, 2011) 63
Table 4: FTA-channels in Flanders (VRM, 2011) 63
Table 5: Private TV-channels in Flanders Part 2 (VRM, 2011) 64
Table 6: Local TV-channels in Flanders (VRM, 2011) 65
vii

8. 1 Introduction
“Traditional media are not dead, they only smell funny” (CAUDRON, Jo, 2011)
This quote from Jo Caudron in his book “Media morgen” (Media tomorrow) perfectly illustrates
what is going on in the world of TV today. For generation Y, watching TV no longer means sitting
in the living room in front of the TV-set to make sure they do not miss anything from their
favourite TV-show.
Generation Y is a generation of digital natives, used to get everything they want, whenever they
want. Instant gratification is not only a fashion word; it is a way of life. According to McConvey,
“generation Y expects everything to adapt to their schedules and whims, rather than the other
way around” (MCCONVEY, Joel, 2009) It is a generation that still loves TV and watches more TV
content than ever. The traditional FTA1-channel however, is not the only way to access this
content anymore.
1.1 TV industry in Flanders
Belgium is one of the most complicated countries in the world when it comes to politics and the
same is true for the Belgian TV market. Each region has its own TV channels, main players and
responsible minister. The problems are mainly the same in both Wallonia and Flanders, but
because of the complexity of the market, this dissertation will focus on the TV industry in Flanders
only. This does not mean that models used further on in this dissertation cannot be applied onto
the Wallonian TV-market. For the sake of clarity however only the Flemish TV-market will be
analysed.
1.1.1 The beginning of commercial TV in Flanders
When the first FTA-channel, VTM, aired back in 1989, accessing TV-content was very straight
forward. There were only 2 players in the market. VMMa2, which owned VTM, and the public
broadcasting company, BRT, owning BRT 1 (now called Eén) and BRT 2 (now called Canvas).
Watching the content on this channels implied people had to sit in front of their TV-set on the
time the program started. Programs where produced in-house or bought from foreign TV-
channels to be broadcast on Flemish television.
VTM, as a the first FTA-channel, paid for its content with the money it collected from selling
advertising space while BRT paid everything with the money it received from the government.
Because of this business model, consumers could watch these channels for free if they had cable
or satellite. The cable network was owned by Coditel (now part of Telenet) which only charged a
small yearly fee to maintain its network.
In 1995, SBS3 entered the Flemish market with VT4, a new commercial TV-channel. VMMa replied
with the launch of a new TV-channel Kanaal2 (now 2BE). In the following years, the advertising
budget for FTA-channels grew year by year and new FTA-channels where introduced.
1
FTA-channel: Free To Air
2
Vlaamse Media Maatschappij
3
Scandinavian Broadcasting System
1

9. At the time, alternatives to access TV-content in Flanders where mostly limited to media carriers
like VHS and data limits prevented consumers to download or watch TV-content using the
internet.
1.1.2 The digital switchover
In 2005, digital TV was introduced in Flanders. Two big companies, Belgacom and Telenet
launched their digital TV offer almost simultaneously and made it possible for consumers to add
extra paid channels to their basic package together with the possibility to rent movies and series
without leaving the house. Furthermore, Telenet and Belgacom started to bid on football
emission rights, thus driving up the price for traditional TV channels. (ZDNET, 2005)
While Telenet is using the cable, Belgacom offers IPTV or TV over the internet. Both providers
have an own set top box which decodes the digital signal and adds interactive content. As
mentioned before, one of the few methods to reach the consumer for FTA-channels is through
the cable owned by Telenet or the satellite. In this situation, Flemish TV-channels had no choice
but to broadcast their content through Telenet and Belgacom which were now directly competing
with the FTA-channels with their own products. Especially since Belgacom and Telenet together
serve almost 75% of the market, there is no alternative for FTA-channels. (IBBT- ILAB.O, 2011)
One year later, Telenet launched its Digicorder, a decoder which made it possible to pause live TV
and record TV-programs, followed by Belgacom later that year. By 2012, 15 to 20% of TV-
programs (depending on the source) are not watched live anymore. 80% of people indicating they
use TSV,4 also state they skip the ads when watching the programs. (WERBROUCK, Stefaan, 2012)
In April 2012, the Flemish FTA-channels joined forces to fight against these DVR-devices.
According to Christian Van Thillo, CEO of De Persgroep which owns 50% of VMMa, these devices
lead to a lower viewing share for commercials and lower prices that can be charged for
advertising space. An evolution threatening the business model of the Flemish FTA-channels.
VMMa even announced to stop producing telenovela’s because too much people where watching
these, generally early-programmed series, afterwards while skipping the ads. (DECKMYN,
Dominique, 2012a)
As if there was not enough pressure on this business-model, generation Y kicked in with its own
values and ideas about media and TV.
4
TSV: Time Shifted Viewing
2

10. 1.1.3 The generation Y touch
The DVR5-devices from Telenet and Belgacom are so easy to use that everybody can use them.
And they definitely speed up the process of decline traditional TV will encounter.
There are however, some evolutions that will be started by generation Y that are a bigger threat
for FTA-channels than they can imagine. Christian Van Thillo states the following in an interview in
the Flemish newspaper “De Morgen”: “The set top box is a great device which is very easy to use.
The mechanism behind it however, is not fair. Selling these devices brings in a lot of money for
Telenet and Belgacom, but TV-channels cannot profit from this money while they account for a
great part of the success of the system” (DUMON, Pieter and Debackere, Jan, 2012)
However understandable, this point of view is debatable. Van Thillo makes no distinction between
watching TV and TV channels. In this point of view, TV-channels are the only way for consumers to
access TV-content which is currently not the case. This is the same mistake the music industry
made 10 years ago while they were fighting Napster and other services. In the world of digital
natives, TV-channels are no longer irreplaceable. It was generation Y that started the shift from
CD’s to MP3’s and it will most likely be generation Y that will start the shift from a traditional way
of watching TV to a new TV-era with other powerful content providers.
5
Digital Video Recorder
3

11. 1.2 Research Aim
This small introduction shows the approaching change in TV-consumption. The impact of
generation Y on the industry cannot be underestimated and the main aim of this dissertation will
be to find out how the changing media consumption of generation Y will influence the business
model of commercial TV channels in Flanders.
1.2.1 Research questions
In order to be able to firmly address this problem, the following research question will be the base
of this dissertation:
What is the effect of generation Y’s changing consumption of TV content on the income model of
commercial TV channels in Belgium?
This question can be divided in two sub-questions:
1. How is generation Y consuming TV content?
2. How is this behaviour influencing the business models of commercial TV channels and
what are the alternatives?
1.2.2 Hypotheses
First of all, the research questions are based on the hypotheses that generation Y has a totally
different way of consuming TV. This means that they are not only using the TV-set to watch TV,
but that also other devices like laptops and tablets are becoming more important. Furthermore,
this generation has been raised in a totally different way and is not as tolerant as other
generations when it comes to advertising and linear TV-viewing. They look for alternatives to
satisfy their needs and do not consider piracy as a problem while doing so.
Secondly, this will lead to a change of business model for FTA-channels. Commercial TV stations
will have to move from a linear TV-viewing experience to a more demand-driven model in order
to survive.
1.2.3 Objectives
By solving the research questions elaborated in paragraph 1.2.1, the author of this dissertation
hopes to determine how generation Y accesses TV content and what damage this causes to the
business model of FTA-channels.
Doing this will create opportunities to identify chances for an alternative media distribution and
to construct new business models for commercial TV channels.
4

12. 1.3 Dissertation overview
In order to make this dissertation easy to read and understand, it contains four main chapters.
The first important chapter is the literature review starting on page 6. This literature review tries
to define generation Y and to understand their values and dreams. Who is generation Y? Why are
they important? What is important to them? Only by knowing what drives this generation, a new
business model for FTA-channels can be developed.
Further on in chapter 2, the biggest threats for FTA-channels are listed and clarified. These threats
include new ways to access TV content by generation Y but also the future market players that
will eventually compete with FTA-channels. By understanding what makes these alternatives
attractive, the strengths and weaknesses of the current business model will be identified in
paragraph 2.6.
After this, chapter 2 discusses the importance of strong content and the convergence process.
Content from different types of media is becoming more and more interchangeable.
Understanding this process is indispensable to understand the future.
Finally, chapter 2 analyses the current business model of FTA-channels in Flanders. This is done
using several academic theories and models. To end chapter 2, alternative business models are
analysed. The focus lies on the current alternatives and their degree of success.
The next chapter, starting on page 38, describes the research methodology. This includes the
research philosophy, the applied approach, the research challenges and a profound explanation
of the used techniques in the primary research.
Another big part of this dissertation is the analyses of the results. Chapter 4 starts on page 42 and
gives an overview of the most important results of the primary research. This primary research is
thoroughly illustrated using charts and tables where necessary. One of the covered themes is the
way in which TV-content is consumed by generation Y. Furthermore, the primary research maps
the attitudes of generation Y towards advertising, pricing models and FTA-channels. Finally, the
possibilities to generate revenue are discussed.
The final and most important chapter of this dissertation treats the recommendations for FTA-
channels. Chapter 5 merges the primary and secondary research into strong and easily
understandable recommendations. These recommendations tend to summarise the possibilities
and threats for FTA-channels to survive.
Literature review
5

13. 2 Literature review
2.1 Defining TV
Defining TV used to be very simple. In the past, there was the TV-set, used to watch TV and that
was the only way TV-content could be accessed. Nowadays, there is plethora of possibilities to
access TV-content and watching TV is no longer the same as sitting in the living room in front of
the TV-set.
In this dissertation, TV will be used to refer to TV-content while the word TV-set will be used to
refer to the traditional device or way to watch TV.
2.2 Generation Y
Over the years, there has been a need to classify and identify different generations of people. The
classification uses age and general cultural characteristics to describe them. This has resulted in
different groups like baby boomers, generation X and more recently, generation Z.
Generation Y is one of these categories and the term refers to those born between 1970 and
1996, depending on the used source. (NEUBORNE, Ellen and Kerwin, Kathleen, 1999) (PAUL,
Pamela, 2001). Generally however, generation Y is defined as those born between 1980 and 1995.
(VAN DEN BERGH, Joeri, 2011) In this paper, Van Den Bergh’s definition will be used to determine
generation Y, also often referred to as “Millennials” because they came of age during the new
millennium.
“They are armed. They are dangerous. They are our children.” (Thomas Hine as cited in (HOWE,
Neil and Strauss, William, 2000))
In the beginning of the century, millennials where regarded as a lost generation, a generation
which was known to be self-absorbed, pessimistic, distrustful and stupid. The future was going to
be dark and people’s own kids were to blame for it. The first real study on generation Y from
Howe and Strauss revealed the truth and opened the eyes of marketers who were targeting this
generation (unsuccessfully) before.
Millennials turned out to be more intelligent, more sociable and more optimistic than former
generations. (HOWE, Neil and Strauss, William, 2000) A study conducted by MTV Networks at the
end of 2009 amongst 7000 youngsters in 7 European countries further confirmed these results.
This study leads to “The ten commandments of youth” which are:
 Have faith in yourself  Work hard to succeed but not to the
 Respect your parents detriment of others
 Be honest  Be tolerant of others’ differences
 Take responsibility for your own life  Be happy and optimistic, even in
 Live life to the full and be passionate adversity
 Keep your promises  Create, don’t destroy
(ROSE, Helen, 2010)
6

14. These commandments illustrate the way in which generation Y thinks and behaves. Millennials
have a strong belief in their selves which is part of the way they were raised. “Two-thirds of
parents claim to ask the opinion of their children before making big decisions such as choosing
holidays. They have raised their children as coaches with one central notion: empowerment”. (VAN
DEN BERGH, Joeri, 2011) That is also the reason why respect for their parents is very important in
their life.
2.2.1 Generation Y as a market segment
“We thought the kids would go crazy for this and the kids couldn't have cared less…. They were
like, “Who is this guy?”” (Heather Keegan, Digital Research, describing a preschool test of a Kermit
the Frog toy as cited in (HOWE, Neil and Strauss, William, 2000))
Millennials are one of the biggest groups in the current population. In Flanders, there are roughly
1,2 million generation Y’ers which account for 19% of the total population.(own calculation based
on (ADSEI, 2012)) The oldest ones have already settled down, owning a house and children, while
the youngest are almost coming of age. This means that generation Y will soon be the leading
group of consumers, raising their own children and making decisions about their lifestyle and
media usage. According to Nickell, generation Y has been more involved than any other
generation in the buying decisions made by their parents. They have controlled a significant
amount of spending power on their own since they were young. (NICKELL, Stephanie, 2012)
Furthermore, they have been raised in a world dominated by brands and marketing and are more
aware of marketing tactics than previous generations. (HEANEY, J.G., 2007) (TSUI, B. and Hughes,
L.Q., 2001) This has however not prevented that “generation Y is the most materialistic
generation yet and forms of consumption are central to its sense of identity and the acquisition of
the status or “cool” through this acquisition. “ (FERGUSON, Shelagh, 2011) The big difference with
previous generations according to Pitta is the fact that millennials want their buying information
from trusted individuals. (PITTA, Dennis, 2012) This means that consumer ratings become more
and more important and that brands have to bond with their consumers.
Another big difference is the way generation Y wants their products and services. Several authors
confirm the fact that millennials need their products and services to be adapted to what they
want. “They expect everything to adapt to their schedules and whims, rather than the other way
round.” (MCCONVEY, Joel, 2009). “They want their products and services now, they want them
perfectly tuned to their taste and they want to buy them with comparatively little effort.” (PITTA,
Dennis, 2012)
All this combined makes millennials at the same time one of the most exciting market segments
ever and one of the most difficult market segments ever. Toggle the right buttons and one’s
product or service will be successful. Approach them in the wrong way, and one’s product or
service will be burnt down in seconds.
7

15. 2.3 Television according to generation Y
“Today’s kids believe in the future and see themselves as its cutting edge. They show a fascination
for, and mastery of, new technologies. (HOWE, Neil and Strauss, William, 2000)
This quote illustrates the danger traditional FTA-channels are in. TV-channels are now at the heart
of content distribution but this can change very quickly since millennials not necessarily use the
same technologies as their parents to access TV-content. They are quick learners and technology
is no longer a barrier to create a new way of watching TV. Peter Hinssen has made a good analysis
of this phenomenon in his book “The new normal”. He distinguishes digital natives and digital
immigrants. Millennials are digital natives and grew up with technology. It is part of their life,
while digital immigrants have learned to use technology while being older. He explains it using the
following example: “I like this simple test to distinguish between a digital native and a digital
immigrant. You put a camera on a table and just ask “What is this?” A digital immigrant will say:
“That’s a digital camera”, whereas a digital native will say: “It’s a camera”.” (HINSSEN, Peter,
2010)
Research from DearMedia and EHSAL management school shows that 60% of youngsters in
Belgium spend 1 to 3 hours a day in front of the TV. 42% of this time however is non-linear
viewing, which means that programs are not watched live and ads are skipped. More than 25% of
the millennials participating in the research stated that they skip advertising daily. (DEARMEDIA &
EHSAL MANAGEMENT SCHOOL, 2012) Thus can be stated that the way generation Y consumes TV
is really different than the way their parents do.
For this reason, the research in part two of this dissertation will focus on the likeliness that
generation Y will jump from the traditional TV-set to alternative content distribution. A shift that
is already happening very slowly. In the following paragraphs, different alternatives for the
traditional TV-set will be considered.
8

16. 2.3.1 Time-shifted viewing
When Telenet and Belgacom released their Digicorders in 2006, millennials finally got what they
always wanted. Convenience, flexibility and a cheap way to watch missed programs. The
Digicorder offered the consumer more freedom and the Belgian population quickly embraced the
new technology. By 2010, only 16.9% of the households in Flanders did not have a product bundle
including digital TV. (BUSINESS MONITOR INTERNATIONAL, 2012)
One of the most used features was TSV or Time Shifted Viewing. This means consumers can pause
a linear program to continue watching it later or record it by pressing one button. The system
quickly became very popular and now FTA-channels are starting to see the consequences.
According to Christian Van Thillo, CEO of De Persgroep, TSV already accounts for 20% of TV-
programs watched. (DUMON, Pieter and Debackere, Jan, 2012) Figures from the newspaper “De
Morgen” even show that 15 to 50% of the most popular TV-programs are watched through TSV.
(DUMON, Pieter, 2011). Other research from IBBt also confirms this. In this research, 28.1% of
digital TV-owners states to record programs or movies daily while only 15.5% states never to use
this functionality.
Unfortunately for the FTA-channels, there is no way back. In Flanders, the CIM6 can measure
which programs are watched and how much are watched through TSV. This means that
advertisers can ask for lower prices, driving the revenue of commercial TV-channels down. The old
adagio from John Wanamaker, “Half of the money I spend on advertising is wasted, I only don’t
know which half” no longer applies on TV.
For this reason, VMMa has asked Telenet and Belgacom to compensate them. Belgacom has
renegotiated its tariffs with VMMa but Telenet refuses to pay anything for a service it offers for
free to its consumers. Furthermore, VMMa has taken steps and asked the government to think
about it.
6
CIM: Centrum voor Informatie over de Media: The Belgian institute that is responsible for TV figures
9

17. 2.3.2 Piracy
Piracy is defined as the acts of producing, acquiring and/or consuming illegal copies of an
authentic product. (HO, Jason and Weinberg, Charles B., 2011). In this dissertation, piracy is all
about the consumption of TV-content in an illegal way. Generally, there are two ways TV-content
can be accessed through piracy. Downloading and streaming.
While downloading implies that content is stored locally on a hard drive or other storage device,
streaming is about watching the content while it is being loaded in the memory of the device that
is used to consume the content. YouTube is a good example of a website which uses streaming to
deliver content.
Buying DVD or Blu-ray copies can be considered as a third way to access TV-content through
piracy. The author of this dissertation however, assumes that since sales of DVD’s and Blu-ray
dropped by 44% in 2010 (ADWEEK, 2011), the impact of DVD-copies no longer has a significant
impact on the consumption of TV-content. Therefore, this dissertation will focus on streaming and
downloading.
Research conducted by Lightspeed research in 2010, showed that almost 58% of people had
streamed or downloaded TV-content in the last six months. (DAVIES, Jessica, 2010) The study
includes legal services like BBC’s Iplayer but demonstrates the readiness of the consumer to catch
up online and leave the traditional TV-set to access good content. In addition to that, a more
recent study in Belgium showed that 60% of young people in Flanders download TV-content
illegally. The main reason for doing so is the time it takes for series to be broadcast in Belgium
while they have already aired in other countries. (DEARMEDIA & EHSAL MANAGEMENT SCHOOL,
2012)
Piracy drivers
“If it’s crap, it’s no money lost. If I hear about a film in the day, it’s nice to be able to go home and
find it immediately. If I like it though, I will generally have a look on Amazon and buy it after”.
(Laura, 19 as cited in (ROSE, Helen, 2010))
Hennig-Thurau identifies 6 drivers for piracy based on their utility. Transaction utility, mobility
utility, storage utility, anti-industry utility, social utility and collection utility. (HENNIG-THURAU,
Thorsten et al., 2007)
The transaction utility is an economic driver and implies that by streaming or downloading
content, money can be saved. This is one of the main reasons for piracy and is confirmed in
several other studies. (SHEEHAN, Brian et al., 2010) (STOLZE, Jim, 2011) All these studies claim
people do not want to pay for content anymore. A recent study from Viacom and MTV however,
shows that generation Y wants to pay for content but that the main reason for not doing so can
be found in the fear to pay for something bad. In other words, millennials do want to pay for good
content but are afraid of buying something they do not like so they download or stream it instead.
Generation Y shows its appreciation for good content by buying it afterwards.
10

18. The mobility utility focuses on the portability of content. Hennig-Thurau’s study mainly deals with
motion pictures but the same portability problem can be applied on TV-content. Just like people
cannot watch Blu-ray movies on the move, it is currently very difficult to watch TV on the go in
Flanders. There are no portable DVB-T devices available, there are no services which support it
and the content providers are not ready to do so. The only way for consumers to watch TV on
their tablet or smartphone is to download the desired program and watch it while being on the
move. Just like people downloaded motion pictures to transport them, people download or
stream TV to watch it on the train, in the bus or in the park.
The storage utility is less applicable on watching TV. It implies that the storage space needed for
physical products boosts piracy. This utility does not apply on TV and will further not be
considered.
The anti-industry utility is all about the feeling people have about content-providers and TV-
channels. Advertising clutter is one of the main drivers for this anti-industry feeling. Clutter
describes the level of advertising and other non-programming material within a medium. (SPECK,
P. and Elliott, M., 1998). According to Speck and Elliott, an increase in advertising clutter increases
ad avoidance which, on its turn, results in lower prices paid for advertising space. Instead of
lowering the amount of clutter however, “it appears that the advertisers’ “solution” to audience
avoidance of their messages is to increase the number of messages, so even effort of commercial
avoidance becomes a source of audience frustration.” (ROTFELD, Herbert Jack, 2006) This leads to
an anti-industry feeling that motivates consumers to look for alternatives that do not make the
consumer feel like a milk cow.
Another important utility is the social utility. Having the knowledge to watch TV programs for free
compared with the ability to talk about the watched programs, enables consumers to “establish
social links with relevant others”. (HENNIG-THURAU, Thorsten et al., 2007) As mentioned before,
generation Y relates on its peers to buy or consume a product. Being the one that knows all about
piracy or TV programs easily enables millennials to become the centre of their peer group.
Combined with the instant-share culture, this makes the social utility very relevant.
The last utility as defined by Hennig-Thurau, is the collection utility. Piracy enables people to
collect large amounts of TV programs, movies and music without having to pay for it. No matter
how rich people are, they can collect these things without any effort. Some people just download
to have a collection and do not even watch or listen to this collection.
These piracy drivers are confirmed by several other studies. Jim Stolze for example, identifies 5
piracy-drivers. These are: instant access, a wide product offer, low price (free), ease of use and
the freedom to choose what you want, whenever you want. (STOLZE, Jim, 2011) Another source
merges the different piracy drivers into three main categories which are ‘Price’, ‘Immediacy’, and
‘viewing channel’. (HO, Jason and Weinberg, Charles B., 2011)
11

19. Content availability and advantages
But what exactly is available through piracy on the internet and what are the advantages of
accessing content on the internet for generation Y?
The first question is rather easy to answer. Almost everything is available on the internet after it
has been released in one or another way. This means that a TV-show airing for the first time today
at 7 P.M can be available online by 9 P.M. The so-called release-groups have thousands of
volunteers who record episodes of their favourite TV-program just to release them on the
internet. Every bit of content which has a consumer, is suitable to be uploaded and shared on the
internet. Up-loaders and release-groups don’t earn any money by uploading this content to the
internet but social acceptance and anti-industry attitudes are the main drivers to upload content.
(SHEEHAN, Brian et al., 2010)
Virtually everything is available online which partly answers the second question of what the
advantages of piracy are for generation Y. No matter if the consumer likes TV-shows from the
seventies or the newest episode of “Dexter”, it is right there and can be watched at the exact
moment desired by the consumer for free. De Kosnik identifies eight advantages of pirating TV.
- Single search
- Simple indexing
- Uniform software and interface
- File portability
- Access to global TV
- Freedom of pre-empting
- Personal archives
- Low-cost and commercial-free
Each one of these advantages can easily be linked to the piracy-drivers identified by Hennig-
Thurau. Low-cost for example, links to the transaction utility while commercial-free, links to the
anti-industry utility.
12

20. 2.3.3 Online streaming TV
Piracy has always been a threat for the traditional FTA-channels but more recently, legal
alternatives are starting to pop-up. In contrary to illegal streaming websites, most services charge
a monthly fee to pay the content-owners a fair price. Netflix for example, enables consumers to
watch as many series and films they want for £6 a month. Other websites like Direct Movie, rent
movies and series for a fixed price. In this way, they offer a cheap and convenient alternative for
live TV and give the consumer a legal alternative for illegal streaming and downloading.
Even consumers who prefer to watch content on their TV-screen can be satisfied by using these
services. Today, Netflix can be accessed using several devices that are very common in every
family. This includes the Xbox, the PlayStation and several set-top boxes and media streamers. In
2011, 72% of families owned a game console in Belgium. (OIVO, 2011) That means that almost
three quarters of the Belgian population can access this content on their TV without the need to
buy new hardware.
Research from Nielson shows that, in the past year, the number of homes in the U.S with
television sets dropped. Partly because of millennials watching TV content on their computers or
mobile devices. “Forget about cord-cutting. These are people who never paid for TV -- or even
owned a television -- in the first place. They're accustomed to watching their favourite shows on
Hulu, Netflix, YouTube and other online video platforms.” (ADWEEK, 2012)
There are however, some problems that need to be solved for these services to become more
popular. In his research paper “Piracy is the future of Television, De Kosnik lists several problems
of these legal services. These include standardisation, global offers, premium service and prices
based on usage. (DE KOSNIK, Abigail, 2010) Especially the global offer is a problem. Most
streaming services are still not available in Flanders. Netflix, Lovefilm and Hulu all announced to
come to Belgium but at the moment of writing this dissertation, they are not offering their
services in Belgium yet. Considering the success of the launch of Spotify in Belgium which reached
300,000 users in merely three months’ time (DECKMYN, Dominique, 2012b), the assumption can
be made that these legal services will put even more pressure on the business model of
commercial TV channels in Flanders.
As for the standardisation, this could be a good solution to attract more customers on a whole.
For generation Y however, technical problems are less common than for older generations.
According to Howe, this generation is more tech-savvy and more prepared to try something new.
(HOWE, Neil and Strauss, William, 2000) Still, these services are improving every day and can
attract a larger public in the future.
13

21. 2.3.4 Video on demand on iDTV
Since the introduction of digital TV in Flanders, consumers are able to watch missed programs
through video on demand or VOD. Research shows that the most important reasons for watching
VOD amongst digital natives are the possibility to watch missed programs, the opportunity to
watch a program without advertising and the ability to watch whenever they want. (DEARMEDIA
& EHSAL MANAGEMENT SCHOOL, 2012) In 2011, a Belgian family spent on average 12.7 EUR a
year on VOD-services. That is 21% more than in 2010 and the VOD-market continues to grow.
(IVF, 2012)
While this provides a new way of earning money for FTA-channels in the first place, it is also a
threat for the same FTA-channels. Consumers can not only catch up with their favourite soap
from their preferred TV-channel, they can also rent movies and series which are offered on the
digital TV platforms of Telenet and Belgacom. In this case, instead of watching a TV program from
any commercial TV station, consumers spend their time on watching VOD which can affect the
viewing figures from these TV channels. In 2011, 6% of watched TV-programs were VOD.
(DEARMEDIA & EHSAL MANAGEMENT SCHOOL, 2012) There can be concluded that VOD accounts
for a small amount of TV-time but time spent on watching VOD is increasing year by year.
2.3.5 Second screen apps
Since the introduction of the Ipad in 2010, tablets have found their way to the living room.
Together with smartphones, they are used more and more to consume media on the go. These
devices are often referred to as the second screen and introduce a new way of watching TV. In
Belgium, 13.1% of consumers own a tablet while 40.4% of the population owns a smartphone.
(IBBT- ILAB.O, 2011)
One of the possibilities of watching TV on these devices is mobile TV. Mobile TV is defined as “TV
on mobile devices that provides the same content as seen on traditional TV. In addition to live TV,
mobile TV also includes on-demand video that can be downloaded or can be broadcast to a
number of users. There are two forms of mobile TV: streamed mobile TV and broadcast mobile
TV.” (BAYARTSAIKHAN, Khulan et al., 2007). While streamed mobile TV uses the internet to
stream content to the consumers’ devices, broadcast mobile TV uses a technology based on DVB-
T7 to deliver content.
In Flanders, the two biggest distributors, Belgacom & Telenet, are both offering an app that makes
watching TV on smartphones and tablets possible. Telenet’s “Yelo” and Belgacom’s “TV overal”
offer live streamed mobile TV and both have the possibility to watch video on demand. At the
moment, it is not possible to use these apps outside of the distributors’ networks. For Telenet,
this means that watching TV out-of-doors is impossible while for Belgacom, only the distributors
own mobile network, Proximus, can be used.
7
DVB-T: Digital Video Broadcasting-Terrestrial: Technology used to distribute a digital TV-signal over the air.
14

22. Telenet is still testing its app and offers this service for free to consumers. As a result of the
problems with VMMa, it is not possible to watch the VMMa-channels on Yelo. Belgacom in
contrary has made a deal with VMMa and offers its service to all its consumers for 5 EUR a month.
This is the same price as is charged by Mobistar, a third provider of mobile TV which enables its
own customers to watch TV-on-the go for 5 EUR a month. Mobistar Mobile TV however, is more
limited. It cannot be used on tablets, it offers less channels and it does not offer any VOD-
services.
Exact figures of the use of these services are not yet available but Telenet claimed that merely
two months after its launch, more than one million programs had been watched on Yelo.
(TELENET, 2011) A clear sign that people are ready for a new TV experience. It is very likely that
the raise of the use of these apps will help consumers to watch less normal TV and use more
alternatives.
2.3.6 Over the top TV
Over-the-top is a general term for services that are used over a network that is not offered by that
network operator. It's often referred to as "over-the-top" because these services ride on top of a
service people already get and don't require any business or technology affiliations with the
network operator. (ITV DICTIONARY, 2012)
In terms of over the top TV, it means that consumers can watch TV programs without interference
of different content providers, distributors or aggregators. In the specific case of the FTA-
channels, it refers to the fact that consumers can watch TV programs bypassing the traditional TV-
channel. Piracy and online streaming video as mentioned above are all OTT8-services but the
catagory is very wide and this section will focus on other players competing with the Flemish FTA-
channels by offering OTT-services.
BBC Iplayer and similar services
“If we don't make content available, viewers will find it despite us. At the moment the global roll-
out is a pilot service to test proof-of-concept and explore demand.”( Jana Bennett, president of
worldwide networks and global iPlayer at BBC Worldwide as cited by ' (OSBORNE, Magz, 2011))
For the Flemish FTA-channels, competition by OTT is not limited to services like Netflix or Hulu.
Foreign TV-channels are also threatening their business model. This is because of the dependency
of Belgian FTA-channels on foreign programs to complete their offer. According to Jo Caudron,
buying foreign programs is way cheaper than producing local programs. When the BBC decides to
make their programs available worldwide, it means that consumers can watch these programs
online without needing a Belgian FTA-channel.
8
OTT: Over The Top
15

23. This is the most extreme form of OTT-TV. In this case, the content producer and distributor are
one and the same. It delivers its content straight to the consumer, eliminating all the middlemen
in the process. This model is only possible when the content producer can deliver an easy to use
platform. Another example of this type of content distribution is HBO Go. HBO produces its own
series and distributes them immediately to the consumer using their own online platform. An
HBO subscription is all it takes.
In the past, the impact of the worldwide introduction of BBC’s Iplayer would have been less
significant because of language barriers and data limits. Research from ESLC however, shows that
the knowledge of the English language of young people in Flanders improves year by year. In
2012, Flemish students shared the first place with Sweden and Malta in the “European Survey on
Language Competences”. (VLAAMSE OVERHEID, 2012) This means that language is no longer a
barrier for millennials to watch content using alternative channels.
As language barriers were disappearing, consumers were also calling ISP’s9 to remove data limits
on broadband connections. Just like on the TV-market, the broadband market in Belgium is
dominated by two large ISP’s, Telenet and Belgacom. The reason for this is their business model
which implies selling triple play packs to consumers including TV, internet and phone calls. Smaller
ISP’s cannot compete with this offer and are less attractive for consumers. Furthermore,
Belgacom and Telenet both own their own network, and at the moment, only Belgacom has to
share its network with other ISP’s.
For long, this led to a very rigid market with very small data limits. That didn’t change until 2009,
when Microsoft complained about the data limits which prevented consumers from renting
movies using Microsoft’s’ Zune platform on Xbox 360. (STOFFELS, Bart, 2009a) The case was
important enough for the Belgian minister of economics, Vincent Van Quickenborne, to ask the
competition commission to look into it. (STOFFELS, Bart, 2009b) In 2010, both Belgacom and
Telenet replaced data limits by a FUP10, implying people could download as much as they wanted
as long as they were not abusing the network. (TIBAU, Frederik, 2010)
As a result, Telenet reported in June 2012 that streaming video was responsible for about 40% of
internet traffic, double the amount of traffic used in 2010. By 2015, Telenet expects to process
more than 33.6 billion hours of streaming video a year. (GROMMEN, Stefan, 2012) A firm proof
that streaming video is becoming more and more important and that there is something moving
in the TV market.
9
ISP: Internet Service Provider
10
FUP: Fair Use Policy
16

24. From content producer to the consumer
While BBC and HBO are both TV channels making their own products available through the
internet, so-called core content producers are also eliminating the middlemen. These content
providers are agencies specialised in producing TV programs which are sold to FTA-channels to be
distributed. In Flanders however, two big content producers are taking their own products to the
screen.
This is the case for Studio 100 and Woestijnvis. Studio 100 is one of the largest producers of kids
programs in Belgium, The Netherlands and Germany. The company owns 5 theme parks in Europe
and is constantly looking to expand. Its TV products are sold to public TV channels and FTA-
channels but the company became big through merchandising. In 2008, Studio 100 launched their
own TV channel together with Telenet, later followed by Junior Channel which is available
through pay-tv in Germany, Austria and Switzerland. (STUDIO 100, 2012)
This evolution is also affecting FTA-channels. Studio 100 is an example of a strong content
provider starting its own TV-channel. Not only this content is very valuable, the fact that Studio
100 is distributing this content by itself is bad news for commercial TV-channels. It means that
they will have to look for high quality kids’ entertainment elsewhere while it becomes more
difficult to differentiate themselves from competitors with unique content. VMMa has already
partly solved this problem by partnering with Studio 100 for its own kids channel: VTM Kzoom.
(STUDIO 100, 2012) Yet the question remains whether Studio 100 will keep producing content for
other TV channels or will focus on its own channels.
While Studio 100 introduced one TV channel, Woestijnvis is even taking it further. Ask 10 Flemish
people which content provider they know and the answer will be “Woestijnvis” in 9 out of then
cases. The content provider has built an image of quality, humour and good TV with inventive and
unique programs. When SBS was selling its TV channels in 2011, the holding owning Woestijnvis
bought VT4 and VijfTV, making Woestijnvis the new owner of SBS Belgium. (DE MORGEN, 2011)
The impact of this acquisition cannot be analysed before the launch of the renewed channels
“Vier” and “Vijf” at the end of September, but the assumption can be made that it will influence
the remaining Belgian FTA-channels in every possible way.
17

25. Apple vs. Google: the final step
Probably one of the biggest threats for FTA-channels on the long term however, is the
introduction of the TV-platforms from Apple and Google. These platforms, based on ITunes
(Apple) and Play Store (Google), offer exactly what millennials are looking for and are the ultimate
form of over the top TV. This is because they integrate all OTT-services under one interface and in
one small box that can be connected to the TV-screen. Hempel has picked up this evolution and
explains it as following: “Thanks to streaming video services like Hulu and Netflix and new portable
devices such as the iPad, we've begun to expect that TV should be more like the web itself: social,
mobile, searchable, and instantly available.” (HEMPEL, Jessi, 2011)
And this is exactly what these services are. GoogleTV for example enables consumers to watch TV
from several content providers. All consumers need is a set top box or media centre which
supports GoogleTV. It integrates Google’s own Play store with Netflix, Amazon’s video store, BBC
Iplayer, YouTube and many more. People owning GoogleTV or AppleTV don’t need their cable
subscription. They can watch what they want, whenever they want with little effort and for an
affordable price. It offers them the freedom to have a product completely tailored to their needs.
Jo Caudron illustrates the danger of these services in his book by composing his perfect TV
package using Google TV:
- BBC Iplayer for documentaries and series
- HBO-app for top series
- Netflix for movies and series
- Studio 100 app for his kids
- Free app of the public broadcasting company to watch the news
(CAUDRON, Jo, 2011)
At the end of the month, this will cost him about 40 EUR. This package is completely tailor-made
and enables him to cancel his cable subscription and see everything he wants without the hassle
of traditional TV channels. However, at the moment, most of these services are not yet available
in Belgium and the question is how fast the Flemish consumer will be prepared to drop its cable
subscription in favour of other paid-services. Generation Y will definitely impact the speed of
adoption and the research conducted for this dissertation will help to see the possibilities.
The final step in this process is the creation of an own network for Google or any other
multinational. Google has taken its first steps in the United States with its own network called
Google Fiber. It integrates every possible TV channel with unlimited access to Netflix, gigabit
internet, online storage and unlimited internet access. (SCHIEVINK, Bauke, 2012) For 120 dollar a
month, Google delivers the ultimate entertainment experience, eliminating all other
intermediates in the process. While this project is still in a test phase, it might come to Europe in
the future and it will most likely blow away all existing TV business models in Europe.
18

26. 2.3.7 An endless list
While this chapter has focused on the main threats for FTA-channels, there are many more
dangers to be considered. There are so many external actors in the TV-business and each of them
can become a danger in the future. Rangone and Turconi have made a model which identifies the
main players in the digital TV-market. Each of them has the possibilities and means to become a
potential competitor.
Figure 1: The main categories of the business external actors (RANGONE, Andrea and Turconi, Alessandro, 2003)
19

27. 2.3.8 Stimulus-junks
Not only the channels millennials use to consume TV-content are different. Generation Y thinks
and processes information totally differently from their predecessors. According to Prensky,
“digital natives are used to receiving information very fast. They like to parallel process and
multitask. They thrive on instant gratification and frequent rewards” (PRENSKY, Marc, 2001)
This way of processing information, also influences the TV-viewing behaviour of millennials.
Instead of leaning back while watching TV, this generation is constantly busy doing other things.
Figure 2 shows that almost three quarters of TV viewers are browsing the internet or checking
their e-mails while watching TV. This means that people are less attentive and even more
distracted from TV when advertising starts. This simultaneous viewing of different devices, known
as second screening, is perceived to be an extra barrier to reach consumers. (GFK, 2012)
Since knowledge about this phenomenon is widespread, advertisers are less prepared to pay for
advertising space because of the low attention rate during commercial breaks. While people used
to go to the bathroom in the past, checking e-mails or Facebook has become the new distraction.
There are however, some opportunities in the use of this second screen which will be explained in
chapter 3.7.
Use a tablet computer 20%
Use social networking sites 51%
Use a mobile phone/smartphone 59%
Use a laptop/computer 72%
Browse the internet/check, send e-
74%
mails
0% 10% 20% 30% 40% 50% 60% 70% 80%
Figure 2: Multiscreening (own chart based on (GFK, 2012)
20

28. 2.4 Convergence: when it all comes together
In order to fully understand the radical change of the television business, knowledge about the
convergence process is indispensable.
Baran defines convergence as “the erasure of distinctions among media” (BARAN, Stanley J. and
Davis, Dennis K., 2011). Lind approaches convergence from the technical side and describes it as
“a discontinuity, a market and/or industry redefinition related to technological change.”
Digitalisation of cable TV, watching TV on a cell phone, the use of IT in telecom, it can all be
named convergence. (LIND, Jonas, 2005)
In 2004, Bill gates gave a speech at the CES where he announced that convergence was finally
here. “Convergence doesn’t happen until you have everything in a digital form that the consumer
can easily use on all the different devices. So, if we look at the three types of media of greatest
importance—we look at photos, we look at music and we look at video—the move toward giving
people digital flexibility on them is pretty incredible on every one of them. It’s been discussed for a
long, long time. And now, it’s really happening.” (Bill Gates as quoted in (BARAN, Stanley J. and
Davis, Dennis K., 2011))
It took a while before his vision became truly possible but today, because of mobile internet,
media are ubiquitous. Radio, internet, newspapers, TV and magazines are all available anytime,
anywhere on almost any device. In this context, Baran and Davis start wondering about the future
of all these media. They are asking “what becomes of the distinction between newspapers,
magazines, radio, and television when all can be accessed anywhere, anytime on a single
handheld device and when each medium can combine graphics, video, printed text, sound, music,
and interactivity to satisfy your entertainment and information needs?” (BARAN, Stanley J. and
Davis, Dennis K., 2011) It is very probable that some of these media will merge into one single
medium, possibly supported by different niche media.
2.4.1 Types of convergence
According to Küng, there are three different forms of convergence. Network-focused
convergence, product & service-focused convergence and industry focused convergence. (KÜNG,
Lucy et al., 2008) Network-focused convergence uses the technological approach from Lind and
implies that every network is able to deliver any content to any consumer. This is partly the case
in Flanders where the cable network and (mobile) phone network are all able to transport TV,
Radio and newspapers (using the internet). There are however still limits to the “any consumer”-
part since these networks are still not available for everybody at every moment.
These limits do not exist in the mind of the consumer. For the consumer, convergence is already
there. A tablet owner can now access radio, TV, newspapers, internet and magazines all from one
device. The fact that these media are delivered using several technologies does not make any
difference. This is called “product and service focused convergence”.
Finally, industry focused convergence is all about IT-companies starting to get involved in content-
creation and transmission.
21

29. Stieglitz approaches convergence from another point of view and suggests a model with four
types of convergence. The first type of convergence is “convergence in substitutes” and it means
that one technology can replace another. The second type of convergence is “convergence in
complements”. In this case, two different technologies work better together than they would
work separately. On the other side of the matrix, Stieglitz has added technology and product
based convergence. In this way, he produces a matrix with four different types of convergence.
(STIEGLITZ, Nils, 2003)
Figure 3: Types of industry convergence (STIEGLITZ, Nils, 2003)
The first type of convergence is technology substitution which is all about new technologies
replacing old technologies. A good example of this is the transition from Edge to 3G which made
mobile internet really useful for data transmission.
The next type of convergence is technology integration. In this case, two technologies work
together to become a new consolidated technology. An example of this is the digital TV-platform
from Telenet which integrates internet and TV in one new technology: iDTV.11
Product substitution is the third type of convergence and happens when two products from
different industries complete each other and eventually merge. In Belgium this is taking place in
the market for mobile internet and internet at home. Because of the constant need to access the
internet everywhere, the distinction between mobile internet and internet at home is vanishing.
Mobistar, initially an MNO12, now offers packages which bundle internet on mobile devices and
internet at home so the consumer does have internet access no matter where he goes.
Finally, the fourth type of convergence is product complementarity. This is the case when two
products can both deliver the services from the other product without the need to incorporate
the same technology. (LIND, Jonas, 2005) Examples of this are the PC and the smartphone which
can both deliver the same services while using a different technology. This technology, however,
is more and more coming together so in the future, this might become an example of product
substitution.
11
iDTV: Interactive Digtal TV
12
MNO: Mobile Network Operator
22

30. 2.4.2 The role of millennials in the convergence process
Generation Y is more technology-driven than any generation before. (Cfr. Infra) They are the
group that speed up the process of convergence and desire more tailor-made TV.
In the first seven months of 2012, market research agency Gfk reported a growth of 244% in
tablet sales compared to the first months of 2011. Furthermore, more than 50% of mobile phones
sold in Belgium were smartphones. (GFK RETAIL AND TECHNOLOGY BENELUX, 2012) While these
evolutions may seem fairly unimportant for TV, they show how fast new technologies get adopted
by young people and how different their behaviour is from other people.
In the process of convergence, millennials will be the first ones to consume TV content on their
tablets and smartphones. In fact, a survey from iBBT-iLab shows that 19% of respondents are
already using their smartphone regularly to watch TV. 34% of respondents in the same survey
state they use their smartphone to watch movies. (IBBT- ILAB.O, 2011) Knowing that half of all
smartphone owners had a data subscription in 2010, convergence of services is closer than ever.
According to Küng, this implies that media companies will have to adapt their content to be used
on several devices. Smartphones demand a different screen resolution and technology than the
classical TV-set. Next to this technological barrier, the format of advertising will have to be
adapted to these new standards. (Küng as cited by (BERTE, Katrien, 2010)) On the long term, this
will create new advertising opportunities but will also generate additional costs for the –already
struggling- FTA-channels.
2.5 Content as the eternal king
“Very few people buy technology per se; they buy it because of what that technology can do for
them. And they buy technology they don’t particularly like if it allows them to access certain
content. “(Lucy Küng as quoted by (HEGEDUS, Nathan, 2010))
While the former chapter shows how generation Y will change the future of TV, there is one
important fact that cannot be neglected. Notwithstanding the evolution of the way in which TV
content is consumed, the content itself remains king. A distribution channel without attractive
content is most likely doomed to fail. According to Mugullavalli, content is still the key-driver
behind the profits of content distributors. (MUGULLAVALLI, Satish, 2011) This is why good content
providers will remain important for the success of FTA-channels. A small amount of good content
is more likely to attract consumers than a large amount of bad content. Furthermore, research
shows that local content is still more appreciated than imported content. (BERTE, Katrien, 2010)
Proof of this can be found in the top100 of most-watched TV-programs in Flanders. The first
foreign program that can be found in this list is ranked at place 25. (CIM, 2011)
This is good news for the Flemish FTA-channels. It provides them with a way to bond the
consumer to their favourite TV-channel. Local content however, is more expensive to produce
and not always a guarantee for success. (BERTE, Katrien, 2010) In 2010, the cost of producing one
hour of TV content averaged 27,284 EUR. (VRT, 2010) Furthermore, some local content is so
important for TV-channels that it becomes even more expensive. Football emission rights for
example are very important to attract consumers. In Flanders, VMMa has partnered with Telenet
to buy these emission rights. The importance of this content is invaluable for FTA-channels and
prices break records, year by year.
23

31. Another evolution in the content-landscape is the rise of public content. The way content is
created, has slightly changed, and today, everybody with a good camera can make a great TV-
show without a large budget. An example of this is the film “Paranormal activity”. The film cost no
more than 15,000 dollars to produce but was aired worldwide in cinemas after 1 million people
voted for the movie on Eventful.com. (HAMPP, Andrew, 2009) In this case, the film got distributed
in cinemas, but there is no need for TV or cinema to distribute content. Nowadays, alternative
distribution channels like podcasts, YouTube or other video websites enable everybody to publish
and watch content for free. No more content distributors, TV channels or intermediaries needed
to share content with the whole world in one click.
24

32. 2.6 Evolution of the current business model
In 1989, the first FTA-channel, VTM, aired in Flanders. It was the first broadcasting company
which was responsible for its own income which it generated by selling advertising space to
advertisers. This business model was very linear as shown in Figure 4 which shows a supply chain
based on Porter’s theories. Each part of this supply chain is a different market player with its own
value chain. The different players in this chain add value to the product and if the overall value of
the product exceeds the sum of its parts, the company generates profit. (PORTER, Michael E.,
1985)
The first step in this process was content creation. Content creation was the work of independent
producers and Hollywood studios. They created the content and produced it together with the
production companies. These companies sold their content to the cable networks which bundled
it to send it to the network operators. The network operators on their turn transmitted the
content to the consumer.
In this model, there were two main income providers: consumers and advertisers. Advertisers
paid the cable networks and broadcast networks to distribute their advertisements and reach the
desired target group. This money was used to pay content creators and production companies.
On the other side, consumers paid the network providers a very small amount to access to their
network. In that way, all costs were covered. (VRM, 2011)
Independent Cable
producers networks TV-set
Advertisers
Hollywood Broadcast
studios networks
TV
User
Content creation Production Packaging Distribution End user
interface
Production
companies
Cable
providers
Sattellite
providers
Figure 4: Broadcast value chain showing the position of cable and satellite TV based on (VRM, 2011) and (MCGRAIL,
Mike and Robert, Bob, 2005)
25

33. 2.6.1 Content scarcity
This model was based on content scarcity. Programs ran once, in real-time with a possibility for
reruns months, or even years after the first airing. Viewers only had one chance to watch a given
program and advertisers only had one chance to deliver advertisements to these viewers. (SELES,
Sheila, 2009) This offer of linear viewing resulted in a healthy balance between advertisers and
FTA-channels which were able to survive on the money they received from adverts. If they
wanted to be sure to see the whole program, consumers had to watch the full TV block including
ads.
Küng also identifies three additional factors which helped to maintain this business model. (KÜNG,
Lucy et al., 2008) First of all, the strong regulatory framework prevented new players to enter the
market. Secondly, the European market is dominated by strong national players. In Flanders for
example, the public broadcast company, VRT, has a market share of 43 % (including Eén, Canvas
and Ketnet). (SVR, 2011a) On average, public broadcasting companies in Europe have a market
share between 30% and 35%. (EXPRESS.BE, 2012)
Finally, there was a stable technological base. The technology needed to distribute TV-signals was
almost the same for cable, satellite or antenna. All these factors contributed to the content
scarcity in the TV landscape. Following this strategy of scarcity, advertisers had no other choice
than to advertise on a limited amount of FTA-channels to reach consumers
2.6.2 From content scarcity to content abundance
Explosive growth of TV-channels
As mentioned in the introduction, until 1995, VTM was the only FTA-channel in Flanders. In that
year, SBS introduced VT4 followed by VMMa which introduced Ka2 (now 2BE). The TV-offer in
Flanders now included seven channels offering local content. This was further completed by a
couple of foreign TV-channels offering their own content like BBC1 or RTBF.
By September 2012, the number of TV-channels offering local content has grown to a whopping
73. (SVR, 2011a) A full list of these channels can be found in Appendix 1. This explosive growth of
FTA-channels in Flanders was mainly caused by the introduction of digital TV. This new technology
enabled distribution companies to offer more channels, using the same bandwidth. (BOUWMAN,
Harry et al., 2008)
Now consumers are offered a wide range of TV-channels which included niche-channels tailored
to everybody’s wish. This evolution can be explained using the long tail theory. In “the long tail”,
Chris Anderson describes Amazon’s strategy in selling a very wide range of different books. These
books are not sold in large numbers but nevertheless account for a big part of Amazon’s profit.
(ANDERSON, Chris, 2010) Just like the hundreds of books that are only sold to a couple of
consumers, small FTA-channels appeal to very specific consumers making it a profitable business.
Opposed to large FTA-channels appealing to a wide range of different people, it might be more
interesting for advertisers to run commercials on more focused channels.
26

34. New market players influencing the value chain
In chapter 2.3, the potential entrants and substitutes in the commercial TV market have already
been carefully discussed. Therefore, this paragraph will not focus on the abundance of new
market players, but on their effect on the value chain of the traditional FTA-channels.
There are two main movements which can be identified in the value chain of commercial TV. First
of all, there is a movement of disintermediation. (KÜNG, Lucy et al., 2008) This means that there is
a certain amount of fragmentation in the market which leads to the removal of certain companies
in the supply chain. An example of this can be found in Netflix, where content providers eliminate
cable companies and TV-channels by offering their content to the consumer using the internet.
At the same time, the Netflix example also applies to the second movement in the value chain:
reintermediation. In this case, content providers have a large catalogue of content they want to
offer to the consumer. This content however, is not easily searchable and Netflix offers the
platform to make that possible.
This makes the value chain less linear than it used to be. The value chain still includes different
intermediaries but they can easily be skipped or replaced by another one. For the end-consumer,
the product (TV) still remains the same, but the way in which it is delivered differs drastically.
27

35. This has also an effect on the financing of TV as a whole. In the old model, advertisers paid the TV-
channels while consumers paid the network providers. In the new model, advertisers pay
whoever they need to distribute their message. On the consumers’ side, consumers pay whoever
they need to access their beloved content. Or in the case of piracy, they don’t pay for the content
at all, but only pay for the network access.
Considering the different challenges, of all players in the supply chain, FTA-channels have the
weakest position. The packaging part of the supply chain is where competition will be the
strongest. Figure 5 clearly shows that the packaging stage can easily be removed or replaced.
Furthermore, the money flowing to this stage is split between the traditional players in this
segment and new entrants.
Cable Advertisers
networks
Independent Cable
producers Broadcast providers
networks
Hollywood Satellite
studios providers
TV-set
Packaging
User
Content creation Distribution End user
interface
Google
Netflix
Apple
User … PC
Internet
generated
providers Mobile
content
devices
MNO’s
….
Figure 5: The new supply chain based on (KÜNG, Lucy et al., 2008) and (BOUWMAN, Harry et al., 2008)
28

36. 2.6.3 Power to the consumer
The introduction of digital TV in 2005 not only caused an explosion of TV-channels, it also gave
more power to the consumer. Technologies like VOD or TSV enable consumers to actively manage
their TV-watching behaviour.
That is very different from the original business model of scarcity. In the past, TV-networks used
different strategies such as counterprogramming13, tent-poling14 and hammocking15 to attract
audiences and keep them tuned in for an entire block of programming. (SELES, Sheila, 2009) In
that way, consumers where stimulated to keep watching one channel instead of switching
channels.
With TSV, a consumer now can pause a live stream and continue watching it later. In that way, the
consumer does not need to miss anything from his favourite program while he can still do other
things while the program is running. Combined with the video recording function on set top boxes
and VOD, the consumer has more power on what he watches and when he watches it than ever.
This new way of watching TV has a positive effect on the time Flemish people spend in front of
the TV. In 2010, the average Flemish viewer, daily watched 9 minutes more than in 2009, totalling
at 2 hours and 57 minutes. (VRT, 2011) This evolution however, does not mean that there are also
more people watching adverts. Because of the possibilities to fast forward programs, ad
avoidance has never been so strong. 80% of people using TSV, state to skip advertisements.
(WERBROUCK, Stefaan, 2012)
In the past, ad avoidance used to be a lot more difficult. Speck and Elliot identify three different
ad avoidance strategies. The cognitive strategy, the behavioural strategy and finally the
mechanical strategy. (SPECK, Paul S. and Elliott, Michael T., 1997)
The cognitive strategy implies that people can avoid a TV commercial by not paying attention to
it. Related to this is the behavioural strategy where people can for example leave to room or start
talking to their neighbours. The most advanced of these strategies is the mechanical strategy. In
the past, this involved switching channels but nowadays, it also includes fast-forwarding
commercials while using VOD or TSV.
13
Counterprogramming: A technique used to attract viewers from another TV-station which is airing a
major event
14
A programming technique where an established show is scheduled between two less successful shows.
15
A programming technique where an unpopular program scheduled between two popular programs
29

37. 2.6.4 Pressure on revenue
The shift from content scarcity to content abundance results in new challenges for FTA-channels.
While in the past only a couple of private TV channels competed for advertising money,
advertisers now can spend their money on tens of different channels, each focused on a specific
type of consumer.
This is a big advantage for advertisers which can now better target their core consumer. More
channels also mean more available advertising space and cheaper prices. Figure 6 shows that
from 1993 to 2010, advertising spending on TV has grown from 185.8 million EUR to 941.2 million
EUR. Unfortunately for the FTA-channels, this amount of money now has to be shared between
more different market players.
Furthermore, these figures do not only include advertisements, but also alternative forms of
advertising like product placement or interactive content which may be more expensive to apply.
Amount (million EUR)
1000 941,2
900
787,1 820,1
800 744,1
689,8
700 605,3 623,3 615,6
600 545
489,2 509,8
500 420,4 441,3
400 321,3
300 248 264,1
185,8 210,8
200
100
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Figure 6: TV advertising spending in Flanders (own chart based on (SVR, 2011b))
2.6.5 A necessary shift
This chapter has clearly indicated that FTA-channels will have to change the way they earn money
if they want to survive. Pressure on revenue has never been bigger than today and alternatives to
watch TV require FTA-channels to become more flexible than ever.
Furthermore, the base of the business model, content scarcity, no longer applies because
consumers have never had so much means to do their own programming. If the generation Y-
factor is added to this situation, it looks even worse. Therefore, chapter 2.7 will focus on possible
alternatives while the research in chapter 4 will help to determine what really is possible.
30

38. 2.7 Alternative revenue models
The former chapters suggest that it will become very hard for large FTA-channels to survive on
traditional spot-advertising. Niche channels may be able to survive but the largest players will
have to find alternative funding. This chapter will list the most important alternatives and identify
the opportunities.
2.7.1 Non-spot advertising
Karrh defines non-spot advertising as “the compensated inclusion of branded products or brand
identifiers, through audio and/or visual means, with mass media programming.” (KARRH, James A.
et al., 2001) Neijens and Smit narrow it down to TV and describe non-spot advertising as
“sponsoring of television programs with the aim to make the message of the sponsor better
known via the programs.” (NEIJENS, Peter C. and Smit, Edith G., 2003) In other words, it includes
all forms of TV-advertising except commercials.
Non-spot advertising is an interesting alternative for commercials since the commercial message
does generally not interrupt the program. Because the product is integrated in the program, it
also means that FTA-channels cannot loose advertising money of consumers skipping
advertisements.
Research conducted in The Netherlands shows that non-spot advertising has a positive effect on
sponsor recognition. On average 7% of the viewers, can name the sponsor spontaneously while
33% recognises the sponsor when it is presented to them. (NEIJENS, Peter C. and Smit, Edith G.,
2003)
The same research also shows a generally positive attitude towards non-spot advertising. In the
study, 42% of respondents had a negative perception of conventional advertising opposed to only
16% of respondents who had a negative perception of non-spot advertising.
Figure 7: A comparison between evaluations and preferences with respect to conventional advertising and non-spot
advertising (NEIJENS, Peter C. and Smit, Edith G., 2003)
This study is backed by other studies conducted in other countries. In a study from Nebenzahl and
Secunda conducted among American college students, 70% of participants answered positively on
the open-ended questions. (NEBENZAHL, ID and Secunda, E, 1993) Another study from Ong and
Meri shows the same image. On a 7-point scale, with 1 = I totally agree and 7 = I totally disagree,
the average score for the proposition “I am opposed to product placement” equaled 5.1, showing
that most respondents did not have strong feelings against product placement.
31

39. In the next paragraphs, some of the most popular forms of non-spot advertisement will be
presented.
Product placement
Product placement is a form of non-spot advertising where products are featured during a
program. A good example of product placement in Flanders is the highly popular TV series
“Witse”. In this series, the main character drives a Lexus which is shown several times during the
program and even in the TV theme.
In Flanders, product placement used to be forbidden but has now been legalised. According to the
VRM, product placement is allowed in films, series, sports programs and entertainment programs.
It is not allowed to use PP in kids programs and informative programs. (VRM, 2012) Furthermore,
PP has to be communicated to the viewers by showing a logo.
In-script sponsoring
In-script sponsoring is a more developed way of product placement. It is also known as product
integration and in this format, a brand or product is an integral part of the program. It is not just a
car that can be replaced by any car brand, but it is completely integrated in the story.
Advertising funded programming
AFP is the most extreme form of product placement. In the case of branded entertainment, the
whole program focuses on one product or brand. An example of such a program was “Onder
hoogspanning (Under high voltage), a program designed by Ogilvy to promote the Belgian power
supplier Electrabel. The program focused on energy consumption and how to use less energy.
(TEMMERMAN, Wouter, 2007)
Billboarding
Billboarding is an advertising format in which the name and/or logo of a sponsor is shown at the
end or the beginning of a program. Generally the product or brand has a clear link with the
program and a billboard can be both static and dynamic.
Title sponsorship
Less frequently used than billboarding is title sponsorship. This happens when a TV program
incorporates the name of a product or brand in its name. An example of such a program in
Flanders is the “Jupiler Pro League”, the national football competition, which is very popular and
airs on TV.
Overlays
Overlays are commercial messages that can be shown during the program and they are
comparable to banners used on websites. (BERTE, Katrien, 2010) The banner is shown while the
program is running and can promote any product. At the moment, this format is not very popular
in Flanders but if advertisers want to, they can use it anytime.
32

40. 2.7.2 Second-screen apps
While second-screening is considered to be a threat for FTA-channels in chapter 2.3, it also offers
a lot of opportunities. This is illustrated by Matthew Kershaw from Bartle Bogle Hegarty: "The
reality is that if 30% of tablet usage takes place whilst people are watching TV, this means that
they are not watching TV. On the one hand, it is a silent killer. On the other hand, it is a massive
opportunity because TV advertising is incredibly powerful in terms of moving people and shifting
emotions." (Matthew Kerhshaw as cited in (MCCLELLAND, Stepehen, 2012))
According to GFK, consumers want a more “engaging and immersive” consumer experience. (GFK,
2012) They want a unique viewing experience and second screen apps are perfectly fit for the job.
Second-screening can differ from using a twitter hashtag, over voting for someone’s favourite
candidate, to actively participating in a TV-quiz. Possibilities are sheer endless and the market is
only starting to grow. With 75% of TV-viewers stating to surf the internet while watching TV (GFK,
2012), it should not take too much effort to involve people in a second-screen experience.
In September 2012, “VT4” transformed into “Vier” and not only the name changed. Vier is actively
using second-screen apps to engage viewers. During the commercial break of “De slimste mens
ter wereld”, a highly popular quiz, they stimulate consumers to watch the commercials by making
them participate in a small quiz. After each advertisement, the viewer is asked a question which
can be solved on a tablet or smartphone. In this way, the viewer has to watch the commercials if
he or she does not want to miss the questions. At the same time, the app stimulates people to
watch live TV since it does not work with TSV. At the end of the program, the fastest player wins a
prize. Future opportunities can lie into forming alliances with partners to produce second screen
apps and earn more money through these apps. This can be done by selling products that appear
in the program, but also by special offers tailored to the consumer.
The biggest risk in the use of these second-screen apps lies in the fact that the second screen can
easily turn into the primary screen. (CASTILLO, Jose, 2011) While receiving more information
about a TV-show, people are easily distracted from the TV-show itself. The biggest challenge for
content providers will be to merge both screens while directing the consumers’ attention to the
desired screen. Next to the risk of distracting viewers, these second screen apps are also
expensive to produce. Research in the UK shows that play along gaming attracts 12% of the TV
audience on average in developed market. (MCCLELLAND, Stepehen, 2012) It is still not sure if
that is enough to justify the costs.
Even so Vier has just started with second-screening, the advantages are immediately visible. In
this case, consumers are motivated to watch the advertisements and stay focused on the TV-
screen. This enables Vier to charge higher prices for advertising space and keep earning money
using a refurbished business model.
Furthermore, customer engagement can make the bond between viewer and TV channel
stronger. Chances are that the research in chapter 4 will show that millennials are more loyal to
content than to TV-channels. Engaging viewers and offering them a unique viewing experience
could solve this problem.
33

41. Figure 8 shows Vivek’s theoretical model of customer engagement.
Figure 8: Theoretical model of customer engagement (VIVEK, Shiri D. et al., 2012)
In his research, Vivek identifies several advantages of customer engagement that can be applied
to the situation of FTA-channels.
First of all, actively engaging with the consumer will lead to a higher perceived value for the
consumer which on his turn, will get more involved and will participate more with the offering or
activity of the company.
Secondly, customer engagement enables the consumer to build a strong engagement with the
company or brand. The more engaged consumers are with a company, the bigger the chance they
will pass along positive word of mouth.
Another advantage of this connection is the increase of the likelihood of a positive behavioural
response toward the brand or organization (Jacoby and Chestnut 1978 as cited in (VIVEK, Shiri D.
et al., 2012)). It means that consumers will become more loyal to the brand when actively
engaged. Since FTA-channels will have to keep their consumers close, this could be a winner.
Finally, second screen apps can help to build and maintain a brand community. The same research
from Vale shows that engaged consumers are more likely to join a brand community and to
become brand advocates.
So while second screening is still an unexplored area, the advantages for both the consumer and
FTA-channels are already there. Future research will hopefully deliver more insights about the
effect of second screen apps on advertising effectiveness.
34

42. 2.7.3 Video on demand services
Near linear TV
While second screen apps can motivate people to watch more live TV and make them more loyal
to TV-channels, they do not offer a solution for people who want to watch programs whenever it
suits them.
In that case, near linear TV could offer a solution. Near Linear TV is all about the flexibility to view
TV programs earlier or later than they are programmed. (CAUDRON, Jo, 2011) As an alternative to
offering a rigid programming, FTA-channels could offer their programs to be watched in a certain
timeframe. Instead of waiting until 10 PM, one’s favourite series can then be watched a couple of
hours before or after 10 PM.
In this way, TV-channels are still responsible for the programming while consumers have the
flexibility to choose when to watch their desired program. Instead of driving away consumers,
FTA-channels with good content can attract consumers who otherwise would watch a recorded
program while skipping the advertisements. In short, FTA-channels can make viewers more loyal
by offering them more flexibility without losing the advertising money.
According to Jo Caudron, ads could be removed from the programs if consumers pay for the
service of near-linear viewing. In Flanders however, this is probably not going to work since
people are already accustomed to recording programs. It offers them the same service for free
while they can skip the ads.
TV on the go
In chapter 2.3.5, Telenet Yelo, Belgacom TV Overal and Mobistar’s TV Everywhere have been
discussed as platforms which enable consumers to watch TV on the go. At the moment, only
Telenet offers this service for free but that is probably going to change.
The revenue from these applications however, is mainly for the distributors and not for the FTA-
channels whose programs can be watched using these apps. An evolution that has already caused
VMMa to prevent people from watching their TV-stations on Telenet’s Yelo.
In the current market, these apps are a threat for traditional FTA-channels. However, nothing
prevents these channels to make a paying app offering the same service themselves. While the
distributors have a very strong position when it comes to the distribution of FTA-channels on the
cable and IPTV, they cannot prevent commercial TV channels from distributing their content
through alternative channels.
That is exactly what the three major players in the Flemish TV-market are planning to do. At the
end of august VRT, VMMa an SBS announced they are going to offer a new mobile TV platform
called Rumble. The service will enable consumers to watch all TV programs from the big three
when and where they want up to three days after the program has aired. (DECKMYN, Dominique,
2012c) Furthermore it will also offer life TV without any interference of distributors.
35