Page 1

Professional Certificate
in Marketing
(Level 4)

521 - Assessing the Marketing Environment
!
Case Study
June and September 2012
!
!
!
!
!
!


Twofour
The Chartered Institute of Marketing 2012

Assessing the Marketing Environment Case Study June and September 2012

Page 2
Assessing the Marketing Environment - Case Study

Important guidance notes for candidates regarding the pre-prepared analysis

The examination is designed to assess knowledge and understanding of the Assessing the
Marketing Environment syllabus in the context of the relevant case study. The examiners will
be marking candidates' scripts on the basis of the questions set. Candidates are advised to
pay particular attention to the mark allocation on the examination paper and plan their time
accordingly.
Candidates should acquaint themselves thoroughly with the case study and be prepared to
follow closely the instructions given to them on the examination day. Candidates are advised
not to waste valuable time collecting unnecessary data. The cases are based upon real-life
situations and all the information about the chosen organisation is contained within the case
study. No useful purpose will therefore be served by contacting companies in the industry
and candidates are strictly instructed not to do so as it may cause unnecessary confusion.
As in real life, anomalies may be found in the information provided within this case study.
Please state any assumptions, where necessary, when answering questions. The Chartered
Institute of Marketing is not in a position to answer queries on case data. Candidates are
tested on their overall understanding of the case and its key issues, not on minor details.
As part of the preparation for the examination, candidates will need to carry out a detailed
analysis of the case material ahead of the examination. Candidates will find that the time
available during the examination is sufficient to answer the compulsory questions, but only if
detailed analysis has been undertaken beforehand. When compiling their analysis,
candidates should only use the information found within the case, supported by their
knowledge and understanding of the syllabus.
The copying of pre-prepared 'group' answers, including those written by
consultants/tutors, or by any third party, is strictly forbidden and will be penalised by failure.
The questions will demand analysis in the examination itself and individually composed
answers are required in order to pass.
Candidates will then need to condense their analysis into both a PESTEL and SWOT
analysis (a maximum of FOUR sides of A4, no smaller than font size 11. No other models
should be included in these analyses. The content of tables, models or diagrams must be in
a minimum of font size 8). The analyses should be numbered for ease of reference when
answering the examination questions.
Candidates must hole-punch and staple their analysis in the top left hand corner. They
should have written their CIM membership number and examination centre name on the top
of the right hand corner of each page of the analysis. It should then be attached to the
answer book on completion of their examination, using the treasury tag provided.
Although no marks are awarded for the analysis itself, candidates will be awarded marks for
how the analysis is used to answer the questions set. Candidates are advised not to repeat
or copy the analysis summary when answering the exam questions. It is important that
candidates refer the examiner to the analysis summary, where and when appropriate, when
answering the questions.
Candidates are only permitted to take their analysis into the examination room. Candidates
are not permitted to take in the downloaded case study or any other notes. The invigilator
Professional Certificate in Marketing

Page 3
will issue candidates with a new clean copy of the case study at the start of the examination
along with the question paper.
Candidates may not attach any other additional information in any format to their answer
book. Any attempt to introduce such additional material will result in the candidate's paper
being declared null and void.

The Chartered Institute of Marketing reserves the right not to mark any submission
that does not comply with these guidelines.









Important Notice

The following data has been based on real-life organisations, but details have been changed
for assessment purposes and do not necessarily reflect current management practices of the
industries or the views and opinions of The Chartered nstitute of Marketing.

Candidates are strictly instructed NOT to contact individuals or organisations mentioned in
the Case Study or any other organisations in the industry. Copies of the Case Study can be
downloaded from the CM student website www.cimlearningzone.co.uk





The Chartered Institute of Marketing 2012. All rights reserved. This assessment, in full or
in part, cannot be reproduced, stored in a retrieval system or transmitted in any form or by
any means, electronic, mechanical, photocopying, recording or otherwise, without prior
written permission of The Chartered Institute of Marketing.

Assessing the Marketing Environment Case Study June and September 2012

Page 4
ASSESSING THE MARKETING ENVIRONMENT


CASE STUDY


Preparation



In preparation for the examination you will need to analyse the Twofour case material
provided, in order to prepare both PESTEL and SWOT analyses of the company. You will be
given a clean copy of the Case Study on the day of the examination, but you must bring the
PESTEL and SWOT analyses with you into the examination. Your written analyses must not
exceed FOUR A4 sides and must be submitted with your answer book as appendices on
completion of the examination.
Professional Certificate in Marketing

Page 5
Case Study: Twofour

Background
Twofour is an award winning international media group that specialises in creating and
delivering engaging, creative media across broadcast TV, corporate communications and
digital media technology markets. Twofour has recently been awarded one of the most
prestigious titles Best Independent Production Company at the Broadcast Awards 2010.
From broadcast TV and complex web design and development to consultancy and print,
Twofour is one of the world's leading convergent agencies.
Although based in Plymouth and London, Twofour works internationally for broadcasters and
multinational organisations and has expanded worldwide with offices in Philadelphia, Pune
(India) and Brussels. Twofour is also establishing twofour54, a base in Abu Dhabi in the
Gulf, as part of its continued international expansion.
The business was set up in 1987 by two broadcast professionals and filled a niche in
corporate communications with a focus on promotional videos. The business very quickly
moved into the broadcast sector, making programmes for national and local BBC and
independent broadcast channels; and then in 2000 it established its new media/technology
division. As the world of television and digital communications has evolved, so has Twofour,
with some heavy investment in media technology and graphic designers, web designers,
.net developers, system architects and technical analysts. This investment enables its clients
to receive the best possible video viewing experience over any internet enabled device. In
2009 Twofour joined the Sunday Times Fast Track 100 league table as one of the fastest
growing technology companies.
Still a relatively small business, it employs around 300 people, and annual turnover in 2009
was around 25 million. It is in the enviable position of being debt-free and has enjoyed fast
growth, with turnover increasing by 96% since 2006. Looking to the future, this is a company
with big aspirations.
There are four divisions to the group, each with a distinct product area and skill set. Each is
a separate limited company but all are wholly owned by the Twofour Group, a private limited
company. The divisions are:
x Broadcast 58% of total turnover
x Digital 34% of total turnover
x Knowledge 7% of total turnover
x HMC Interactive 1% of total turnover.
Broadcast
Factual entertainment programmes are the focus of the output from this division, and
Twofour works with all the major terrestrial and digital channels in the UK, including BBC,
ITV, Channel Four and Sky. Much of the broadcast sector is dominated by large media
companies such as Endemol, RDF and Shine; however, following a series of mergers and
acquisitions within the sector, Twofour is now one of the biggest independents left in the UK.
In recent years the Broadcast Division represented 70% of the group's turnover and much of
the group's growth, as the demand for new programming exploded with the launch of new
BBC TV channels and the expansion of satellite and digital channels. Broadcast's share is
Assessing the Marketing Environment Case Study June and September 2012

Page 6
now closer to 50%, but this is as a result of growth in Twofour's other divisions rather than a
decline in the Broadcast Division's activity.
At the heart of the company's success is a culture of nurturing creativity and talent. The
Broadcast team has recently been strengthened with the appointment of a new creative
director from Channel 4, building the team's resources to develop factual entertainment
programming and its capacity to generate new programme commissions from broadcast
companies. Business is often won by the extremely competitive process of pitching ideas to
the commissioning editors of broadcast channels.
The broadcast industry has been in turmoil in recent years, with the recession resulting in
many commercial broadcast companies downsizing their staff and the BBC facing tough
decisions on the allocation of its licence fee resources. The impact of this on independent
producers has perhaps been lessened as a result of the BBC's commitment, embedded in
the Communications Act of 2003, to commission independent programme makers to
produce at least 25% of its programming output. In addition to this quota is a further 25%
called the Window of Creative Competition (WOCC), which is open to both in-house and
external producers.
Twofour's strong broadcast expertise has an important role to play across the group, and
Managing Director Mark Hawkins explains, 'our skills in entertaining, exciting and engaging
audiences of millions of viewers through the creative development of ideas, talent and
storytelling into programmes are skills which are critical across the group...we have to prove
how we deliver value.'
Through this culture of creativity, Twofour aims to take advantage of new areas of
opportunity in the field of broadcast, such as funded programming and product placement.
For example, Twofour produced a TV series featuring the work of Police Community Support
Officers (PCSOs), funded by the Government's Home Office and perceived as a cost-
effective way of raising awareness of the role of PCSOs. The industry is witnessing fast
growth in funded programmes, as they represent an opportunity for broadcasters to fund
programmes with reduced dependency on advertising income, and an increased opportunity
for brands to deliver their personality and brand values direct to the consumer through their
TVs. Funded programming, however, remains under the tight control of Ofcom, the
communications regulator set up under the Communications Act of 2003. Ofcom's rules say
that programmes must clearly identify their sponsors, and sponsors must not influence the
content of the programme in such a way as to impair the broadcaster's editorial
independence.
Product placement is another potential revenue stream that could help broadcasters to
support the costs of funding programming. Unlike broadcasters in the USA and in continental
Europe, UK broadcasters are currently banned from using product placement, that is,
charging advertisers fees for their products appearing or being used in programmes. As
traditional advertising income falls, product placement could become a life-line for
broadcasters as well as an effective advertising tool for brands.
Digital
The Digital Division was formed following the merger of two separate divisions, Technology
and Communications, in January 2010. It established a new approach to enabling clients to
develop consolidated strategies: bringing content, technology and strategy together to build
brands and achieve strategic goals for both public and private sector organisations. The
merger enabled Twofour to offer customers seamless cross-platform planning and delivery
of communications strategies. For example, Twofour Digital works with the Volkswagen
Group in the UK on its internal and external digital communications, and also undertakes the
delivery and execution of those plans, providing:
Professional Certificate in Marketing

Page 7
x integrated communications plans around a range of digital activities
x a digital internal communications platform
x LCD screens in car showrooms
x comprehensive event management.
Twofour describes this as a package of corporate communications, wrapped around
business TV, targeting Volkswagen's internal and external audiences.
Similar services are offered to public sector bodies, such as government departments. The
Digital Division runs with the support of a strong technology team, recognising that the
business's success in this market is dependent on their ability to bring together clear
strategy, compelling content, efficient delivery, and robust technology. The content may be
animation, video and interactive, and the technology needs to ensure that the content is
delivered securely and flexibly to customers and other stakeholders.
The significant investment in research and development in the software systems required for
such technology-based services comes with a risk of poor return on investment. Twofour has
minimised this risk through the development of a core product called MediaFreedom. This
is Twofour's own branded software product and uses web-based technology to enable
broadcasters, corporations and public sector organisations to build Web TV and IPTV
communication channels for online and for mobile devices. It is a content management
system with the extra functionality relating to a wider range of content formats, particularly
video. For example, it can provide a turnkey solution enabling a TV broadcaster to create a
catchup TV and simulcast channel online, in order to generate new revenue streams by
reaching new customers and managing the migration of audiences online. MediaFreedom
enables broadcasters to simply and quickly launch channels, and also facilitates payment,
whether single access, subscription or pay-to-view. The clients pay an annual licence fee
which provides a steady income stream for Twofour. A typical contract using
MediaFreedom might be based 80% on core modules and 20% on facilities customised for
the client. MediaFreedom is the system used by the European Parliament for its Web TV
platform, which is available to all EU citizens across four channels and in 23 languages. The
demand for this product is expanding fast, as organisations increasingly want to engage their
audiences through the use of video. It enables them to simply and quickly create a Web TV
channel.
The development of the MediaFreedom software suite has enabled Twofour to establish
new working relationships with organisations that have significant in-house resources
designers, developers, studios, producers and technicians but lack the skills to fully utilise
these resources. Twofour's software and strategic management can help its clients to
optimise the outputs from these resources. In some instances it has contracted to deliver the
services, taking over the teams under TUPE agreements (Transfer of Undertaking
[Employment Rights] Regulations, 2006), and the facilities, running them more efficiently and
effectively. This is described as 'smart-sourcing' as opposed to out-sourcing as the staff
tend to remain within the corporate premises. This is a further example of a business model
that can be replicated across sectors and markets. The partner organisations have the
benefit of retaining corporate branding whilst improving measurable outputs with the support
of a skilled and focused digital partner.
Twofour's Digital Division has grown phenomenally and has been a great success story for
the business. This success in the face of stiff competition is seen as being a result of the
fusion between great entertainment concepts and the appropriate knowledge and expertise
around technology to deliver it to the right audience, whether in the broadcast or the
corporate setting. Twofour's USP is a culture that ensures a strong focus on the audience
Assessing the Marketing Environment Case Study June and September 2012

Page 8
and the media they are consuming, and then the development of the right campaigns to
achieve results.
The synergy between the Broadcast and Digital Divisions becomes clear as one considers
that many of Twofour's clients are looking to maximise their income generation.
Mark Hawkins comments, 'How do broadcasters and production companies deliver
increased value and develop new business models which enable expensive productions (for
example, drama) to be funded across new digital channels?' and adds, 'Can pure play
production companies survive by just relying on secondary programme rights?' (that is, re-
selling programmes after a certain period of time).
In 2010, it is hoped that the BBC's governing body will give the go-ahead for the BBC to
participate in Project Canvas, a partnership between BBC, ITV, Channel 4, Five, BT (British
Telecom) and Talk Talk. The aim is to develop a single standard for Internet Protocol
Television (IPTV) in the UK, enabling consumers to access programmes via the internet
rather than through the air. It has been described as an attempt to converge broadcast with
broadband that could hold the key to the future of broadcasting in the UK. From the
consumers' viewpoint they will be watching a programme and will not even need to know
how it is being transmitted landline, satellite, airwaves or broadband. The enhanced
facilities of IPTV will mean the ability to access video-on-demand services; to watch a
football programme and have access to previous highlights; to watch an interior design
programme and be able to buy the furniture online; to book a test drive or engage with public
services all through the consumer's TV screen and their remote control (not a keyboard).
This is one key thread of the convergence of technologies, but Mark Hawkins also describes
it as a divergence, offering clients many more choices, 'There are so many new platforms
through which organisations need to be able to engage with their customers. t's such an
exciting space we sit in dealing with the private and public sectors through both broadcast
and digital services.'
This impact of convergence is forcing politicians and the industry to review the scope of the
Communications Act. For example, the BBC invests 135 million a year in www.bbc.co.uk,
and industry players are now lobbying for this element of public service to be subject to the
same 25% quota of independently produced content as the BBC's broadcast content.
Twofour Knowledge Division
Set up in the late 1990s, this division is at the forefront of transforming learning through
digital media. Twofour Knowledge Division believes that the combination of inventive content
and innovative technology has the power to raise educational standards, to recruit and train
education professionals, to link up managers cost-effectively and to extend the benefits of
education far wider than ever before.
Twofour Knowledge operates at all levels in the education system from early years through
to universities. Typically it works with government agencies, academic bodies, publishers
and technology providers. Twofour Knowledge is a framework supplier to the UK
Department of Children, Schools and Families and to the Government's Qualifications and
Curriculum Development Agency. Projects include virtual teacher recruitment, online TV
channels, e-learning and management tools for school governors and games-based
resources for classroom lessons.
The skills in the Knowledge Division are similar to those required in the Digital Division, but
the two companies remain separate because of the specialist skills required for the
education sector: the staff are generally ex-teachers. Again the key products are creating
engaging content and using effective technology platforms to enable organisations in the
educational sector to train teachers and support learners. The UK education sector is
Professional Certificate in Marketing

Page 9
respected internationally and Twofour is now building on its successful track record in the
UK, by taking the business model and supporting technology into international markets,
particularly in the world's emerging economies.
HMC Interactive
Set up by three Plymouth University graduates in 2003, HMC Interactive was originally
founded on the back of a computer game. The students won the 2nd prize in a business
competition: 10 hours of free legal time, which they used to set up a company that thrived
and became part of Twofour in 2007. Their focus is experiential marketing 'where the real
world meets the digital world'. They produce interactive screens and tables, face recognition,
motion capture, touch and feel and holographic imagery for visitor attractions, product
launches, exhibitions and key contact points such as airport lounges. The Twofour
philosophy of engaging audiences is evident as HMC Interactives aim to give museum
features a wow factor and to communicate brand values to audiences in a really exciting
way. HMC Interactive's ingenuity is evident in Twofour Broadcast's programme for BBC,
Make My Body Younger, where real time 3D projection is used to show the effects of
excessive alcohol and drug abuse on the body.
Visual Voice Pro is one of the company's recent digital developments with scope for
licensing. Produced by HMC Interactive, the software converts audio into visual imagery
and was initially developed for autistic children. It is endorsed by the musician Jools Holland,
and Twofour is already selling it internationally and developing new applications to support,
for example, in-store displays to expand the retail experience.
The Future
The four divisions of Twofour remain distinct; however, the group's real recipe for success is
in its ability to link all the parts together. Clients generally engage in the first instance with
one of Twofour's divisions but by bringing all of the group's elements together, the company
aims to offer its clients a much richer proposition.
Fast-changing technologies, compounded by the effects of the recent recession, have seen
the broadcast sector fall into turmoil; traditional advertising revenues have fallen dramatically
and most broadcast businesses have been faced with some form of downsizing and
restructuring. However, Twofour has been faring well through this period of turmoil, proof
that consumers still want to watch great content and that the sector remains willing to fund it
via advertising or alternative income streams. The convergence of technologies will
inevitably increase the range of options available as web-enabled TV, interactivity and
e-commerce combine to offer tremendous opportunities for broadcasters and advertisers
alike. Twofour anticipates that the UK's economy may take 4-5 years to recover from
recession so, like many businesses, the management team is keeping a tight control on
costs at the same time as being prepared for key investment opportunities.

Broadcast has traditionally generated over half of Twofour's business, but through 2010 it is
likely that the balance between the Broadcast Division and the other three divisions will
become closer to 50:50 as the Digital Division continues to grow fast.

Mark Hawkins says, 'There is no doubt that Digital's growth is because we are able to
demonstrate measureable value across multiple digital platforms. It is critical we focus on
business benefits and don't get carried away by the latest technologies.'
The short-term outlook for the Knowledge Division is very bright. In the UK, the education
sector is creating a vision of how the school of the future will look, and digital technologies
are inevitably going to play a greater role. A proactive approach by Twofour will lay the
foundation for growth potential in overseas markets.
Assessing the Marketing Environment Case Study June and September 2012

Page 10
Overall, the group's UK business is expected to continue growing, particularly on the back of
growth in the Digital Division. The business is embryonic in terms of its global presence, and
international expansion is likely to be carefully planned, with the possibility being considered
of a Brussels office to support European interests. In the medium to long term there are
clearly significant opportunities in emerging economies where, despite the recession,
economies continue to grow at 8%. Specific market segments in the USA are also perceived
as holding strong potential for growth. The group's strong but modest position in terms of
global expansion is seen as being a result of careful expansion and investment, often linked
with strong working relationships with clients and the winning of key contracts. Mark Hawkins
is reluctant to use the term 'cautious' and describes Twofour as 'poised for growth', 'You
could spend a lot of money establishing expensive offices and studios in several countries
but we will only do that when we have the right customer and the right partnership. We must
also keep a tight focus on returns and not get carried away with technology. Convergence
offers so many different opportunities that we must be careful about which opportunities we
invest in.'
Across business sectors there are some that are considered key in the group's expansion
plans, such as banking and business consultancy. However, Twofour expects to remain a
key supplier to public sector contracts (particularly when the BBC is defined as public
sector). The UK's public spending crisis could in fact be a growth opportunity for Twofour,
'We can achieve results more efficiently and effectively for public sector organisations
through digital media. What's important is that we can position ourselves as an effective
delivery partner in the public sector's new results-based environment.' Twofour in fact aims
for a good balance between public and private sector contracts, with sales teams focused on
both.
The group recognises that emerging markets represent considerable opportunities for
growth. The growth of digital media seems destined to accelerate in countries with 50% of
the population under 25 years of age.
Twofour also aspires to launch an institute, iMIT Institute of Media Innovation and
Technology to foster future talent by bringing together the best international graduates in
cross-disciplinary teams. A master's qualification has already been approved by the
University of Plymouth.
Competitors
Twofour faces strong competition in each of its sectors. In the Broadcast Division it is
competing against large broadcast companies, other independent production companies and
in-house production teams. In the Digital Division it is competing against web designers,
digital agencies, webcasting companies and specialist technology companies. Within the
field of digital technologies converging with broadcast, it competes with organisations such
as Red Bee Media (formerly BBC Broadcast Ltd). The key to moving forward is having a
proactive approach to building partnerships and winning business on the basis of creativity,
relationships and trust. It is this multi-disciplinary approach to business development that has
resulted in an increased emphasis being placed on the group branding of Twofour
International Media Group. The divisions of Twofour have all followed their own expansion
plans but increasingly the client is seen as engaging with Twofour as an international media
business.
Sales Operations
The Broadcast Division has a dedicated development team that monitors market trends,
industry news and socio-demographic trends, laying strong foundations for creative pitches
for programme commissioners in the big broadcast organisations. Broadcast has a
considerable track record, and many of its programmes are highly regarded by both
Professional Certificate in Marketing

Page 11
programme viewers and broadcast professionals. This track record forms a core part of
detailed programme pitches and tenders.
Twofour has a multi-faceted business development strategy which includes direct sales,
telemarketing, networking and tenders. Again, building relationships is important, and
referrals from existing clients are a measure of the success of these relationships.
The large size but relative specialisms of the UK's educational sector means that the
Knowledge Division team needs to network at relevant education fairs and events. Much of
the growth for this Division has been as a result of partnering with appropriate educational
organisations.
Across all divisions there is significant crossover, and clients will often enter into a
relationship with one division and progress to dealing with others in the group. The internal
processes could perhaps do more to enhance this cross-fertilisation of ideas and sharing of
leads.
Winning new business is certainly hard, but little emphasis is placed on producing glossy
corporate print. The strongest selling tools are often detailed client cases studies with
testimonials. One frustration for the business development teams is that some clients
demand strict confidentiality, and this means that Twofour is not always able to promote the
successes of some of its biggest and most lucrative contracts.
Summary
The business has changed dramatically over the last decade, evolving from a UK TV
production company into an international media group. The business will need to continue to
change and develop as it grows. According to Mark Hawkins, 'How we position and market
the business in these fast-changing sectors will be absolutely critical to our future success.'















Assessing the Marketing Environment Case Study June and September 2012

Page 12
APPENDIX ONE


United Kingdom Broadcasting & Cable TV Market Segmentation
1: % Share by Value, 2010


Category % Share

TV subscriptions 41.50%
TV advertising 34.10%
TV license or public funds 24.30%

Total 100.00%
!
Source and Copyright: Datamonitor October 2011. Reproduced with kind permission.
Professional Certificate in Marketing

Page 13
APPENDIX TWO!


With SeeSaw, TV faces its future outside the box

Stephen Armstrong, The Guardian
15
th
February 2010

A rush of website launches promises to accelerate the divorce between TV shows and your
TV with drastic results for the industry

Lyndsey Duncan is 21 and hasn't watched any real TV for the past four years. She's got
favourite shows Flight of the Conchords, for instance but views everything online via
iPlayer or streaming sites. She's a student at a northern university and says she doesn't
know anyone who watches TV, with the possible exception of the X Factor finals, because
"watching it online means you can avoid the annoying ads and you can watch whatever you
want whenever you want".

She is not alone. Matt Shepherd-Smith, former chief executive of the ad agency TBWA, cites
Microsoft research that suggests one in seven 18-to-24-year-olds no longer watches linear
TV. "The internet is going to overtake broadcast television by the end of 2010," he says. "It
means advertisers are going to have to be much smarter about where we place our ads,
which in turn will have revenue implications for commercial channels."

There are broader implications for the industry, too. Several launches in the coming months
starting with Seesaw this week could dictate whether, and at what pace, the habits of
Lyndsey and her friends will spread to the rest of us.

Last year Andy Duncan, then chief executive of Channel 4, outlined how he saw those
implications to the National Endowment for Science, Technology and the Arts, noting that TV
ad revenue mostly reinvested in new content had peaked in the middle of the decade,
and then shrunk even while the economy as a whole was growing. Online advertising,
meanwhile, had grown almost to parity with TV, but "the bulk of the ad revenues more than
2bn of that 3bn goes straight back to the US and very little of the entire sum finds its
way into UK content production".

Chris Anderson, the editor of Wired magazine in the US, argues that TV advertising works
on a fundamentally flawed model: "pretty much, annoy 90% of the people in the hope of
reaching 10%". "An annoyance-based advertising medium doesn't seem like a good thing
We've been charging more and more for less and less reach in television for decades. It's
like a house of cards, and we're just waiting for an alternative."

Broadcasters' fear was that the alternative would be online piracy. Certainly most of the
online content available to date has been of dubious provenance and of no financial use to
broadcasters. Last month, however, saw the start of a legal alternative, SeeSaw, which says
that it's here to save the TV industry. Born from the ashes of Project Kangaroo, the joint
venture between BBC Worldwide, ITV and Channel 4 that foundered on regulatory
disapproval, SeeSaw is a website that streams TV programmes on demand. The
transmission company Arqiva bought Kangaroo's tech and tied up deals with BBC
Worldwide, Channel 4, Five and a range of UK independent producers from Shed to
Talkback to supply 3,000+ hours of programming. So far the site is free, funded by
advertising, but it will shortly set up a payment system, in part because that's the only way it
can show some programming acquired from the US.

Assessing the Marketing Environment Case Study June and September 2012

Page 14
And SeeSaw could be followed by a wave of similar offerings this year. The US streaming
service Hulu which was launched by NBC, ABC and Fox in 2008, and is second in US
online video to YouTube has been toying with a UK launch for some time. It may still set
up this year despite troubled negotiations. Meanwhile Project Canvas the broadband-on-
TV successor to Kangaroo from the BBC, ITV, C4, BT and TalkTalk is pencilled to start
this autumn.

Internet-enabled TVs from the likes of Sony and Samsung will arrive in shops in the spring.
Sony has deals with Amazon, Dailymotion, YouTube and AOL, as well as Sony Pictures and
BMG Music, to provide free online content direct to the new S-series Bravia television.
Microsoft's Xbox has started offering TV content and video is also coming to mobile phones.
Even BT is in on the act with an online download service called BT Vision, which has more
than 7,000 hours of archive programming.

SeeSaw's platform controller, John Keeling, says: "I've been waiting for video on demand to
take off since 2007, because I'd spent my career at MTV, Sky, Disney and UKTV essentially
aggregating catalogue programming and then broadcasting it on linear TV iPlayer and
4OD have blazed the trail and it feels like 2010 is the year it's finally going to happen."

But success isn't assured, as the fate of Joost proves. Created by Skype founders Niklas
Zennstrom and Janus Friis, Joost launched in 2007 using peer-to-peer technology to stream
content from Endemol, MTV and Paramount. In June 2009, it switched to providing
distribution software. CEO Mike Volpi announced that "in these tough economic times, it's
been increasingly challenging to operate as an independent, ad-supported online video
platform."

Joost's problem, argues Michael Comish, CEO of BlinkBox, a rival streaming site, was in its
design. "It was very complicated to use and using peer-to-peer tech slowed everything
down," he says. "In fact, online video sites can offer advertisers the same opportunities as
they get on commercial TV at half the cost per thousand. It's going to be a tough and
competitive market for a while!but [VoD] is the future."

Neither SeeSaw nor BlinkBox are planning to create content. These are archive and catch-
up TV services, which do not directly address Andy Duncan's concerns about money leaving
UK production.

Jonathan Webdale, editor of industry site C21media.net and Future Media magazine, argues
that the chance of revenue from archives does help broadcasters, but not enough to sustain
old business models. "TV viewing is actually on the increase in spite of all the online
offerings, but the money isn't following," he says. "TV salaries, TV budgets the whole TV
business is going to have to change."

"The point is, the entire media industry from TV to newspapers is facing the same problem,"
argues Rhys McLachlan, head of futures at media-buying giant MediaCom. "We're seeing a
market-wide correction of the perceived value of entertainment and information .!We're
entering a two-tier TV market.

"There will be those huge, expensive drama[s] like HBO's The Pacific everyone's looking
forward to that, and advertisers will pay a premium to be around that and then you'll get
the cheap stuff that fills the rest of the space. It'll be viewed online, on mobiles, everywhere.
The TV set is just going to be the bit at the front that creates the demand but doesn't
necessarily pay for itself."

2010, in other words, marks the point where we all start to watch like Lyndsey Duncan, off in
our rooms with our net books and laptops, and we may remember the X Factor final as the
last symbol of a shared-experience golden era. (Lyndsey Duncan is not a real name).

Professional Certificate in Marketing

Page 15
APPENDIX THREE


THE INDEPENDENT PRODUCTION SECTOR

Overview
The UK independent production sector is the largest in Europe with a turnover more than 2
billion and creating around half of all new UK television programmes each year. It employs
over 20,000 people, more than all of the Public Service Broadcasters (PSBs) combined
1
and
produces such hit shows as Who Wants to be a Millionaire, X Factor and Big Brother. It also
creates key public service programmes such as Question Time, Who Do You Think You Are
and Jamie's School Dinners.
The sector is growing rapidly. 15 years ago, turnover was just 475m, less than a quarter of
today's level. The sector has grown from being almost exclusively populated by small-scale
"lifestyle companies working for fees, to a wide cross-section of businesses, ranging from
SMEs specialising in specific genres to larger groups capable of competing globally and
generating annual turnovers in excess of 100m.
Role of the independent sector
The independent sector provides plurality in the programme supply market, broadens the
diversity of programmes on offer to the public and the competition it provides ensures that in-
house production departments at broadcasters deliver value for money. In addition, the
intense competition created with the 600+ companies in the independent sector competing
with each other, broadcasters' in-house production departments and overseas companies,
ensures only the best shows reach our television screens.
Using the IP rights granted to them under the Codes of Practice/Terms of Trade to raise
investment, 'indies' now provide around 126m
2
per year for the development and
production of UK content. This is more than Channel 5's total investment in new UK
programmes, and more than the annual profits returned to the BBC by BBC Worldwide.
Independents' success
Ownership of their IP enables indies to help drive exports of UK TV programmes. TV exports
are up 39% since Terms of Trade were introduced. In addition, indies have cracked the US
market, notoriously one of the world's most difficult, with exports to the US up 40% year-on-
year in 2008. Indies are also responsible for 80% of format sales. Indies also won 14 out of
21 Baftas in 2008 with hits such as Gavin & Stacey and Mark of Cain.
About Pact
Pact is the UK trade association that represents the commercial interests of independent
feature film, television, digital, children's and animation and interactive media companies.
Pact is the largest representative group of screen-based content producers in the UK and
the largest trade association in the film, television and interactive media sectors.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
"
!#$%&'($)*+!,)*-.-!/0012!345&&-)+6!!!
/
!789+!%'&59(!-.:;)(!8*<!=5*8*958&!9)*-.-!/00>2!8!:)%':+!?(!@&5;):!8*<!@A&?8.$!B--'958+)-!=':!789+!
Assessing the Marketing Environment Case Study June and September 2012

Page 16
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!

Moor Hall
Cookham
Maidenhead
Berkshire, SL6 9QH, UK
Telephone: 01628 427120
Facsimile: 01628 427399
Website: www.cim.co.uk