The sun may always be shining in Teletubby land, but kids' TV has experienced some tough times recently - and not even Bob the Builder could guarantee to fix it.
Hit by the triple whammy of the ban on ads for high fat, salt or sugar (HFSS) foods, increased competition and audience fragmentation, broadcasters have been finding it harder to attract the kind of audiences that make kids' TV economically viable. As a result, UK investment in original programming has declined sharply over the past few years, with public service broadcasters radically cutting back on new UK commissions (see box).
So how healthy is kids' TV as 2008 draws to a close? James Thickett, director of market research at Ofcom and the author of October 2007's discussion paper The Future of Children's Television Programming, says that after a decline in programming investment over several years, the situation has now stabilised.
"A year ago, we painted a picture of serious concerns for kids' TV in this country, but now there are a few glimmers of hope on the horizon," he says. "The BBC and S4C have both increased their investment in original programming, while Five is stable. The decline in investment could be bottoming out."
However, concerns remain. Thickett adds: "We still believe there is a serious deficit of investment in kids' programming going forward. Our latest PSB review suggests this deficit is about £35m."
To combat the shortfall, Ofcom has proposed several models, which have now gone out for consultation. These include Channel 4 and Five taking enhanced roles in kids' programming, and a potential new provider entering the arena.
So far, the terrestrial broadcasters have been hit hardest by the HFSS ad ban, because the new legislation for dedicated kids' channels does not fully kick in until January 2009. Kelly Williams, sales director at Five, says that while the channel has maintained its investment in original programming, it is struggling to make money from its kids' TV strand Milkshake.
"I estimate we have lost £1m a year as a result of the ban," says Williams. "The bottom line is that it hits you hard. Milkshake is very valuable to advertisers from September to December, but outside these times, trading is much harder."
To plug the gap, Five is trying to strengthen the Milkshake brand in different areas. Activities include a nationwide Milkshake theatre tour, and Five is hoping to build a partnership with a major retailer to create a Milkshake-branded area in-store. It is also mulling the possibility of developing Milkshake as a digital channel.
ITV refused to comment specifically on whether its programming investment has declined. However, it says it will continue to invest in original UK content, with a new pre-school commission, Bookaboo, among plans for next year.
Gary Digby, sales director of ITV Commercial, says the broadcaster's digital CITV channel has expanded through DVDs, music and computer games. CITV also offers multi-platform opportunities for advertisers.
For example, British Gas recently signed up to develop a new programme on CITV called Green Up Your Life, which includes online content across ITV.com and CITV.co.uk.
However, Digby adds: "We remain concerned that the restrictions on HFSS advertising will continue to put pressure on commercial PSBs in what Ofcom acknowledges is a period of both cyclical and structural commercial pressure."
According to GMTV's acting sales and marketing director Simon Poole, GMTV Kids is "in a strong position, both in terms of ratings and revenue". However, he warns the downturn means many advertisers will be looking at their budgets.
GMTV has been targeting toy and game brands with "low or zero" TV spend, building targeted campaigns on their behalf. Poole claims the broadcaster is continuing to invest in content, in particular through the launch of its pre-school brand The Fluffy Club, which will have a major focus on original, UK-produced shows as well as its own website.
Next year could prove to be a tougher year for the multichannel broadcasters, who will be hit by the full ramifications of the HFSS ban in January. Bobi Carley, director of kids at Viacom Brand Solutions, says: "The ban has led to a gradual decline in revenue from HFSS foods over several years, but obviously we will feel the impact of the final revenue loss in 2009."
Despite this, total advertising revenue increased 31% in 2007, with a rise of 257% in online ad revenue. Carley says Nickelodeon has increased its programming investment, with two new original productions on air this year, and six new pre-school co-productions slated for 2009.
Experiential activity has increased, with new initiatives such as Nick-branded interactive flooring in shopping centres and huge live events such as the Kids' Choice Awards giving advertisers further opportunities to engage with kids.
In the past year, Nickelodeon has also increased its partnership activities with retailers. Online pre-roll advertising has been a particularly successful revenue-driver from retail clients.
Simon Cox, vice-president at Turner Media Innovations, says the broadcaster is recording "record revenues" despite the pressures. "We have done a lot of work on persuading new advertisers to come to us and promoting the fact that kids are a valuable audience," he explains. "For example, more than 70% of all video games are sold to kids."
Cox believes advertisers can build brand equity in red-button gaming: "Kids appreciate that brands are making an effort, reaching out to them and offering them something they want to do." Last year, Turner opened a UK production studio for Cartoon Network and its first fruits will get the green light immediately.
Disney-owned Jetix is also in good health. Michael Ghosh, pan-European sales director, says that while the HFSS ad ban has undoubtedly had an impact on revenues, the channel has experienced "substantial" year-on-year ad revenue growth. Its audience share has also grown: kids' impacts on the channels are up 40%.
Jetix has increased its programming spend, with three shows in production. It plans to relaunch its website to include more games and has commissioned short-form comedy content for digital platforms. In addition, it is offering advertisers more integrated TV and digital solutions.
Despite the pressures, media buyers are bullish about the opportunities for advertisers on kids' TV. Adrian English, media director at Carat, who manages the Mattel account, says: "Commercial viewing figures for kids' channels are fantastic. All the year-to-date impact figures from Barb were well up at the end of September.
"When you consider the strength of the CBeebies and CBBC brands, as well as the Disney Channel, the performance from the commercial channels is remarkable."
Chris Locke, trading director of VivaKi UK, agrees the HFSS ban hasn't been quite the disaster that was predicted: "There are real opportunities for advertisers - particularly in areas such as gaming, where they need to let kids find ways to experience the product. HFSS was supposed to be the death of the kids' TV channel, but in fact kids' television seems to be in rude health."