Kanal 2 is 25 and changing with success
The 2018/2019 season was quite eventful for Estonian commercial net Kanal 2. The channel used its 25th anniversary to fully revamp its strategy with a focus on content produced in-house with more talk and social interest programs, while canceling several popular shows. Even though the transition has been hard, Kanal 2 managed to keep its leading position on the commercial market during the spring season and continues to build on that success, as Postimees Group CEO Andres Kull tells Georgi R. Chakarov.
Andres Kull, Postimees Group CEO
Mr. Kull, this season Kanal 2 celebrated 25 years on air as Estonia’s first commercial channel. What were some of the highlights and accomplishments for your company during the past year?
As I started as CEO from January 1, maybe I’m not the best person to ask. During the last year there have been lot of changes in our staff, new people were coming in and I think at the moment we are more pragmatic in our approach, carefully assessing any changes we plan, acknowledging that it’s not a growing market and act correspondingly…
The flagship channel saw a major revamp during the spring season. What were the key changes that you introduced in the schedule and are you satisfied with the results?
Actually, those changes were already started before I took the position as CEO. So suddenly I happened to be in the middle of that process and everything was quite new to me. We dramatically cut the part of third-party production and replaced it with our own. We heard a lot of screams from the market: “It’s cheap!” as if the price tag would always grant the quality. Nobody had trust in us, a lot of people expected us to die. It didn’t happen and during the first 4 months we’ve been the market leader among the commercial channels. So, rating-wise we are quite satisfied, but sales could be always better.
Other market players have qualified your move as a risky one. Do you agree? Are you planning to continue implementing this strategy for the next season and what is included in your plans?
Every change you make can be risky. Then again, doing nothing isn’t necessarily the safest way either. People in this business know very well that there are no guarantees for success when you make changes in your program. It’s more or less a question of stomach feeling and testing. Trusting your own taste is normally the last thing to do. The only thing that is certain is that in a small country like Estonia local content rules and you must build your primetime mainly on that. It’s more expensive but unavoidable.
What would you say are the main trends in Estonia in terms of viewing preferences?
It’s harder and harder to attract younger viewers because their watching
habits are very fragmented and inconsistent. They don’t have Estonian language preference probably due to their English language skills, so Netflix and similar VOD platforms are very popular. Older people, on other hand, are very loyal to linear TV, but even their habits are changing. More and more of them are using catch-up services. It has its positive and negative side. Actually, it leads to an even more extended TV consumption but takes away some ad revenues as you can easily skip the commercials. Generally, I don’t think that we have any specific trends in Estonia which don’t apply to the other markets.
Estonia is quite small but quite competitive market. With a total ad spend of about 26 million euros, how hard is it to run a sustainable business?
If somebody claims it to be easy, just don’t believe them. Even if the main competition for ad money takes place between the two major commercial channels, we shouldn’t forget about the national broadcaster and its two channels. Their content spending is far bigger than ours which makes it hard for us to compete for the viewers. In this situation it is quite logical that CPM goes up, but CPS goes down. In other words, we give away more media for less money. Spending on TV ads is quite constant and rather declining than going up. We can’t say that Facebook and Google’s increasing share only impacts the local web revenues - all media are under that fire.
Eesti Meedia is the biggest media company in the Baltics. What are the synergies that you have running between the various operations? Are you planning to expand your TV presence beyond Estonia?
Our business name has changed from Eesti Meedia to AS Postimees Grupp now. All the classified business was separated in Q1 and sold in Q2. The Postimees brand became dominant in our group and as it is much better known on the market, we decided to go back to using that brand. We have some synergies by producing news and investigative journalism in almost all our media operations. Nowadays, there is a strong convergence between different media, so we don’t invent the bicycle here. As regards expanding the TV business, we are careful because we don’t see it sustainable in the long run in the current form. Some kind of transformation or convergence will happen in the already near future.
How important was it for you to drop the free broadcasters and start charging pay TV operators for your channels?
I think it was the same process which all the news media in web are currently in the middle of. Losing ad revenues leads one to selling the content instead of giving it for free. In TV business it was even worse – you just didn’t give it for free, but even paid substantial money for being on the air. Concurrently, the share of cable operators on the market was rapidly increasing. Of course, that move still forced lot of people to join a cable operator and in the new situation they discovered lot of additional available localized channels to watch, which resulted in even more fragmented viewership. But in the end, we got paid for our content which took away some pressure from the diminishing ad revenues.
You recently acquired two smaller cable channels. Are you planning to continue to expand your channel portfolio?
First of all, we need to see how it will go with these two. Then we can make further plans.
You are very active in making (integrating) shows with YouTube/Instagram stars into your program. Does this strategy help you attract the younger viewers?
Yes, it does, but everything connected to what is viral for the young is like mayflies, they come in numbers but die very soon.
You also operate the VOD platform VEEBITV which offers original and acquired content as well as sports events, movies and news. Can you reveal some figures on the usage of the service? Which are the most popular sections and titles?
We have two main content sources – one comes from the TV channels and the other from our postimees.ee news media site. The most popular sections are TV series (local and foreign) and news media clips about what happens right now. The usage isn’t very massive yet but increases slowly and constantly. Considering the amount of Estonian content we offer, it’s actually Estonia’s Number 2 VOD platform after YouTube.
Are you planning to produce digital-only content?
We already do produce digital-only content. There are numerous news clips as well as live broadcasts have produced only for digital platforms and they’ve never seen on linear TV.
How big is the influence of the major international VOD platforms in Estonia? Is a small market like Estonia of interest to them?
As I mentioned earlier, young people are quite heavy users of Netflix and similar platforms. The major interest is in TV series, which they watch many episodes of in one go. Netflix is very visibly present on our market and has a remarkable amount of user accounts in Estonia.
As I started as CEO from January 1, maybe I’m not the best person to ask. During the last year there have been lot of changes in our staff, new people were coming in and I think at the moment we are more pragmatic in our approach, carefully assessing any changes we plan, acknowledging that it’s not a growing market and act correspondingly…
The flagship channel saw a major revamp during the spring season. What were the key changes that you introduced in the schedule and are you satisfied with the results?
Actually, those changes were already started before I took the position as CEO. So suddenly I happened to be in the middle of that process and everything was quite new to me. We dramatically cut the part of third-party production and replaced it with our own. We heard a lot of screams from the market: “It’s cheap!” as if the price tag would always grant the quality. Nobody had trust in us, a lot of people expected us to die. It didn’t happen and during the first 4 months we’ve been the market leader among the commercial channels. So, rating-wise we are quite satisfied, but sales could be always better.
Other market players have qualified your move as a risky one. Do you agree? Are you planning to continue implementing this strategy for the next season and what is included in your plans?
Every change you make can be risky. Then again, doing nothing isn’t necessarily the safest way either. People in this business know very well that there are no guarantees for success when you make changes in your program. It’s more or less a question of stomach feeling and testing. Trusting your own taste is normally the last thing to do. The only thing that is certain is that in a small country like Estonia local content rules and you must build your primetime mainly on that. It’s more expensive but unavoidable.
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What would you say are the main trends in Estonia in terms of viewing preferences?
It’s harder and harder to attract younger viewers because their watching
habits are very fragmented and inconsistent. They don’t have Estonian language preference probably due to their English language skills, so Netflix and similar VOD platforms are very popular. Older people, on other hand, are very loyal to linear TV, but even their habits are changing. More and more of them are using catch-up services. It has its positive and negative side. Actually, it leads to an even more extended TV consumption but takes away some ad revenues as you can easily skip the commercials. Generally, I don’t think that we have any specific trends in Estonia which don’t apply to the other markets.
Estonia is quite small but quite competitive market. With a total ad spend of about 26 million euros, how hard is it to run a sustainable business?
If somebody claims it to be easy, just don’t believe them. Even if the main competition for ad money takes place between the two major commercial channels, we shouldn’t forget about the national broadcaster and its two channels. Their content spending is far bigger than ours which makes it hard for us to compete for the viewers. In this situation it is quite logical that CPM goes up, but CPS goes down. In other words, we give away more media for less money. Spending on TV ads is quite constant and rather declining than going up. We can’t say that Facebook and Google’s increasing share only impacts the local web revenues - all media are under that fire.
Eesti Meedia is the biggest media company in the Baltics. What are the synergies that you have running between the various operations? Are you planning to expand your TV presence beyond Estonia?
Our business name has changed from Eesti Meedia to AS Postimees Grupp now. All the classified business was separated in Q1 and sold in Q2. The Postimees brand became dominant in our group and as it is much better known on the market, we decided to go back to using that brand. We have some synergies by producing news and investigative journalism in almost all our media operations. Nowadays, there is a strong convergence between different media, so we don’t invent the bicycle here. As regards expanding the TV business, we are careful because we don’t see it sustainable in the long run in the current form. Some kind of transformation or convergence will happen in the already near future.
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How important was it for you to drop the free broadcasters and start charging pay TV operators for your channels?
I think it was the same process which all the news media in web are currently in the middle of. Losing ad revenues leads one to selling the content instead of giving it for free. In TV business it was even worse – you just didn’t give it for free, but even paid substantial money for being on the air. Concurrently, the share of cable operators on the market was rapidly increasing. Of course, that move still forced lot of people to join a cable operator and in the new situation they discovered lot of additional available localized channels to watch, which resulted in even more fragmented viewership. But in the end, we got paid for our content which took away some pressure from the diminishing ad revenues.
You recently acquired two smaller cable channels. Are you planning to continue to expand your channel portfolio?
First of all, we need to see how it will go with these two. Then we can make further plans.
You are very active in making (integrating) shows with YouTube/Instagram stars into your program. Does this strategy help you attract the younger viewers?
Yes, it does, but everything connected to what is viral for the young is like mayflies, they come in numbers but die very soon.
You also operate the VOD platform VEEBITV which offers original and acquired content as well as sports events, movies and news. Can you reveal some figures on the usage of the service? Which are the most popular sections and titles?
We have two main content sources – one comes from the TV channels and the other from our postimees.ee news media site. The most popular sections are TV series (local and foreign) and news media clips about what happens right now. The usage isn’t very massive yet but increases slowly and constantly. Considering the amount of Estonian content we offer, it’s actually Estonia’s Number 2 VOD platform after YouTube.
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Are you planning to produce digital-only content?
We already do produce digital-only content. There are numerous news clips as well as live broadcasts have produced only for digital platforms and they’ve never seen on linear TV.
How big is the influence of the major international VOD platforms in Estonia? Is a small market like Estonia of interest to them?
As I mentioned earlier, young people are quite heavy users of Netflix and similar platforms. The major interest is in TV series, which they watch many episodes of in one go. Netflix is very visibly present on our market and has a remarkable amount of user accounts in Estonia.
