Five spies hidden value in children's TV market

On closer analysis, however, it appears the RTL-owned broadcaster might be onto something in wanting to extend its established - and successful -Milkshake programming strand into a channel of its own.

Levels of children's programming are already in the spotlight, with Ofcom criticising the free-to-air commercial terrestrial public-service broadcasters (PSBs) for retrenching their output, leaving it largely to the BBC. ITV has transferred almost all its weekday children's shows to digital-only channel CITV, with Freeview homes having the choice of only this, CBeebies and CBBC. Channel 4's output is negligible.

The reason for this shift has been well-publicised - the ban on the advertising of foods that are high in fat, salt and sugar during child-oriented airtime has reduced its profitability. Therefore such programmes have been relegated by the PSBs to the fringes of weekend mornings and onto cheaper digital platforms, leaving the market dominated, and to some extent super-served, by pay-TV operators such as Nickelodeon, Turner and Disney.

That said, if Five makes its service free-to-air, as expected, it may well be in demand from toy manufacturers, FMCG firms and retailers - as long as its price point is right, according to Adrian English, media director at Carat, whose clients include Mattel.

'The sheer number of channels in the kids TV market means that there is a home for every type of audience that advertisers are interested in attracting,' says English. 'Channels like Nickelodeon have been doing exceptionally well this year and are growing. If Five were to launch a channel into the market, that would be very good news for advertisers if the pricing were right. Although children's channels can be called niche, they offer the very high volume audiences advertisers want.'

Disney, which does not carry any advertising, is the biggest channel in the UK for five- to 14-year-olds. Michael Cairns, general manager, Disney Channels UK and Ireland, says he would welcome more competition in the market, but does not think Five's plans present too much of a challenge. 'We know we will continue to do well because we know our audience and our content is of such a high standard.'

Cairns adds that Disney is also investing more in local productions; plans are afoot to develop new shows based in the UK to consolidate its position. 'It's local content relevant to our audience, but we can take it globally if it's strong,' he points out.

However, with evidence that pay-TV channels might fall victim to consumer belt-tightening, and the choice and technology offered by Freeview and Freesat improving, free-to-air is an increasingly attractive option.

If Five is right - and it has certainly established its credentials with Milk-shake - its bold move would add to the growing optimism at the broadcaster that has been sparked by Dawn Airey's recent return as chief executive.