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Despite its limited offerings, the UK's Freeview digital terrestrial service could pose a threat to BSkyB's subscriber targets. Adding a pay element could benefit both parties.
Britain's digital terrestrial service, Freeview, will get a boost when final sales figures are released for 2003, probably sometime in March 2004. It appears from early returns from retailers that Freeview had a fantastic Christmas, with fully 325,000 digital set-top boxes sold in December.
Freeview is the 25-channel television service that uses digital terrestrial signals in the UK. It charges no subscription rates, but nor does it provide any premium pay-TV product. The BBC dominates the service, with eight channels, and ITV offers its mainstream ITV1 channel and its sister service ITV2. A raft of news and shopping dominates the rest of the line-up.
It is hardly a compelling service if you are used to an all-singing, all-dancing digital offering such as BSkyB's Sky Digital (378 channels, with movies, sport, premium US TV series, UK Gold, etc.). But it looks reasonable for those digital refusniks who have said no to expensive pay television ever since Sky launched its original multi-channel (analogue) service in 1989.
With an estimated 200,000 boxes sold in November, an estimated 300,000 integrated digital TV sets sold in the course of 2003, and an installed base of Digital Terrestrial homes of 2.175m at the end of October, it looks like Freeview is now in more than 3m homes in the UK. That is nearly triple the number of digital terrestrial homes signed up by the doomed ITV Digital, the pay digital terrestrial service that was shut in 2002, which Freeview replaced.
Moreover, many of the 3m or so homes that now enjoy DTT have paid as much as £99 (€143) for their boxes. In High Street shops in Britain today, you can get a box for as little as £49 (€71). Market monitoring firms now predict the availability by 2006 of a £25 (€36) box. This is going mass market, big time.
So vindication for the BBC, which controversially backed Freeview when the DTT licences were re-awarded following ITV Digital's demise. And a bit of a worry for BSkyB, another backer of Freeview, which was hoping the free DTT platform would be a modest, rather than a runaway, success. Sky's main business is pay TV, and its involvement in Freeview was seen originally as a clever way of hedging bets. That assumed, however, that Freeview limped along rather than soared.
The challenge to BSkyB is plain. Sky Digital enjoys average revenues per home of about £370 (€536m) a year (with more than half of all subscribers taking the top package of sport and movies, in addition to the Big Basic tier of general and thematic channels). It now has more than seven million subscribers in the UK, and its recently departed chief executive, Tony Ball, had set an eight million target for December 2005. Rupert Murdoch, whose News Corporation owns more than a third of BSkyB, has privately targeted 10m.
Of the 10m homes in the UK that take only a terrestrial analogue service, how many can be convinced to sign up to the expensive Sky proposition? To get to Murdoch's 10m, a third of the remaining analogue homes will have to sign up to Sky Digital. If the momentum of DTT's strong start is maintained, then the eight million Freeview base that my firm forecasts for 2010 is clearly achievable. That would leave Murdoch well short of his own target.
There is another worry on the horizon for BSkyB. Freeview currently offers what any multi-channel subscriber on cable and satellite would view as an inferior service. Where is Sky One? Where is Nickelodeon? Where is E4? But it does offer the BBC channels (1,2,3,4, News 24, Parliament, CBBC and CBeebies), ITV1 and ITV2, on which a number of popular programmes are broadcast.
If a cheap personal video recorder (PVR) were to be introduced for Freeview homes (there is already a relatively expensive one on the market), many more viewers could time shift the programmes, personalise schedules, and thereby enhance the attractiveness of the line-up. A marriage of PVRs and Freeview might be very attractive to the digital refusniks.
The good numbers at Freeview, and the prospect of a PVR-inspired enhancement of the service, may be focusing minds at Sky. Is it not time, some wonder, that BSkyB start to argue for the introduction of a pay element to the Freeview platform?
Why not encourage manufacturers to sell boxes with conditional access systems built in? That way, in addition to the free channels, Freeview customers could choose to receive a small number of pay channels too – E4, UK Gold and Sky One for starters.
This would have several benefits for BSkyB. It would allow the company to generate revenues from low-spending homes on a different platform from its high-revenue satellite service. This protects the business model at Sky Digital, and enhances revenues at the margins.
It would also give it exposure to a platform that might serve as a window on pay TV. Like what you see? Why not upgrade to the bells-and-whistles satellite version?
The last thing BSkyB wants is to write off as many as 10m homes that will never get pay TV. Freeview may yet be a threat of Trojan Horse proportions.
Britain's digital terrestrial service, Freeview, will get a boost when final sales figures are released for 2003, probably sometime in March 2004. It appears from early returns from retailers that Freeview had a fantastic Christmas, with fully 325,000 digital set-top boxes sold in December.
Freeview is the 25-channel television service that uses digital terrestrial signals in the UK. It charges no subscription rates, but nor does it provide any premium pay-TV product. The BBC dominates the service, with eight channels, and ITV offers its mainstream ITV1 channel and its sister service ITV2. A raft of news and shopping dominates the rest of the line-up.
It is hardly a compelling service if you are used to an all-singing, all-dancing digital offering such as BSkyB's Sky Digital (378 channels, with movies, sport, premium US TV series, UK Gold, etc.). But it looks reasonable for those digital refusniks who have said no to expensive pay television ever since Sky launched its original multi-channel (analogue) service in 1989.
With an estimated 200,000 boxes sold in November, an estimated 300,000 integrated digital TV sets sold in the course of 2003, and an installed base of Digital Terrestrial homes of 2.175m at the end of October, it looks like Freeview is now in more than 3m homes in the UK. That is nearly triple the number of digital terrestrial homes signed up by the doomed ITV Digital, the pay digital terrestrial service that was shut in 2002, which Freeview replaced.
Moreover, many of the 3m or so homes that now enjoy DTT have paid as much as £99 (€143) for their boxes. In High Street shops in Britain today, you can get a box for as little as £49 (€71). Market monitoring firms now predict the availability by 2006 of a £25 (€36) box. This is going mass market, big time.
So vindication for the BBC, which controversially backed Freeview when the DTT licences were re-awarded following ITV Digital's demise. And a bit of a worry for BSkyB, another backer of Freeview, which was hoping the free DTT platform would be a modest, rather than a runaway, success. Sky's main business is pay TV, and its involvement in Freeview was seen originally as a clever way of hedging bets. That assumed, however, that Freeview limped along rather than soared.
The challenge to BSkyB is plain. Sky Digital enjoys average revenues per home of about £370 (€536m) a year (with more than half of all subscribers taking the top package of sport and movies, in addition to the Big Basic tier of general and thematic channels). It now has more than seven million subscribers in the UK, and its recently departed chief executive, Tony Ball, had set an eight million target for December 2005. Rupert Murdoch, whose News Corporation owns more than a third of BSkyB, has privately targeted 10m.
Of the 10m homes in the UK that take only a terrestrial analogue service, how many can be convinced to sign up to the expensive Sky proposition? To get to Murdoch's 10m, a third of the remaining analogue homes will have to sign up to Sky Digital. If the momentum of DTT's strong start is maintained, then the eight million Freeview base that my firm forecasts for 2010 is clearly achievable. That would leave Murdoch well short of his own target.
There is another worry on the horizon for BSkyB. Freeview currently offers what any multi-channel subscriber on cable and satellite would view as an inferior service. Where is Sky One? Where is Nickelodeon? Where is E4? But it does offer the BBC channels (1,2,3,4, News 24, Parliament, CBBC and CBeebies), ITV1 and ITV2, on which a number of popular programmes are broadcast.
If a cheap personal video recorder (PVR) were to be introduced for Freeview homes (there is already a relatively expensive one on the market), many more viewers could time shift the programmes, personalise schedules, and thereby enhance the attractiveness of the line-up. A marriage of PVRs and Freeview might be very attractive to the digital refusniks.
The good numbers at Freeview, and the prospect of a PVR-inspired enhancement of the service, may be focusing minds at Sky. Is it not time, some wonder, that BSkyB start to argue for the introduction of a pay element to the Freeview platform?
Why not encourage manufacturers to sell boxes with conditional access systems built in? That way, in addition to the free channels, Freeview customers could choose to receive a small number of pay channels too – E4, UK Gold and Sky One for starters.
This would have several benefits for BSkyB. It would allow the company to generate revenues from low-spending homes on a different platform from its high-revenue satellite service. This protects the business model at Sky Digital, and enhances revenues at the margins.
It would also give it exposure to a platform that might serve as a window on pay TV. Like what you see? Why not upgrade to the bells-and-whistles satellite version?
The last thing BSkyB wants is to write off as many as 10m homes that will never get pay TV. Freeview may yet be a threat of Trojan Horse proportions.