Digital acorns 

1 January 2003

The death of ITV Digital was without a doubt a major setback to the quest to turn off analogue transmissions in the UK.

But in October 2002, its replacement appeared on air. The launch of Freeview, as digital terrestrial television (or DTT) is now dubbed, was much more low-key than the beginnings of ONdigital all those years ago.

ITV Digital

The lack of fanfare wasn’t particularly surprising. The channel line-up is rather low-key, with the biggest commercial name being Sky News, the UK’s first dedicated rolling news channel.

Whilst the critics may bemoan the lack of Sky One or E4, their omission isn’t particularly surprising – most digital channels are paid for by a subscription fee. Despite the large number of commercial breaks, a few years ago it was estimated that just 20% of Sky One’s revenue came from advertising. The rest came purely from subscription fees.

Given the reliance of subscription fees to make ends meet many would wonder why a company would even go near free-to-air television. The economics look even less appealing when you consider the number of people who still have ITV Digital set top boxes. By the end of the ITV Digital era, less than a million people were still subscribing. On its demise, many will have gone straight to the arms of the cable companies and Sky.

On the other hand, the rise of the digital TV adapter, first launched by Pace, has brought a cheap entry-level way into digital television. And with more companies entering the set top box market, there is a good chance of the price falling, helping to attract more people to make the switch. Whilst in the short term, the number of viewers will be low, the key is to look at the long term.

The government has decided that digital television is the future, and the aim has been to turn off analogue by around 2010. Whilst many viewers will opt for satellite or cable, there is still a huge proportion of the population (estimated to be at least 30%) who just won’t pay a monthly subscription for their television. That’s still a very large market.

Add to that homes with multiple television sets. Whilst you could pay to have a second decoder in your home, many people just won’t, which means that whilst the TV in the front room could have satellite, the TVs in the bedrooms or kitchens will be using digital terrestrial for their television. Then there’s the portable market, caravans, holiday homes and more.

Whilst the short term is likely to have some heavy losses for the channels broadcasting on the platform, the future could be paved with gold for those prepared to get in there first.

A number of companies do appear to be looking at the long term, and some have even created new channels especially to tie in with the Freeview launch.

EMAP, MTV and UKTV have all launched brand new stations, and 2003 two more are scheduled to join the platform, one from Flextech and a second from UK TV.

EMAP’s confidence in Freeview’s success appears to be firm as the company brought three of its radio stations to the platform to join Oneword and Jazz FM as the five commercial radio stations available.

BSkyB too has joined the Freeview party, bringing Sky Travel, Sky News and Sky Sports News.

It’s not the first time Sky have taken an interest in digital terrestrial. They were originally part of British Digital Broadcasting (later to become ONdigital) but were forced out by the ITC over competition fears.

Some will no doubt suggest a sinister motive for Sky’s move, with accusations of Sky filling the platform with poor quality programming to make the proposition look less appealing. Allegations of the channels being there to do little more than promote the satellite stream also crop up (but given the channels are identical to the versions broadcast on satellite, and contain the same trailers and promotions, this is inevitable anyway).

Whilst Sky News is a well-known and highly regarded channel, it is true that Sky Sports News and Sky Travel aren’t exactly the most exciting channels around. Indeed it could easily be that they are little more than placeholders, which could be removed for something different in the future, when the economics of the platform make launching a new free-to-air entertainment channel more appealing.

It has already been rumoured that BSkyB is planning such a service, dubbed Channel 6. The rumours were fuelled by the company stealing former Channel 5 head Dawn Airey out from under the noses of ITV. However the company hasn’t made any formal comment on issue, so what its intentions are remain to be seen.

Even without a new entertainment channel, the inclusion of three Sky branded channels on DTT are an excellent way for the company to get its brand into non-pay TV homes. Despite company rhetoric about wanting to see every home with a satellite dish, they obviously know the truth is that not every home will move to pay TV. When you have a free to air channel like Sky News, why not put it on a free-to-air platform and get your brand out in other homes?

Sky’s intentions towards DTT also look honourable by their involvement within the Freeview company itself, bringing their knowledge and (highly successful) marketing experience to the platform.

To some the channel line-up may not currently look that appealing, although some aspects are carefully calculated to those less likely to have pay-TV (UK History, Oneword and Jazz FM are all likely to help reach this market). In the short term, the economics are going to make like for the new channels pretty tough, but pretty large players in the TV world back the channels themselves. The aim is obviously that the losses in the short term, become profits in the long.

And a lot can change in very little time. Just five years ago, Channel 5 was a small, low budget player. Now it’s taking on Channel 4 and ITV1 – and succeeding. From small acorns do large oak trees grow – or at least that’s what the channel operators will be hoping.

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