Top Up TV: The figures don’t add up. 

1 March 2004

I have to say I have very real doubts about the viability of Top Up TV

They say they need 250,000 subscribers by year end. Well, according to the published facts and figures, by Top Up TV themselves, and those who are involved with Digital Television, I have to seriously dispute this.

Their start up costs, they said, would be at least £10 million. Considering that they will be broadcasting on 5 streams of DTT, which according to published figures are somewhere between £2-3 million each, and that doesn’t take into account anything else, then for safety’s sake, we’ll use the top end figure, and say that with 5 streams, which they need because TCM is obviously going to be a stream by itself or maybe replacing the promo stream during the night, and the others fit neatly onto 4 strreams, then we’re talking at least £15 million just for the streams themselves.

Add to that, the cost of the licencing for the subscription software, the cost of the web domain, and the designers of the site, the cost of the equipment to rebroadcast the signals, and the equipment to recieve it from from whichever satellite hub is used to braodcast them, and that will not be Sky Digital, and we’re fast heading towards the £20 million mark.

Now, to get connected to Top Up TV, you have to pay a one-off connection fee. If you subscribe online, it’s £10, but if you subscribe by phone, it’s £20. So without knowing how everyone subscribes to the service, we’ll assume the top end again, which would mean £5 million of income, take away 17.5%, which is VAT, which comes to £875,000, meaning what goes to TUTV, is £4.125 million.

Then there is the £7.99 a month subscription fee. Now this is where the fun begins.

17.5% of that fee has to go again in VAT, which equates to £1.40, so that reduces what Top Up TV recieve down to £6.59 a month. Then Top Up TV have to pay the broadcasters a certain amount, per subscriber, per month. Now these are fairly major channels and will not be cheap to Top Up TV. I expect the cost to be somewhere in the range of 50p to £1 per subscriber, per month. So for the sake of argument, we will assume £1, worst case scenario. That reduces what TUTV keeps, down to just £5.59 a month.

Top Up TV said they need 250,000 subscribers by year end to break even. Even allowing for a start on 1st April, which would leave 9 months of the year left, and assuming that they have 250,000 subscribers for the whole of the remaining year, which is extremely unlikely, but a best case scenario, their subscription income figure would total just over £12.5 million. Add the connection fee income to that, and you’ll see that Top Up TV are actually short of break even, by almost £3.5 million, and then add to that calcualtion the fact that in all likelihood, they wouldn’t have 250,000 subscribers from the get-go, and would be building up to that figure, and that makes them even further away from break even, say somewhere around £5-10 million short, depending on how quickly they were to reach that subscriber level.

Now let’s perform the same calculations for other subscriber levels.

At 300,000 subscribers, connection fee revenue would be a maximum of £4.95 million and the maximum subscription revenue would be about £15 million. Whilst this seems to cover it, it is debatable because again it is very likely that they would have 300,000 subscribers from the start, so again, they are likely to be just short of break even, maybe by as much as £7 million

At 350,00 subscribers, connection fee revenue would be a maximum of £5.775 million and the maximum subscription revenue would be about £17.6 million. This looks to take TUTV into profit, but in fact, dependent on speed of take up, it could still leave us about £3-4 million short.

At 400,000 subscribers, connection fee revenue would be a maximum of £6.6 million and the maximum subscription revenue would be about £20.1 million. This does look like it would be the minimum level required for break-even, taking into account the likely fact that Top Up TV would not have 400,000 subscribers from the word go.

So, it’s looking like at least 400,000 subscribers is in fact the break even level, maybe even as many as 500,000, dependent on speed of take-up. Now I have seen a wide variety of figures quoted for the number of ex-On/ITV Digital boxes out there, ranging from 500,000 up to 800,000, but every one of these numbers is an estimate, there is no definitive number and no way to know exactly how many there are.

We also have some history to call on here as a guide to possible performance. On/ITV Digital managed in the first 6 months to get 130,000 subscribers, which was thought to be a good pace of sign up. But, that will be short of pace for Top Up TV, whether by their own figures or by the ones I’ve calculated. They would need to sign up at least a further 120,000 in 4 months. And remember this was at a time when On Digital was the only way to get DTT. These days, you just have to get a basic box to get DTT, which can cost as little as £50. So, it could be fair to assume that Top Up TV may not even do as well as On Digital did.

All in all, it does seem to seem to point to the probability that Top Up TV will not survive. Indeed, at the moment, they are already broadcasting one stream on DTT shwoing a promotion, plus a website, plus a telephone subscriber centre and staff running it and advertising campaign, so that is at least £3-5 million already spent, and at the moment, we have no idea how many subcribers have signed up.

The odds seem stacked against Top Up TV. Only time will tell if this second attempt at pay-TV on DTT will get off the ground.

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Ian Beaumont Contact More by me

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