ITV’s revenge? 

2 May 2008 tbs.pm/892

Digital Spy: ITV HD to be Freesat exclusive?

This could be a potentially interesting twist to the low-key feud between ITV plc and BSkyB, which is attributed to BSkyB blocking potential suitors to a painless ITV plc takeover with its influential shareholding; in particular, blocking Virgin Media’s takeover attempt before they lost interest due to rising costs and internal concerns.

Making ITV HD Freesat-only wouldn’t exactly hit ITV that hard financially in the short term – especially as it isn’t available to the public yet – and could inflict some damage to Sky’s subscriber base even if only a temporary measure. It could also act as a bargaining counter in relation to ITV’s subsequent dealings with Sky and its ITV shareholding.

Freesat is potentially a much greater direct threat to Sky’s subscription income since it has the potential to cannibalise some of Sky’s existing subscribers, especially in areas where Freeview isn’t yet available.

It’s likely that many people don’t even realise that there’s a “Freesat from Sky” and would buy a Freesat box to replace their Sky digibox even if they’re not yet interested in upgrading to HDTV, such has been the power of Sky marketing over the years in convincing a lot of people that Sky TV equals pay-TV.

For one thing, it took years for the stigma of Sky TV being associated with large satellite dishes on the roofs of council house-dwelling Sun readers to be shaken off, and it took a switch to digital TV, a smaller satellite dish and a massive marketing push to make this happen.

It will be interesting to see what Sky has in its marketing armoury to counter the Freesat threat, since it can’t push its “Freesat from Sky” too hard for fear of depleting its own subscription revenue. Perhaps there will be new, low-cost subscription packages introduced or a greater emphasis on bundles including internet and phone calls.

Avoiding the pay-TV only trap for Sky may be nearly impossible if the subscription income is to be protected, though one possibility could be to have a cheaper phone and/or internet service deal that also comes with a “Freesat from Sky” box, although the cost of the box will have to be recouped over a fairly long period of time.

These TV/phone/internet bundles help to improve the ‘stickiness’ of Sky subscriptions since you can’t cancel one without foregoing the others; something that’s crucial to Sky especially given the threat of a downturn in the economy.

Otherwise years of Sky marketing that have effectively linked satellite TV with pay-TV will become unravelled, threatening to hit Sky’s subscription income even harder if programme and movie downloads become even more popular (Sky is worried about the BBC’s iPlayer possibly for this very reason).

Now all Freesat has to do is to ensure that Channel Five is on board and that there’s a relatively decent selection of channels in the EPG, even if a third of them are shopping channels.

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