Why BDB is confident of digital TV success

An audience hungry for information about British Digital Broadcasting, the paid-for terrestrial venture from Carlton and Granada, were last week thrown a few choice morsels at the TV Barcelona conference, which is organised in association with Marketing Week.

No doubt about it: the inevitability of digital terrestrial TV(DTT) is a compulsion driving BDB forward in a way not matched by its digital satellite or digital cable counterparts.

When the Government eventually switches off the analogue signal – possibly in ten years’ time – existing free channels will have to be shown on the digital platform, which will also host a number of new free services from the BBC, ITV and possibly Channel 4.

According to BDB, the average replacement cycle for TVs is between seven and eight years, so future replacement sets will most likely be digital compatible TVs. This will give BDB a foothold in every home – because every digital integrated TV will carry not only the DTT tuner and demodulator but also the BDB access system. As the analogue switch off date nears (possibly as early as 2008), every traditional TV set will carry a “health warning”, spelling out to consumers that it will soon be useless.

In a lucid presentation to the assembled delegates, Nigel Walmsley, the chairman of Carlton Television and director of BDB, cited estimates that 50 per cent of UK TV households will have DTT by 2006, and 70 per cent by 2008.

BDB’s basic package of 12 channels will include six new channels and there will be three premium channels – Sky Screen One, Sky Sports One and Sky Screen Two. Walmsley said: “BSkyB’s pricing arrangements with BDB will be comparable with the cable operators. The increments the subscriber pays for the premium channels will be in line with what they are paying now for the Sky premium channels.”

Walmsley said each BDB channel supplier – Granada, Carlton, Flextech (which is providing channels in conjunction with the BBC) and Sky – would handle airtime sales through their respective sales houses. But last weekend it emerged BDB has held talks over a link-up with SDN, a consortium that includes ITV’s other main player United News & Media – which could see all ITV’s digital sales handled under one roof.

BDB says it is aiming to launch in the last quarter of this year. The transmission and distribution network is under construction, set-top boxes are being manufactured and (according to Walmsley) will be in the shops in time for Christmas. Abbott Mead Vickers.BBDO is working on a launch campaign.

The push will also benefit from the promotion of digital TV’s launch on all terrestrial channels – which Walmsley valued at 100m worth of airtime.

The next steps include finalising its customer management centre, to manage and contain churn. Test transmissions begin next month.

The company is to be renamed for its launch, and will carry a new brand identity. Two manufacturers are expected to have digital TVs, with the receiver built into them, available in the shops for Christmas.

But the case for the take-up and subsequent success of DTT does not necessarily extend to the prosperity of BDB in particular.

With the advent of DTT, viewers will be able to watch BBC News 24, BBC Choice, BBC Learning and ITV2. All these new, free, channels will arguably lessen untapped demand for paid-for channels. And that’s where BDB will be hoping to make quite a bit of its money.

Mike Gorman, media director at Saatchi & Saatchi, says: “It is an overestimation of consumer pull. Technology is pushing it into our homes rather than consumers pulling it in.”

Christine Walker, managing partner at Walker Media, was also sceptical. She says: “Having been out of the industry for a year, I have come back to find that there has not been a lot of change, which makes me think Walmsley’s take-up predictions will be out by some measure.”

But the UK has some of the lowest multichannel penetration in Europe, and in this BDB sees a great opportunity. According to its research, of the 17 million UK homes without multichannel TV, 63 per cent have indicated a willingness to pay for TV services, particularly as BDB’s basic package of 12 channels is a “manageable choice”, which it says will cost less than 10 a month – less than the entry level of Sky’s basic package.

Then again, according to BDB’s figures, the percentage of people interested in acquiring satellite has fallen from 17 per cent in 1993 to nine per cent in 1997. Those interested in acquiring cable have shrunk from 13 per cent last year to ten per cent this year. BDB argues there are reasons for this, such as an aversion to a dish on the roof, or cost.

Yet clearly these figures could also indicate a worrying decline of interest in multichannel TV.

The arguments for the success of BDB are being somewhat disingenuously blurred with the arguments for the long-term take-up of DTT as a whole.

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