Who is going to win the digital TV war in the UK? I believe there is the opportunity for all three digital TV platforms to succeed within the next five years. Why? Because the three platforms and their respective brands each have unique values, providing a competitive advantage in the race to sign up customers.
Digital satellite is due to be launched by BSkyB this month, probably a soft launch to existing subscribers, with the full-scale launch later this year. BSkyB is in a strong position to succeed. It will be first to the market, it has approximately 3.7 million satellite subscribers to its current analogue service and a low churn rate.
The combination of BSkyB’s marketing skills, experience and exemplary customer service should empower the company to convert the majority of analogue viewers to digital. Digital satellite technology will also provide BSkyB with a significant bandwidth advantage allowing the company to expand the number of TV channels if it so wishes.
The additional weapon in BSkyB’s digital armoury is the interactive services supplied by British Interactive Broadcasting (BIB), which includes games, shopping, banking, education and e-mail. BSkyB digital satellite receivers will have an integral modem and will be connected to the telephone, so providing the return path to BIB content providers. These services will be accessed with a simple remote control. The main weakness of satellite technology is its reliance on existing telephony networks to provide a limited bandwidth for the return path, preventing the transmission of online video on demand.
By converting existing subscribers and attracting new ones to the proposition of “hundreds of TV channels and interactive services”, BSkyB could achieve a critical mass of 4 to 5 million digital satellite subscribers within five years.
Cable will probably launch digital services in late 1998 or early 1999. The industry has focused its investment and time on constructing an infrastructure and consequently underperformed in marketing and customer service. I believe cable is the sleeping giant of the TV industry.
Consolidation will probably result in two cable brands – Telewest and CWC. Cable has two significant USPs. It can offer a discounted telephony service, which it can bundle with TV programming. Secondly, it has significant bandwidth for broadcasting TV and online interactive services on demand, with full-screen video for shopping, banking and games. These services will be the killer applications of the future. The combination of converting analogue customers to digital, cross-selling telephony customers and increasing penetration from 22 to 25 per cent should result in cable achieving 4 to 5 million subscribers in five years.
British Digital Broadcasting, the digital terrestrial service, will launch within the next nine months with a limited channel line-up and no interactive services. The majority of digital terrestrial receivers will be installed by customers, plugging into existing TV aerials. If you don’t want a dish and don’t have cable but do want some of the best channels with no interactivity at a low price, BDB is for you. A significant number of new TV sets will include the BDB technology, allowing easy subscription access.
BDB also has the support of the Government, terrestrial broadcasters, retailers and manufacturers and could succeed in recruiting 3 to 4 million subscribers within five years.
To achieve my forecast of 12 million subscribers – 50 per cent penetration by 2005 – BSkyB, Telewest, CWC and BDB must focus on developing “killer” programming and interactivity. The role of TV will change in the digital age from a passive to an interactive, transactional medium where pay-per-view and on-demand interactive services will drive sales. Customers will subscribe en masse when they see that digital TV can deliver unique value and “must-have” entertainment such as pay-per-view football and interactive games.