Can broadcasters make PPV TV pay?

The collapse last week of the £328m deal giving cable and telecoms operator NTL 40 pay per view Premier League football games for each of three seasons, raises the question of whether broadcasters can really make PPV TV pay.

NTL reportedly pulled out after the Premier League forbade it from using the PPV games as a loss leader, bundling them up with cable TV and telephone packages and offering the games either on the cheap or even free.

The cable giant – for whom £328m is a drop in the ocean of its $9bn of debt – needs football to build its brand in the UK. At present, the NTL brand has little resonance for UK consumers. One of the best ways to build a name is through football – this is, after all, what drove take-up of Sky in the mid-Nineties.

When NTL struck the deal in June, marketing director Mike Hounsell said: “This deal adds weight to us as a national player and indicates the content people want. We will be tapping into fan bases through PPV. We have worked on this deal for some time to justify the money spent.”

Clearly, NTL did not work long enough, and its subsequent withdrawal is a blow to its branding ambitions.

But the Premier League effectively neutered NTL’s ability to leverage its football coverage and turn it into what the company needs most – more subscribers. The cost of the deal should now plummet – opening the way for other bidders such as ONdigital, Telewest/Flextech and Sky if the rules are changed. Reports that the BBC was interested in bidding were played down by a corporation spokesman, who says: “We can’t do PPV – we would need the express approval of the Secretary of State [for Culture, Media and Sport].” He says the BBC has not asked for approval “as far as I know.”

PPV is being held up as the next big thing in TV, as new companies such as U>Direct enter the fray, and established operators like Sky, NTL and Telewest expand their PPV movie channels.

U>Direct marketing director Roger Hall, who joined in 1998 from video rental giant Blockbuster, says: “PPV television is part of the future of pay-TV. When pay-TV started there were many doubters, but ten years on it is part of the landscape. PPV has put its first foot forward and attracted criticism. There’s resistance to change.”

The company launched its PPV film and sports on SkyDigital in July 99, but its recent experience broadcasting England’s World Cup qualifier against Finland on October 11 shows the limitations inherent in the PPV offer.

The game was broadcast at 5pm – an unattractive spot, with most people still at work. But problems arose when many viewers waited until the last moment to sign up to watch the game, and many failed to register correctly. Some who signed up 15 minutes before kick-off found they could not get a picture, added to which there was a glitch 15 minutes in.

U>Direct refuses to reveal how many PPV packages it sold.

One observer described the England Finland match as a “marketing disaster” for U>Direct, as this was its most visible public launch of PPV football. Hall dismisses this, but accepts that getting viewers to sign up correctly and in good time will be essential for the success of future paid-for sports events.

But with new ways to watch TV coming on the market, some wonder whether PPV will emerge as a successful format – viewers feel they are already paying to watch, and object to being asked to pay again.

PPV could lose out with the launch of TiVo and other personal video recorders allowing viewers to plan their own schedules, the imminent arrival of video-on-demand and the explosion of digital channels.

Dan Clays, deputy head of interactive TV at Quantum New Media, says: “As more interactive services come on board, as the choice of viewing content grows, as PVR (personal video recorder) technology begins to roll out into homes, it will be interesting to see how many people will be prepared to pay extra cash in addition to their monthly subscription.”

But he adds that as the average number of TV hours viewed drops and online use grows, viewers will have so many channels that “PPV could be the solution to subscribing to channels which are rarely watched”.

There are few figures available on the take-up of PPV, though NTL’s first quarter 2000 results published in May showed that last year, the company earned over £5.7m through its Front Row PPV format, its British Eurosport and the ITN interactive services, but lost more than £21m on running the services.

The problem, as Blockbuster Video points out, is that PPV films are still generally six months behind the video rental market, and viewers know they will probably be able to see the best films without paying at some point in the future. All the same, Front Row says one-quarter of its 3 million customers pay for a film every month.

Clays explains: “As the choice of what to watch and what to do with your TV grows, the contest for viewers’ attentions will be increasingly fierce.”

Premier League football will be the content that drives viewers to use PPV, but the broadcasters will have to overcome consumers’ natural incompetence when signing up for big sporting events. If the contract is won by the BBC, there could be a negative reaction as viewers are asked to stump up on top of their licence fee.

But one thing is certain, there will be increasingly fraught marketing battles between the rival formats, as TV companies step up the fight for market share.