Open verdict on Sky interactive shopping

British Sky Broadcasting Group is counting on interactive services to drive up revenue from subscribers, yet its Open TV shopping mall has still to prove its worth.

BSkyB is betting on interactive services accounting for half of a &£100 increase in the average annual revenue from each direct-to-home-via-satellite (DTH) subscriber over the next four years.

It is unclear what proportion BSkyB expects to come from t-commerce through Open’s shopping mall and what will be provided by its betting, telephony and text services.

Richard Hitchcock, media analyst at WestLB Panmure, believes that BSkyB will be successful in its bid to raise the average annual revenue from each DTH subscriber from &£286 to &£400 by 2005, with half the increase coming from interactive services. But the odds appear to be stacked in favour of interactive betting rather than shopping.

He says: “I don’t know how it [the target] breaks down. The betting operation probably has the best prospects, with 15,000 subscribers registering in the first three weeks.”

According to BSkyB, its wholly-owned TV betting service, which currently sits in Sky Interactive and launched on December 11, is already taking about 2,500 bets per day, with an average spend of &£6 per customer.

Hitchcock believes interactive TV shopping “has much to prove”.

At the presentation for BSkyB’s latest financial results, little was mentioned about the shopping service, save that 655,000 retail orders were made through Open during the six months to the end of December. The results also revealed that the number of DTH subscribers increased to 5,051,000, and that two-thirds of these used Open, making more than 30 million connections to the service for such purposes as shopping and e-mailing.

No official figures were given for the Christmas period, although it is understood that gross weekly sales peaked at &£2.3m. Open’s first trading update, released in January last year, showed that, for the period from launch in October 1999 to the following Christmas, there were 8 million visits to the service, resulting in 127,767 orders, with sales peaking at &£1m per week.

BSkyB and Open have so far refused to supply sales figures for the same period in 2000, but Nick Bryant, sales director for Open, claims that average transactional values “vary wildly”.

He adds: “At the moment it lies between &£25 to &£35 but that’s skewed by holiday purchases.”

On this basis, Open would have taken about &£23m in retail orders over the past six months.

Open’s shopping and interactive advertising services provide the bulk of the &£36m revenue for holding company BiB, which posted losses of &£116m for the period. Open is 80 per cent owned by BSkyB after the group raised its stake last year.

Site leasing fees from the 84 retail, betting and banking content providers, including Woolworths and Domino’s Pizza, and interactive advertisers account for part of Open’s revenue. Prices start at &£50,000 for a month. Site construction fees, commission on sales and telephony services are also sources of income.

Howard Unna, head of production for e-commerce at long-term content provider Woolworths, claimed last year that the Open site ranked as the chain’s 173rd biggest store in terms of sales out of 800. He says: “It’s commercially viable otherwise we would not be there.”

But interactive advertisers which are not long-term content providers have to provide a click-through service out of the broadcast stream to a micro site on Open.

BMP TVi, managing director Andrew Howells would like Open to be more forthcoming about its prices. “It doesn’t have a ratecard and every deal is individually-priced depending on what that company wants to do.”

Carat Interactive planning director Keith Rattray with believes that interactive advertising using Open is too costly. He says: “These micro sites within Open are not cost-efficient. The only advertisers really using the click-through to Open are long-term content providers.”

Rattray claims that BSkyB is about to introduce new formats for interactive ads using WML technology. He claims this will cut costs and operate within the broadcast stream, allowing consumers to keep an eye on programming at the same time as working through the given text from the advertisers.

Costs are also likely to come down for both content providers and interactive advertisers with the arrival of new competitors to Open, such as Energis’ Bright Blue. Bright Blue has yet to sign up any retailers, banks or betting operations, but is scheduled for a launch through BSkyB in the spring.

The Energis system can be linked to the client’s current digital system, says Tim Harris, managing director of Energis Interactive.

“The benefits to the consumer are that they can access a deeper level of choice while they’re online and that they can take the same content through other digital routes to market such as the Internet and mobile phone,” says Harris.

Howells says: “Energis will hopefully provide a breath of fresh air. Having a competitor on the same platform could be the beginning of a truly competitive market.”

BSkyB also has plans to improve interactive services within the broadcast stream around its programmes with the provision of more information, chat rooms, and shopping and betting opportunities.

It remains to be seen whether these developments and Open’s shopping mall help BSkyB to significantly increase its revenue from interactive services.