Could pay-per-view be the future of digital TV?

The question now is what should replace ITV Digital. More subscription TV services are not the answer. Guy Abrahams thinks he may have a solution

Having spent the past few weeks blaming people for the collapse of ITV Digital, the time has come to discuss what might replace it. It is a fact that Sky has an overwhelming advantage in pay-TV subscription, with a strong product and dominant market share. It is also true that the subscription market is close to plateauing as a significant percentage of the population cannot, or do not, see the need to pay for TV in this way.

Digital penetration is overestimated. Some 85 per cent of homes have two or more sets, so digital penetration of sets is lower than penetration of homes. With conversion to digital of a second set costing £10 a month in Sky homes, is there still an opportunity for digital terrestrial?

After the failure of ITV Digital it is clear that another subscription TV service is not the answer. So what are the alternatives? With more than 60 free-to-air channels on Sky, could digital terrestrial be advertiser-funded? Rather than charge consumers for digital TV, why not charge the broadcasters?

There are three types of broadcasters which have potential interest: the multinational Turner portfolio of Boomerang, TNT, and CNN are all free-to-air on Sky. For them and similar pan-national channels such as Eurosport, this is an interesting alternative to subscription.

The digital terrestrial box could broadcast numerous radio stations using small bandwidth. With secondary sets often in bedrooms or kitchens, the addition of digital radio gives added value even to existing Sky subscribers.

Finally, the free-to-air proposition might even appeal to existing subscription channels. What better way to encourage purchase than giving viewers a taster of what is available?

Free-to-air is not the only alternative to subscription – pay-as-you-go or pay-per-view is another option. For many consumers subscription is not great value, because once they have watched what they want on terrestrial channels, they rarely have time to watch sufficient satellite programmes to justify the expense. The question is whether there is a profitable, yet affordable alternative.

Charging from £1 a night for a channel or a few pence a programme may be the answer. It could be billed by direct debit or paid for in a similar manner to mobile phone pay-as-you-go cards. Before you know it, consumers could be running up bills as large as subscriptions.

The best answer could be a combination of systems as the free-to-air solution will give consumers a reason to buy the box, and the pay-as-you-go could give the licence-holder a reason to earn.

There are, however, other hurdles to be overcome concerning technology. For second sets and shared aerials to work requires a stronger signal or a more powerful box, and digital boxes need to come down to an affordable consumer price.

Pay-as-you-go revolutionised the mobile phone market – maybe the demise of ITV Digital will give it the opportunity to do the same for digital TV.

Guy Abrahams is strategy director at media agency Carat

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