Freeview finally set to make its mark

After a bumpy start, the news that Freeview has reached a user base of 2 million homes suggests that DTT is finally taking off, says Amanda Wilkinson

It could be third time lucky for the digital terrestrial television, after Freeview, launched following the collapse of ITV Digital, reached a user base of about 2 million homes.

Included in that figure are 600,000 ITV Digital boxes which are still in use. But if set-top box adaptors continue to be sold at the rate of 100,000 or more every month, then the BBC expects that Freeview will claim up to 4 million users by the end of next year (MW last week), outnumbering the 3.2 million households receiving cable TV, but still way behind BSkyB’s 7 million digital satellite subscribers.

The rate of take-up is likely to be boosted by the falling price of set-top box adaptors – &£100 at the time of Freeview’s launch and now &£70, with some boxes expected to go on sale for as little as &£40 in the run-up to Christmas – and a heavy digital marketing campaign by the BBC.

It is this campaign and the simple concept of a one-off fee for more TV channels that have helped to capture the imagination of satellite refuseniks. DTT is the only digital system in nine out of ten Freeview homes, claims the BBC, one of three companies behind the DTT platform, the others being BSkyB and Crown Castle.

This is also reflected in the profile of Freeview customers, of whom 66 per cent are over 35 years-old and 32 per cent above 55 years – an older skew than the pay digital population. There is also a viewing bias towards BBC digital TV channels, although ITV1, Channel 4 and Five all perform better than on digital satellite as there is less competition from other channels.

Critics would argue that that is hardly surprising, given the millions of pounds that the BBC has spent on marketing its own digital TV and radio channels in fulfilment of its obligation to push digital. However, the BBC would argue that it is not in the business of promoting other broadcasters’ channels and that it was not allowed to market DTT to the exclusion of other platforms.

Starcom Motive executive buying director Andy Roberts says: “The pace of growth has surprised me and everyone else, and therefore a number of things may change because it has become more powerful more quickly than anyone thought.”

Major broadcasters are already reassessing their presence on the platform, and BSkyB has made it clear that it is considering developing its free-to-air Sky Travel channel into a general entertainment channel, therefore increasing competition for ITV1 and Five. Channel 4 has also confirmed that it is to launch More 4, a free-to-air channel aimed at an older demographic than its pay channel E4, at the beginning of 2005.

As the number of DTT households grows, the broadcaster is likely to look at turning E4 into a free-to-air channel, as the increase in advertising revenue due to a larger audience could more than offset its subscription revenue, but it would have make sure that the core Channel 4 is not undermined.

With about four slots left on the platform, other broadcasters such as ITV are also likely to try to increase their share of viewing in Freeview homes by launching more channels.

BBC director of marketing and communications Andy Duncan says: “Once you get to 4 million homes there is economic potential to switch a pay channel to free, or for it to develop a strong second channel on the platform.” However some pay channels could be restricted from making a straight transition to free-to-air due to ownership of the relevant programme rights, and variations of the pay offer could appear instead.

For some channels there is also their relationship with BSkyB to consider. Earlier this year, Turner Broadcasting System cancelled plans to launch a channel made up of three of its brands – CNN, Turner Classic Movies and Boomerang – on Freeview in the same week that it signed a new carriage deal for its pay channels with BSkyB.

Duncan believes that once the platform reaches a certain size then a “pay-lite” proposition – pay as you go for channels or movies – may be introduced. But others are sceptical and argue that it goes against the concept of receiving more channels for a one-off fee and that a pay-lite system would require huge investment in terms of technology, promotion and customer support.

Carat broadcast planning director David Peters says the success of a pay-lite system would depend on the business model concerned, but adds: “In principle I don’t think it would have a chance as people buy Freeview because it is free. ITV Digital showed that a pay-lite system doesn’t really work.”

Despite Freeview’s growth there is a limit to take-up. Only 75 per cent of households receive a suitable signal, and of those some require a special aerial. The catchment area is set to increase to 80 per cent in the next 12 months, but no further until the analogue switch-off, scheduled by the Government for 2010.

MindShare head of research Nick Theakstone says: “I don’t think 2010 is a realistic date for switch-off. Our latest estimate is that it will be five years on from that.”

Spectrum strategy consultants estimates that if switch-off does take place by 2010 and outstanding homes are transferred to digital, then Freeview stands to benefit by an increase in the number of homes to 10 million, ahead of BSkyB’s 9 million, digital cable’s 5 million and free satellite’s 2 million.

But anything could happen in the next seven years. Indeed, broadband may even take off to such an extent that TV fans prefer to download episodes of their favourite shows, thus potentially stifling the growth of Freeview and other platforms.

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