The evolution of satellite television continues, fuelled by Freeview, which sells 200,000 boxes a month; the launch of Freesat from Sky; the availability of Top Up TV; and the introduction of Sky Plus technology. By the end of this year 55 million households are expected to have switched from terrestrial to digital, and the terrestrial TV giants are now taking satellite seriously – ITV has launched ITV3, and Channel 4’s More4 will soon follow.
The battle for carriage, viewers and revenue is fierce – witness Sky’s huge rebranding campaign, its expenditure on the US drama 24, and the cross-promotion on ITV.
This evolution poses many questions, including how far will pay-TV go and what are the implications for advertisers?
Evidence from Sky suggests that people are, up to a point, prepared to pay significant amounts to have access to more television. For instance, 60 per cent of Sky’s subscribers pay over £30 a month for a Sky World package; top-tier subscribers pay over £610 a year including the licence fee. But to reach its target of 8 million subscribers, Sky must attract more customers by paring down its 16 package options and offering lower entry costs.
Technology offers the potential for growth: data shows that Sky Plus subscribers are least likely to churn, while Freesat from Sky offers it a solution for those people who will not pay a lot more for extra channels.
Competition is welcome from an advertiser’s perspective because different channels offer distinct profiles and targeting opportunities. But audiences are to an extent cannibalised and the end result is lower average ratings. In 1999 the 48 channels measured by BARB delivered an average rating of 0.19, now 145 channels deliver an average rating of 0.05, and the gap between the big and the small channels is growing (this year the top 50 satellite channels delivered 85 per cent of all audiences).
The larger channels will fight back, but the smaller channels must avoid further market commoditisation and concentrate on differentiation, selling the strengths of their product. This might be a distinct audience or content for channels such as Discovery, or through research adding value.
Channels must respond to the needs of viewers and must be more aware of the requirements of advertisers that part-fund their existence. E4 is not the sole offender, but it is no longer appropriate for broadcasters to operate a “one policy fits all” approach – channels need dedicated sales teams that can provide advertisers with bespoke schedules that will deliver quantifiable return on investment.
Satellite’s evolution is not yet at an end: there will be more launches and more failures, and viewing habits and the public’s appetite for pay-TV will change. The onus is on the broadcasters, advertisers and agencies to respond to this evolution.