Freeview subscriptions head Skywards

When Freeview launched three years ago, soon after the collapse of ITV Digital, few expected its meteoric rise. But now the free-to-air service looks set to become the UK’s largest digital television platform.

Zenith Optimedia says take-up of the service has exceeded expectations, and forecasts 8.8 million homes will have Freeview by 2008, compared with the 8.7 million projected for Sky. Freeview, set up by the BBC, Crown Castle International and BSkyB, is currently in 5 million households, compared with just under 8 million for Sky. The merging NTL and Telewest cable operators count 3.3 million digital TV subscribers between them.

Freeview’s popularity lies in its simplicity, says Numis Securities media analyst Paul Richards. For a one-off payment of about &£40, customers can receive the service. More set-top boxes are needed for each TV in a household, but there remain no ongoing subscription costs. And Freeview has now received a boost from ITV’s and Channel 4’s decision to join the consortium. The broadcasters are likely to cross-promote the service on their terrestrial channels.

With Freeview’s performance, analysts and media experts predict that Sky will launch an aggressive marketing campaign to re-establish its dominance, but believe it will struggle to reach the 10 million subscribers it wants by 2010.

In 2004, growth in Freeview accounted for about 70 per cent of the rise in the number of homes with digital TV, with more high-profile channels being launched or transferred to the platform. Channel 4 this week became the latest broadcaster to launch a channel, More4, on the Freeview platform. Earlier this year it also made its E4 entertainment strand available free.

Channel 4 marketing director Polly Cochrane explains why: “We perform much better on Freeview than on Sky, which is entirely down to the range of options open to viewers.”

ITV will launch ITV4 on Freeview later this month. Theresa Wise, a media partner at Accenture, believes this highlights an increasing threat to Sky’s pay-TV position, particularly with a 2012 analogue switch-off date confirmed. “The default choice for most people who haven’t got digital TV at present will be Freeview,” she predicts.

It is an issue Sky, which currently counts advertising as just ten per cent of its revenue, seems to be taking seriously, with greater forays into free-to-air territory. It is to relaunch Sky Travel as Sky 3, an entertainment channel showing repeats of its popular shows. Yet Sky might find shoring up its subscriptions becomes a fight on two fronts, with a combined NTL/Telewest offering a bigger threat. The cable company hopes to compete for the post-2007 TV rights to Premiership football games. If successful, it would be a huge setback for Sky, which has staked most of its sports coverage on football. But Zenith Optimedia broadcast director Chris Hayward believes it is unlikely: “Sky has built its sport package around football and I don’t see any situation where it would let that go. Sky knows what it’s doing. It has set itself some very tough targets and will be thinking about ways to achieve them.”

Hayward sees Sky combating its competitors with a combination of more flexible pricing, rather than the “flat-pack” subscriptions available at present, in the near future. It will also subsidise Sky Plus to woo new customers. He concludes: “There’s a battle out there: Sky will respond.”

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