Cable operators plot digital assault

Cable players are busy developing their plans for digital TV, and the fact that nobody else is paying much attention says much about the continual poor performance that has dogged this industry since its inception 20 years ago.

The industry will have to shout to be heard as it enters the digital revolution next year. Sky Digital and terrestrial player ONdigital have advertising budgets of 60m and 40m respectively. The major cable players will not reveal their plans, but this industry’s idea of a marketing blitz is to drop a leaflet through your door.

After years of consolidation, more than 30 cable companies have now been reduced to three main players. They are Cable & Wireless Communications, Telewest, and NTL, each with around 1 million subscribers. All three plan to launch digital services next year.

CWC’s plans are the most advanced. In October, the company announced it would give its customers a free digital upgrade when its service is launched next year. Its basic package, which includes a telephone line, will cost 9.99. Subscribers will not need to buy a set-top box.

In contrast, subscribers to the existing competing services ONdigital and Sky need to buy a box, which costs about 200 – and the boxes for each system are not compatible. The basic packages for Sky and ONdigital are 6.99 and 7.99 respectively. Monthly rental for a BT telephone line is 8.87.

The plans of the other two players are hazy. NTL will put out a digital TV service. However, it will concentrate heavily on interactive TV services, such as home shopping, banking, travel, education and entertainment. It is in discussions with more than 30 other companies, including British Airways, Great Universal Stores, Barclays Bank, and the Open University. NTL’s system is understood to have taken two years to develop at a cost of 40m. This service is scheduled to launch on March 31 next year.

A spokesman for NTL says: “The main driver for digital will be interactive services. We will not just offer a simple shopping mall, but a wide choice of different services.”

Telewest will go digital next autumn. Like the other players, it will offer a mixture of TV and shopping services. One spokesman says airily: “We will look for exclusive deals.”

All three players have put a lot of resources into interactive services – but this may not be wise. The history of new technology shows that viewers have always been more interested in entertainment value than interactivity.

This was the case when cinema overtook radio as the world’s entertainment medium. The pattern was repeated when television overtook cinema. Pay TV in the UK famously became successful when Sky screened regular live Premiership football.

So Sky’s decision to offer more content, albeit many music channels, plus a range of staggered time-slot movies and shows may be the right one. It has decided to leave the launch of its shopping services, now called Open, until autumn next year. It believes that content will lead the way, while shopping will be a secondary long-term consideration for those with digital.

Indeed, cable’s conversion to interactive services is curious considering it has singularly failed to build a relationship with the UK public over almost two decades.

The stories about these companies’ poor marketing are legion. Observers say this is because they tend to be run by engineers, who are more concerned with extending their networks than in selling cable TV to potential viewers.

The movie deal that cable companies cut with Hollywood allowed them significantly lower profit margins than their rivals at Sky, partly because the satellite company had higher calibre personnel at the table.

The outcome is that Sky has more than 6 million subscribers, while cable has 3 million. The UK is virtually the only country in Europe with more satellite subscribers than cable. In the US, satellite also trails far behind cable.

As one observer puts it: “Cable has the best technology and the worst people. The companies need to get some smart commercial and marketing personnel on board.”

Telewest has recognised this and appointed former Walkers Snack Foods president Tony Illsley as its new chief executive in September.

As a Telewest spokesman says of his new chief executive: “He is here to take us from being an engineering-oriented company to being more marketing-focused.”

Most observers say it will take a year before any changes to the company’s culture will become noticeable.

Marketing digital and interactive shops is a huge endeavour, but there are no plans for a joint cable marketing effort.

One Telewest spokesman says: “Digital is going to be here for the next 100 years, so it’s going to be a long game.”

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