I read in The Observer last week that BSkyB’s plans to launch a digital satellite service this autumn were threatened by its failure to secure a subsidy deal for set-top boxes. It would not be out of character for BSkyB to take a strong negotiating position, but I wonder if the lack of a firm launch date is more to do with its interest in the digital terrestrial licence.
It seems likely that BSkyB’s digital satellite strategy will be governed by the scope of its total involvement in the digital market. One would assume having both the terrestrial and satellite services would strengthen its negotiations with set-top box suppliers. But this is only part of it. If British Digital Broadcasting (BDB), of which BSkyB is a major shareholder, is awarded its digital terrestrial licence, BSkyB will be in a strong position to influence the differential positioning of the two services.
A commercially-minded cynic might suggest that control of both will lead BSkyB to position digital satellite as the premium digital service. Its commitment to the terrestrial route is questionable, given that its shareholding in this service is smaller.
A review of the two competing digital terrestrial television bids supports this view. BDB’s proposals for digital terrestrial include no plans for interactive services, while these would be part of its celestial offering.
The Digital Television Network (DTN) proposals offer a fuller consumer package. For the 75 per cent of homes which have yet to take up the multichannel proposition, I think the promise of lower-cost access to multichannels and interactive services could be a compelling reason for people buying into it.
BDB might argue that the key issue will be the programming and I would not disagree. However, it is my view that we should not confuse content and distribution. The content will follow the distribution. So if DTN were to win, it would be in a position to bid for event television, which will be the critical element.
By creating real competition in digital, rights holders, consumers and advertisers stand to gain.
Whether you are negotiating on behalf of the Premier League or the Spice Girls, a single company dominating the distribution network will limit your potential yield.
Competition will also encourage the lowest entry price for the consumer. The price of cable subscription at the moment is a big barrier to further growth.
From an advertiser’s perspective, the interactive opportunity, providing attractive database marketing solutions, will be a potent tool. Advertisers will welcome efforts to build databases which they could access, and use as a counterbalance to the retailers’ databases.
Forward-looking media owners are already beginning to see this possibility. Television broadcasters have, with the interactive technology provided by digital, the chance to realise a stronger relationship with their viewers, and advertisers would be extremely willing participants in building that relationship.