LONDON — Proof, if proof were needed, that the U.K. digital terrestrial service, Freeview, has wrought a seachange in the dynamics of British TV came last week — on Feb. 1, to be precise.
That’s the day some of the world’s biggest entertainment companies put the final touches to sealed bids running into millions of dollars to grab a slot on Freeview.In the cloak and dagger atmosphere surrounding the auction, rumors spread around London that established U.S. channels including ESPN, A&E, and 13th Street were bidding.
It is believed the TV arms of Disney and Universal Studios plus Turner Broadcasting and maybe MTV were all prepared to pay big money for a chance to buy a ride on Freeview, now in 5 million U.K. homes and growing.
It is in the only digital rival to satcaster BSkyB, on course to meet its target of 8 million subscribers by the end of the year.
British outfits in the ring included ITV, Five and Channel 4, in the midst of a strategic rethink engineered by CEO Andy Duncan, who helped launch Freeview.
“I expect up to a dozen bids were received,” says a senior U.K. broadcaster. “Everyone wants to get on Freeview because it’s a great environment.
“If you’re a channel operator and need to increase your audience share Freeview is the obvious choice. On BSkyB there are 400 channels, whereas on Freeview there are only 30-odd.”
When Disney negotiated the deal to launch ABC1 on Freeview last fall, it is understood to have paid less than $1.3 million for a year’s contract.
There is speculation that the winning bid for the vacant Freeview slot, to be announced in time for an April 1 launch, could be as high as $9 million.
“The figures people are talking about are so high that some of the pay channels that are bidding to get onto Freeview will find it very hard to get their money back,” reckoned a consultant.
“But if they get onto Freeview it may help them tactically when they have to renegotiate their contracts with Sky.”
None of the U.S. channels would comment on whether they had bid for the slot. The only company willing to confirm it was not participating in the auction was BSkyB itself, which, arguably, has most to lose if Freeview dents its growth.
James Murdoch, BSkyB’s youthful topper, played down the threat of the non-subscription multi-channel service in which his company, ironically, also has a stake, as does the BBC.
Announcing an impressive set of half-year results on Feb. 2 that suggested his strategy was beginning to work, Murdoch junior said that although Freeview homes would overtake Sky homes, he believed that a lot of them would eventually trade up to become paying Sky customers.
He had no doubt that, Freeview or not, ultimately 80% of households in Blighty would eventually take pay TV.
But the fact remains that Freeview’s rapid success — it has taken a little over two years for the platform to get to 5 million homes — is having a big impact on viewing patterns.
Generally the best performers are the established U.K. brands and their spinoff webs, especially when compared to how they fare on the Sky platform.
Overall, ITV remains the U.K.’s most popular private net with a share of around 23%, but in homes that also have BSkyB this fell to 17.4% last year.
Channel 4 is hit even harder. It gets only 6% in homes that also have access to BSkyB, whereas it achieves 11% in homes that also have Freeview.
No wonder C4 is among those bidding for the vacant Freeview slot. If it wins it is expected that C4 will use the license to turn its E4 into a free channel boosting the chances of pushing the niche net into profit.
The same big differences in ratings are also evident for specialist channels. Thanks to being on Freeview, the Disney-backed ABC1, aimed at female daytime auds, has achieved an impressive 1.5% share; ITV2, focused on the under-25s, gets 2.73% on Freeview, but only 1.51% on Sky.
But oddly Sky News fares better on Sky than it does on Freeview — 0.74% compared with 0.29%.
The station is one of three Sky channels available on Freeview, along with Sky Sports News and Sky Travel.
No wonder James Murdoch was prepared to stick his neck out and say he had not tendered a bid for the new slot.
Smart as ever, Sky already has its Freeview spaces sewn up. He knows that if Freeview ever reaches the critical mass where ad revenues start to generate meaningful numbers BSkyB can always beef up its offerings.