LONDON — A year ago digital terrestrial television was an expensive embarrassment in Blighty as ITV Digital, with losses of $1.5 billion, threatened to bring down joint owners Carlton and Granada, the powerhouses behind commercial giant ITV.
Twelve months on, those two companies are still suffering the fall-out from this epic media misadventure.
But under new ownership and a radically different approach, an alliance of pubcaster the BBC, Rupert Murdoch’s satcaster BSkyB and transmission combo Castle Communications, is proving that DTT can and does work.
Commentators have long argued that DTT could only succeed with the committed backing of a pubcaster — and so it has proved with the BBC-led Freeview, which on present trends may revolutionize British broadcasting and emerge as the world’s first successful DTT service.
Figures released June 9 show Freeview, offering 30 channels for a single payment of $140 for the decoder box, is attracting twice as many new customers as Sky.
“The Freeview proposition of a one-off payment and no contract is clearly attracting a lot of our audience who would not have previously considered digital,” says Andy Duncan, BBC director of marketing and communications.
With 800,000 converts to DTT since Freeview launched seven months ago, its backers claim that at current projections, take-up is likely to outstrip U.K. sales of both Playstation and DVD players in their first year on sale.
Or to put it another way, one million Freeview boxes will be in British homes by the fall.
Lacking big-ticket sports or a premium movie channel, skeptics had written off Freeview as a marginal entity that would struggle to find a market.
Instead, Freeview’s success, powered by a shrewd marketing campaign and extensive cross-promotion across all BBC media, is the talk of Blighty’s TV community this summer.
“The momentum of Freeview is surprising everyone,” reckons a British multi-channel veteran.
“We all expected it to do well in the first couple of months, but the fact that the number of customers appears to be increasing, with no sign of demand leveling off, means that it could eventually cause people to churn out of Sky.”
The possibility of that happening is at least 18 months away, when — and if — Freeview reaches the three-four million mark and becomes viable as an advertising medium.
Freeview’s success is all the more surprising considering that ITV Digital and even Sky Digital — poised to reap big profits following huge investment — had to tempt potential subscribers by giving away set-top boxes and offering other cut price deals.
At present Sky Digital, driven by premium sports and movie fare, has 6.7 million subscribers and is adding new paying customers at the rate of about 50,000 a month.
Freeview is in 1.6 million homes (800,000 are watching via old ITV Digital boxes) and since January the service has been shifting more than 100,000 units a month.
Unlike Sky, there is no churn because no subscriber fees are involved.
And with the cost of the Freeview decoder predicted to fall by at least a third in the near future, growth could become still more rapid in the next 12 to 18 months.
The irony of the commercially savvy Sky getting into bed with the BBC is intriguing observers, but this marriage of convenience was based on mutual self-interest.
In order to justify the millions poured into its new digital channels, the pubcaster needed to do everything it could to make DTT work.
The BBC had the content, but Sky possessed the multi-channel know-how.
The BBC runs eight channels on Freeview compared with Sky’s three — Sky News, Sky Sports News and Sky Travel.
In other words, Sky’s presence on Freeview verges on the perfunctory, whereas the BBC, mindful of the government’s aim of switching off the analogue signal by 2010, is providing a portfolio of services embracing children, entertainment for 16-35-year-olds, cultural fare and news.
Commentators believe that Sky intends to use Freeview as a way of persuading consumers to switch to its pay TV offering as well as a route to a terrestrial audience.
It is likely to beef up its channels on the platform once the numbers reach critical mass, possibly launching flagship service Sky One on Freeview.
Sky Networks’ new managing director Dawn Airey thinks Freeview’s penetration will need to triple before this can happen.
“Freeview’s grown rather nicely and we watch with interest as it grows further,” she says cryptically.
The BBC says that research conducted by itself and retail chain Dixon’s, which sells Freeview boxes, shows that DTT is appealing to a different demographic to traditional multi-channel homes — now 40% of the U.K.
Three-quarters of Freeview buyers are over 35 while 40% are 55-plus.
For advertisers, this makes audiences less attractive, but as the platform gets into more and more homes, and channel providers improve their programming, younger audiences may come on board.
Last week Channel 4’s CEO Mark Thompson said that he intends to use a guaranteed slot on Freeview to launch a new station by the end of the year, but declined to give details. C4 already provides youth station E4 to pay platforms.
Negotiations between Freeview and Turner to broadcast a mix of CNN, Turner Classic Movies and Boomerang collapsed, but the outfit may reconsider.
Two things are clear: the early success of Freeview has rubbed salt in the wounds of those responsible for the ITV Digital fiasco; the BBC discussed a free DTT service with ITV but the talks proved fruitless.
It also could put more power into the hands of the already dominant BBC and BSkyB, and may increase calls to curb their market leadership.
But finally DTT looks here to stay.