Why BSkyB is likely to be twice a loser at digital’s dawn.

In the end, the Independent Television Commission made a hard-nosed business decision. It opted to award all three commercial multiplex licences, half of the capacity on offer, to British Digital Broadcasting, owned by Carlton and Granada, shorn of BSkyB as an investor.

In the end, the Independent Television Commission made a hard-nosed

business decision. It opted to award all three commercial multiplex

licences, half of the capacity on offer, to British Digital

Broadcasting, owned by Carlton and Granada, shorn of BSkyB as an

investor.



But it also emerged that the ITC arrived at its decision after some

heavy scrutiny of the current BARB audience ratings. These confirm how

poorly almost all the basic lifestyle, repeats and niche cable and

satellite channels perform, including those run by Granada and Carlton -

as well as Flextech, the BBC’s commercial partner of choice (which also

supply BDB).



So the ITC is insisting as a condition of the licences that Sky’s four

premium movie and sports channels, the only really successful British

satellite services apart from UK Gold, remain firmly contracted to the

BDB programme mix. These are seen by the ITC as providing the key

incentive for households to move to digital. It is an astonishing

commentary on the failure of the established broadcasters to think

big.



Yet at first sight, the ITC’s stance does not seem wholly logical. For

you could equally well argue from the data that satellite and cable

penetration, now at 6.2 million homes, is slowing. That the real message

after eight years of sustained Sky marketing is that 74 per cent of

households have turned down the chance to become subscribers, either

because they don’t want a satellite dish on their house or another cable

under the carpet, are happy with what they currently receive, or simply

can’t afford it.



But, in an unexpected move, the ITC also revealed it is close to making

an announcement about whether people should be allowed to buy TV

subscription channels a la carte, one by one, rather than being forced

into buying bundles of basic services, with premium ones on top.



The ITC points out that last year the Office of Fair Trading ruled that

cable companies, as wholesalers, should be free to buy flexibly. So why

not ordinary people? The warning that ’they (BDB/BSkyB) cannot rely on

the structure remaining acceptable to the ITC’ suggests that it wants to

see a dismantling of the current system, with an obvious impact on

BSkyB’s income. It would also completely undermine their marketing

approach which has linked regular annual price rises to the added value

of extra channels such as Disney.



But cheaper subscription options for fewer services, reasons the

regulator, would hasten the spread of digital, its primary concern. And

it would also expose the fundamental weaknesses of channels forced to

stand alone.



Their operators would have to dramatically upgrade and invest to raise

standards, or kill them off. Let’s hope the ITC is brave. It would be a

great service to broadcasting’s long-term health.



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