SkyDigital, Freeview and NTL Telewest are pretty tough competition for anyone entering the cut-throat digital-entertainment market. For BT, facing pressures on its fixed-line and broadband businesses, it is a challenge it must meet.
Offering TV down the phone line, the BT Vision platform launched this week. BT's 3m broadband customers who buy a Philips-made, Microsoft-powered set-top box will be able to access about 30 Freeview channels, video-on-demand, PVR with 80 hours' storage and catch-up TV of the last seven days' viewing, not to mention shopping, games and community services, and products such as instant messaging and video telephony.
The selling point is that users won't pay for anything they don't want. Once they have bought the set-top box and installed a digital aerial, they get Freeview and a menu of on-demand services, which they can access either by pay-per-view or subscription.
'We think there's a market that doesn't want to buy high-price, long-term subscriptions, but would like more than what's on offer from Freeview,' says BT Vision chief executive Dan Marks.
Whether it proves to be a compelling proposition will depend on the quality of the on-demand content. Marks has been busy signing contracts with Hollywood studios such as DreamWorks, Disney and Paramount for its movie service. Deals with Setanta Sports (for live FA Premier League rights), Cartoon Network, BBC Worldwide, Endemol, National Geographic, MTV, HIT! and music service i-concerts will provide the spine of subscription services.
Other key factors in wooing customers will be price and ease of use. Marks claims BT Vision will have 'a simple, fast, intuitive' interface and, more importantly, he says, BT has advantages in reach, market power and consumer trust that 'a new company would find almost impossible to replicate'.
Analysts remain dubious. The announcement of a measured roll-out that will 'pick up momentum in the spring' means BT has blown the chance to make a splash in the run-up to Christmas. The delay has been made all the worse by Sky, which has pre-empted the launch with its Sky Anytime broadband service.
Henley Centre Headlight Vision director Andrew Curry is sceptical, not least because BT's previous attempts to deliver content have failed. 'Maybe it's a cultural thing, but BT has always struggled to adapt to the demands of running an entertainment service,' he says. 'I'm also not convinced the brand has "permission" from consumers to enter TV.'
Conrad Roeber, a partner at media consultancy Mediatique, shares Curry's concerns. 'It's talking about 2m subscribers in three to five years, which is ambitious. The low-hanging fruit are the 1m homes that have both Freeview and BT Broadband, but even if BT got all of those, it would still have to persuade other Freeview customers to trade up and incentivise users of other broadband services to migrate.'
Even if BT Vision gets its 2m, Roeber has reservations about its revenue model. 'There is potential in pay-per-view movies and perhaps in premium channels. But other platforms provide similar on-demand TV content for free. BT Vision may have to go the same way - giving away on-demand content to hold on to broadband subscribers.'
As for advertisers, there is potential for audience to be lost, as BT Vision encourages viewers to take control. But it is not something agencies fear, according to Universal McCann broadcast account director Keith Welling.
'In the short term, we don't need to do anything, because BT Vision will be in only 250,000 homes by the end of 2007,' he says. 'In fact, it is a chance to learn. One area BT Vision has pioneered is ads around PVR functionality. Ads can be inserted when viewers pause or fast-forward. And they can be tailored according to the genre of show being watched.'
Longer-term, the impact on advertisers will depend on the business model BT Vision adopts, says Welling. 'If an ad-free PPV environment works well for it, that reduces the opportunities for advertisers. But if it is forced to give on- demand content for free, it will need to compensate for that by developing a robust advertiser proposition.'
This article was first published on Marketing