Worldwide Advertising: Global review of Digital TV - Everybody’s talking digital, but what’s actually going on? Carat International rounds up how the world’s TV companies are responding to the new era

Everyone knows digital television technology has the potential to

offer viewers a higher quality of broadcast signal including HDTV and

CD-quality sound. But it also gives broadcasters the chance to offer

viewers a vast choice of programming.

Because digital signals can be compressed, up to 200 channels can be

received by a viewer with a single dish. This has important implications

for programme makers. The extra ’bandwidth’ created by digital

technology is likely to reduce the cost of owning bandwidth, enabling

marginal players to broadcast to small audiences - including small

geographical areas - and to special interest groups, such as

shoppers.

In addition, digital technology potentially allows for the development

of interactive services: this is because the signal from a digital

broadcast is in effect a computer program which can be interpreted and

manipulated by the viewer.

Digital television services are now becoming available to viewers around

the world. Digital TV can be received in three ways: via cable, via

terrestrial broadcast and by satellite (DTH or DBS). In addition,

microwave and ISDN services are also being developed. Satellite is the

easiest way to transmit a large number of services but is, obviously,

limited by the number of homes with receiving dishes. Conversely,

digital terrestrial is potentially universally available (given

appropriate television sets) but is restricted in terms of its spectrum.

Digital cable is positioned somewhere between these two extremes.

Programming on the early digital offerings generally includes major

cable services, sports, pay-per-view (PPV) movies, audio services as

well as niche programming aimed at smaller audiences. PPV movies in a

’near video on demand’ mode (where movies are offered on several

channels with start times staggered at, say, 30-minute intervals) is

already a popular service with DirecTV in the US, achieving average buy

rates of two movies a month.

As well as conventional programming, digital TV has the potential to

provide data services and this is perhaps the most exciting element.

Because the signals are sent as digital packets, like computer software,

the systems can broadcast video, audio, and computer data in any

combination.

Most decoders contain a high-speed data port which can be connected to a

computer. A huge amount of information can be sent this way: at least 23

MBits of data per second, which is a thousand times the speed of the

average Internet modem. This facility will be of special interest to

advertisers, who could use it to send extra information packaged within

a traditional television or ’linear’ commercial.

There are some problems with digital satellite. Because of the broadcast

frequencies used by digital satellite TV providers, severe rainy weather

can affect output. Digital ’noise’ is sometimes visible which some

viewers find objectionable. The digital decoders are about three times

the price ofanalogue decoders, largely because of the memory chips

needed.

Although digital TV services still have far fewer subscribers than the

cable TV industry, they are adding subscribers rapidly and the medium

has strong growth potential.

United States of America

There are approximately five million homes in the US that subscribe to

digital satellite TV services. They are offered by four main groupings:

Primestar; DirecTV/USSB; EchoStar (DISH Network)/Sky Angel; and

AlphaStar.

DirecTV, a subsidiary of Hughes Communications, is considered the

premier digital satellite TV service in the US and has signed up more

than 2.5 million subscribers since starting in June 1994 - more than

half of the digital satellite TV market. The United States Satellite

Broadcasting Company (USSB) delivers a 25-channel service which uses the

same satellites and reception systems as DirecTV and a merged programme

guide makes their offerings appear as a single service. In conjunction

with Microsoft, DirecTV has created a Windows 95-based PC system which

can receive their programming in combination with data services. Launch

is expected in late 1997 or early 1998.

The oldest service in the US is Primestar, offered by a group of cable

TV companies. It has captured more than 1.8 million subscribers (more

than 30 per cent of the digital satellite TV market) since its launch

two years ago.

The DISH Network, from EchoStar Communications, launched in April 1996

and, so far, has captured about 505,000 subscribers. DISH entered the

market with inexpensive hardware and programming; this has proved to be

very popular with subscribers and its strategy has forced other

providers to lower prices. A six-to-ten channel niche Christian

religious service, called SkyAngel. is offered by Dominion which appears

as part of the EchoStar service. In addition, EchoStar has announced a

data service, called AgCast, aimed at the rural farm markets;

subscription will be about dollars 35 per month.

AlphaStar from Tee-Comm started in late 1996 and has added subscribers

very slowly: so far only 52,000. In the US, the service is the only one

available to residents of Alaska and Hawaii and it appears to be more

popular outside the US.

Unsurprisingly, Rupert Murdoch’s News Corporation is also on the

scene.

Together with MCI, NewsCorp has purchased significant transponder rights

and has recently announced plans to merge with EchoStar to provide a

single 500-channel digital satellite service, called Sky. If it

overcomes regulatory hurdles, Sky will probably become the foremost US

digital satellite service and a significant competitor to cable TV.

Digital cable has been pioneered in the the US by TCI, one of the

world’s largest cable operators, which ordered digital decoders back in

1992.

However, the service had trailed in just three US cities by 1996. TCI

recently announced a roll-out of its service across metropolitan Denver

and plans to have five million digital subscribers by the end of

1997.

Eventually, 90 per cent of its subscribers will be able to receive

digital signals. Other cable operators are now getting involved in this

area, but it will be the end of 1997 before serious commercial numbers

are achieved.

United Kingdom

When Margaret Thatcher was prime minister, she took a dim view of the

lack of competition in the commercial TV market. She wanted to introduce

viewer choice - and was sympathetic to the launch of two (which soon

became one) satellite operations. Irrespective of a change in political

complexion, the UK is still determined to act positively to encourage

competition in broadcasting.

With digital technology providing the opportunity to split the available

terrestrial bandwidth into up to 36 channels in place of the existing

five, new technology can serve this competitive ideology.

The Government is to introduce six new frequencies, known as

multiplexes, for broadcasting digitally. One of the multiplexes will be

allocated to the BBC. Two more multiplexes will be divided between ITV,

Channel 4, S4C, and Channel 5, which will get half a multiplex each

(roughly another three channels each).

The Independent Television Commission is expected to announce the

results of the auction for the allocation of the remaining three

multiplexes in May. An indication of its commitment to digital is that,

unlike terrestrial licences that are sold to the highest bidder, the

digital licence does not require a fee to be paid to the Government for

12 years. The licence will be awarded to the service that will best

establish digital in the UK, with services due to start in July

1998.

Two bidders have emerged: the first is British Digital Broadcasting, a

consortium owned by the terrestrial franchise holders, Carlton and

Granada, and the satellite operator, BSkyB; the second is the Digital

Television Network, owned by the cable franchise operator, International

CableTel.

As well as being part of British Digital Broadcasting, BSkyB has its own

digital plans. Towards the end of the year another huge satellite will

be flung into orbit, with half the capacity leased by BSkyB to

accommodate 160 or so digital channels.

It is not fully clear what kind of services will be available on all

this additional channel capacity. What is certain is that it will not

simply be used to provide more of what we presently see and it will

definitely provide a range of interactive facilities. But until digital

television gets into its stride, the exact nature of the offering will

remain speculation.

Near-video-on-demand, pay per view and exclusive coverage of major

sporting events will form a core, while British Interactive Broadcasting

(a consortium comprising BSkyB, BT, Midland Bank and Matsushita

Electric) will help subsidise the introduction of the set-top boxes that

will be needed to decode the digital signals. The shareholders aim to

introduce the first set-top boxes at a retail price of about pounds 200.

It is hoped that this will be an acceptable price to viewers who appear

to have been put off by the high cost of boxes in other countries. BIB’s

shareholders all stand to gain from a share of the profits in the

interactive services that the decoders will facilitate.

Germany

In 1995, plans to launch three digital TV services were announced by

Club RTL (IP Group), PRO7 Digital and DF1 (Kirch Group). By mid-1996,

only the Kirch proposal remained. The problem for the other two, as will

often happen in the world of interactive television, was that they were

unable to find enough good content. Most of the digital broadcasting

licences for sports and films were owned by Kirch.

Kirch’s DF1 service began with 15 different channels and this has now

been expanded to 20. A wide range of programming is available including

sports, documentaries, movies, children’s programmes and music.

Independent programmes will also be delivered, including output from MTV

and VH-1.

Kirch has been quick to respond to digital’s potential. For instance,

Formula One races are broadcast with five different camera feeds,

enabling viewers to choose their favourite shots by using their remote

control.

DF1 has also developed near-video-on-demand programming with four

box-office hits delivered simultaneously with start times at 30-minute

intervals.

In addition, DF1 plans a partnership with the pay TV channel, Premiere,

to exchange films and sports programming and enhance the content of both

services.

Advertising has not been forgotten and advertiser-funded channels,

Website downloading and interactive ads are being developed.

Despite such innovations, the numbers of subscribers remains low at

30,000.

This is partly because Deutsche Telekom, which controls German cable,

has failed to agree with DF1 on access to cable and aims to have an

active role in deciding content and subscriber administration. As a

result, about 16 million cabled homes in Germany are unable to receive

DF1.

Forecasts of up to 200,000 subscribers by the end of the year are being

mooted, but these depend on Kirch reaching an agreement with Deutsche

Telekom. Legal conflicts with Premiere, Germany’s analogue pay TV

service, have also paralysed marketing efforts: Premiere, with about 1.5

million subscribers, is also testing digital packages. Moreover, at

about dollars 500 each, the cost of set-top decoders is perceived to be

a barrier to mass adoption. There are plans to reduce this price to

nearer dollars 300 and this may well be the catalyst that enables

digital television to take off in Germany, as would the possible merger

of Premiere and DF1.

France

In France, three digital programme packages are available for

subscription and their take-up is increasing rapidly. The first pack was

launched in April 1996 by Canal Plus. Already, 300,000 households have

subscribed to it. Meanwhile, a consortium of French national stations

(with the exception of Canal Plus), CLT and two cable operators created

TPS (television par satellite), which opened to subscribers in December

1996. Three months later, 116,000 households had already reserved their

decoder. At the same time, AB Production, a French production company,

launched its digital package at the low price of FF49 per month. So far

only 4,600 homes have subscribed.

Interactive television services are being planned in France. Canal Plus

aims to launch an interactive facility - including Internet access,

e-mail and home shopping - this summer. The company has established a

subsidiary, CanalPro, to sell digital services and it is expected to

generate revenues of about dollars 2.5 million in its first,

experimental, year.

Italy

In January 1996, Italy became the first European country to launch a

digital television service. Telepiu’, through its division Telepiu’ Sat,

is still the only real player operating in the medium. Telepiu’

broadcasts the following digital satellite channels: Telepiu’ 1

(movies), Telepiu’ 2 (sport), Telepiu’ 3 (culture), Telepiu’ calcio

(football live), some thematic channels, a Disney channel and some

foreign channels.

Telepiu’ had expected about 150,000 subscribers by the start of 1997 but

at the end of January 1997 it had captured only 60,000. The slow take-up

is probably because of the expense of the digital decoder and antenna

and the fact that Italian TV carries plenty of free football. Telepiu’ 2

continues to broadcast live football games for its 700,000 analogue

subscribers.

The main shareholder, Canal Plus, is preparing a new marketing and

selling strategy, based on renting the digital kit and a discounted

programming offer.

Digital cable television is being investigated by Stream, a company

owned by the state-controlled Telecom Italia. It has completed a

14-month video-on-demand trial with 1,000 families, but has postponed

further VOD developments on the grounds of cost. Now Stream has started

selling digital cable TV subscriptions with an offer similar to that of

Telepiu’. The progress of cable in Italy is likely to be very slow,

whereas satellite digital TV is expected to develop more rapidly, at the

rate of 2,500,000 subscriptions within the next six to eight years.

The future structure of the TV system is uncertain - the Italian

parliament is now discussing new laws to regulate it. An important part

of the debate concerns digital TV. One possible outcome is a joint

venture among Telepiu’ (ie Canal Plus), RAI and Stream.

Netherlands

The development of digital television in the Netherlands is still at an

exploratory stage, even though cable penetration is at 93.6 per cent and

4.6 per cent of Dutch households own a satellite dish. The biggest

problem is that Dutch viewers are not used to paying for TV and they

don’t want more of the same programmes. At the moment, they pay about

Fl15 per month for their cable connection and Fl360 viewer tax to

receive 25 channels on average. This is more than enough for the Dutch.

About half of Dutch viewers prefer the ’old situation’: a basic package

of ten channels for 70 per cent of the price.

Beside the small pay-per-view market, few interactive products have been

introduced: most of these are still being tested. KPN multimedia has

developed products that integrate TV, PC, cable and telephone including

a digital TV guide and interactive teletext. Nethold/Multichoice will

introduce an interactive service by satellite at the end of 1997 and the

service will include channels for video on demand and computer

games.

Far East

In Asia, digital broadcasting is set to have a huge impact and all new

satellites are fully compatible with digital signals. At present, Star

leads the way in providing digital programming. It was Star that

heralded the start of regional programming in the Far East at its launch

in 1991.

The digital platform, with its potential for multiple channels, may well

drive the further development of regional programming in the Far

East.

The Asia/Pacific markets are expected to adopt digital broadcasting much

faster than the more established European TV industry. Until recently,

for example, Australia had little direct-to-home satellite take-up but

it is now passing analogue technology by.

More than 40 million households in the Asia/Pacific region will

subscribe to digital TV services by 2005, according to a recent report

by CIT Research, and it could be available to 95 per cent of all homes

with a satellite dish in less than a decade. This will make the

Asia/Pacific region the world’s biggest market for digital television.

However, the speed of development will depend on the level of

co-operation between broadcasters and equipment manufacturers. As in all

markets, unless they can map out a clear path for subscribers to upgrade

to digital technology, it could take another 20 years for analogue

receivers to become redundant.

This article was first published on Campaign