C&W attributes its success to the fact that its networks allow customers to order films from their remote control facility, whereas BSkyB customers cannot. Pay-per-view allows people to pay for a single film rather than having to buy a package. C&W's experience shows that people are far more likely to pay for a film if they can order it from their remote control rather than making a telephone call.
Cable companies believe the technology in their networks gives them an advantage over BSkyB in selling interactive services. BSkyB's satellite network is unable to broadcast and receive signals at the same time, so customers must order by telephone.
"Remote control is driving the buy rate," said Greg Clark, chief operating officer of C&W. "Pay-per-view is an important revenue stream for us in the long term."
Others agree remote control purchasing is the key to driving demand. "US experience shows there is a significant lift on the buy rate if you use remote control," said Andy Birchall, chief executive of Front Row, a group of cable companies that includes Telewest, NTL, General Cable and Diamond Cable.
But US experience also shows that pay-per-view is not expected to be a big money-spinner. Rather, it is seen as a significant lever to break the control BSkyB has on dictating the terms on which customers and competitors buy its programmes. C&W said pay-per-view penetration is 17 per cent in some franchises.
BSkyB has, however, reaped high revenues from signing exclusive contracts with Hollywood studios and sports bodies, particularly the UK Premiership when it started. That strategy has attracted more than 6m subscribers to BSkyB, or a quarter of homes in the UK and Ireland. It has allowed BSkyB to dictate the price paid by competitors to use its programmes.
Earlier this month, BSkyB said demand for its pay-per-view service, which started in December, has underperformed expectations. "They were slightly below our plan," said Mark Booth, chief executive of BSkyB, earlier this month.
However, he added that once digital TV begins this year - the service will expand the number of TV channels in the UK to more than 200 - pay- per-view will take off. "What makes pay-per-view exciting is having 60 channels," said Mr Booth.
BSkyB has set up a joint venture with BT to sell interactive TV services in the UK - called British Interactive Broadcasting - which would use BT's network as a return path for remote control purchases. However, that venture has become mired in regulatory problems at the European Commission.
C&W began offering pay-per-view films at different times of the day on four channels in January and now has 1m customers. It also has the franchise for 53 per cent of those UK homes that are able to buy cable.
Copyright: IOS & Bloomberg