Sky facing increased threat after E4 channel switches to Freeview

Channel 4 is to make its E4 youth-orientated channel available for free on Freeview, boosting the attractiveness of the digital terrestrial platform.

Channel 4 is to make its E4 youth-orientated channel available for free on Freeview, boosting the attractiveness of the digital terrestrial platform.

E4 will join a growing list of general entertainment channels that are either already available on Freeview or will be launched soon.

Freeview, which is free to use once a digital box has been acquired, is available in more than five million homes and sales are continuing to accelerate. Some analysts have suggested that Freeview's growth rate will make it much more difficult for Sky to meet its target of being in 10 million homes by 2010, up from the current 7.4 million.

Over the Christmas quarter, 1.2 million Freeview decoder boxes were sold. That compared with 371,000 gross customer additions at Sky. However, Sky believes that its family package, which offers many more channels but at a monthly cost of £19.50, appeals to a different group of consumers than Freeview. The satellite group pointed out that its Sky One channel remains the most popular digital station in multi-channel homes and that this is not on Freeview.

ITV will start its ITV4 male-orientated channel on Freeview later this year, to add to ITV2 and ITV3, which are already available on the platform. E4 will be launched on Freeview at the end of May, sooner than expected, to coincide with the next series of the Big Brother reality television series. In October, More4 will launch on Freeview, which will offer factual programming, drama and films.

To make E4 a free-to-air channel, it is being withdrawn from Top-Up TV, the pay-TV service that uses digital terrestrial technology and provides a limited pay package for Freeview viewers. Analysts said the presence of E4 on Freeview could dent viewing figures for ITV2, which is aimed at the 16-34 age group. Andy Duncan, Channel 4's chief executive, said: "We have now reached the tipping point where we gain more in advertising than we lose in subscriptions by making E4 free-to-air. We also want our brand available in as many homes as possible."

E4's programming budget has been ramped up to £60m, from £40m last year. Mr Duncan said that although E4 had got to the point of break-even last year, the increased investment now being made meant it was back in the red.

Adam Smith, of Zenith Optimedia, the media buying group, said: "If Sky has saturated the demand for movies and sport, it leaves general entertainment to go for. That becomes harder if channels like E4 are available for nothing."