Conor Dignam on Broadcasting

Freesat challenges dominance of Sky in the high-definition future

The launch of the new Freesat joint venture between the BBC and ITV last month, was so low key that most people won't have noticed its arrival.

Looking at some of the online chatboards at the moment you'd be forgiven for thinking this might be because of a lack of confidence by a new satellite service taking on Sky's strength. Disgruntled consumers, on sites such as joinfreesat.co.uk, complain about a lack of boxes in the shops, poor sales experience when they've tried to buy one, and a general lack of information about the service.

But it would be a mistake to read too much into Freesat's first few weeks – and Sky certainly won't take much comfort from the fact that its new rival has arrived with a whimper rather than a bang. There is plenty of time for Freesat to make its mark. After all, Freeview is now in more than 15 million homes and it has been around for less than six years. The new Freesat service has even greater potential to significantly change the landscape of digital television, and create real competition for Sky in the area of satellite television.

On the face of it there isn't much that separates Sky's own "freesat" offering and the new BBC/ITV service. Sky's free service has more channels – about 200 in total – and the installation of a box and dish will cost about £150. Freesat has fewer channels, about 80, but this will grow, and a box and installation will cost you £130-£150.

For Sky, "free" boxes are digital Trojan horses to get inside people's homes and then entice them to the world of pay TV. The new BBC/ITV service, on the other hand, does exactly what it says on the tin and there won't be any attempt made to "spin-up" people to pay services.

There are two imperatives behind the BBC/ITV launch of Freesat – the first is short-term, and concerns the digital switchover. About 27 per cent of the country cannot receive digital terrestrial television (DTT), so Freeview boxes are not an option for them. Even when the analogue signal is switched off, boosting the DTT signal, some 10 per cent of homes will still not be able to receive Freeview.

So digital switchover presents Freesat with clear opportunities for growth and a very obvious market to go after. But it is high definition television (HDTV) that really underpins the logic of Freesat's launch. Freeview, for all its success, has serious limitations when it comes to HD capacity and will be able to carry only four channels – with the first three due to launch in 2009. High definition is the next wave of television; over time it will replace standard definition in the same way colour sets replaced black-and-white ones.

In this multichannel, high-definition TV world, Freeview and DTT may quickly become an obsolete platform, where viewers used to HD are not prepared to put up with poorer picture quality. Satellite, of course, has a limitless capacity to carry HD. The BBC and ITV know that the HD future is too important to leave to Sky and other pay services. ITV has already used the service to broadcast the Euro 2008 tournament in HD – matches that are not available on Sky's pay or free services.

At present Sky believes that its 18 HD channels are a premium service that it can charge customers extra for – and so far about 500,000 Sky customers have agreed, paying £10 a month in additional subscription for access to HD services. Yet more than 9.6m "HD-ready" TV sets have been sold in the UK, suggesting that the vast majority of viewers aren't persuaded to pay a subscription to access HD content (at least so far).

Freesat's managing director Emma Scott, speaking at a Broadcast conference recently, said she believed these are the customers who will turn to Freesat for HD services. She also claimed Sky would not be able to sustain HD as a subscriber service – as viewers would come to see HD as standard and refuse to pay a subscription for it.

She may be right, and both the BBC and ITV believe she is. Of course, Sky has a different take on all of this. It has defied those who in the past have suggested it is running out of road for new subscribers – constantly innovating and delivering both content and technology that finds new customers and keeps its existing ones coming back for more. It believes people will still pay for the very best content exclusively in HD as part of their subscription package, and it will fight tooth and nail to make sure that every satellite home is a Sky home.

But the proposition of "free" digital services in the multichannel market has proven more difficult for Sky to deal with than seeing off rival pay-TV services.

The clear contest in the digital market is free versus pay, rather than Sky versus Virgin or any other pay service. And that battle will take place increasingly in an HD world. It may have arrived quietly into the market, but Freesat is HD-ready – and that is likely to make it a major player in years to come.

BBC seeks better control of iPlayer

Page Three Teens, a repeat on BBC3, was sitting at the top of the BBC iPlayer's most popular chart last week for some days. There was a bit of discomfort among senior BBC figures when the programme was featured so prominently on both the iPlayer's homepage and the homepage of bbc.co.uk, which lists the most watched shows on the iPlayer.

But that's life in an on-demand world where you no longer have the same control over your content or how it is accessed. In the past seven months, the iPlayer has transformed the way millions of people think about and view TV shows. About 100 million shows have been watched on the service since it launched, and even the BBC has been surprised at just how quickly it has become established.

Big shows such as Dr Who and Top Gear are inevitably proving popular – but others such as BBC3 series Gavin and Stacey recorded 7 per cent of its viewing from the iPlayer – and CBBC series MI High an impressive 20 per cent.

The BBC is busily trying to work out how it might be able to manage content around this growing user group – and redefine in some respects the role of the scheduler in a non-linear age. Anthony Rose, head of digital media technology at the BBC, recently revealed that the BBC is exploring how much individual viewers are drawn to "clusters" of programmes, whether family shows, children's, art and culture, science and nature or soaps. The aim is for the site to serve up to viewers the kind of shows that, based on their previous viewing, they will enjoy. This will involve an Amazon-like recommendation service, saying "other people who viewed Dr Who also watched Torchwood". Much of this work will be done by computer software rather than human schedulers – matching up the content with the viewer history.

It will also depend, of course, on people being willing to give the BBC their personal details, which may one day be used to ensure they have a TV licence.

Conor Dignam is director of digital content for Emap Inform

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