BT Television Services extracts
6 October 2010
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Extract from BTwatch, report #216. Click through for: the Executive Brief from this month’s report; the Report Snapshot; or to contact us for more information about the full 58-page report, this industry standard monthly report service, and ongoing subscription access.
BT TELEVISION SERVICES
BT ties with Disney Co for ABC TV On Demand service
BT announced an agreement with The Walt Disney Company EMEA to jointly launch ABC TV On Demand, a video on demand (VOD) service for BT Vision customers in the UK.
The service features popular current US television series from ABC, such as Cougar Town and Desperate Housewives, as well as past seasons of these and other ABC made “modern TV classics”.
The ABC TV On Demand service became available from 15 September 2010, as part of BT Vision’s TV Pack, which costs £6.99 per month. Individual episodes are priced at £0.99 each. The channel is Disney’s first launch of an ABC branded on demand channel in a market outside of the USA.
[Further reference: The Walt Disney Company EMEA and BT Vision announce launch of ABC TV On Demand service -- BT, 26 August 2010.]
BT welcomes Ofcom Sky Movies referral
BT Retail welcomed a decision by regulator Ofcom to refer the control of movie distribution rights for UK television to the Competition Commission, following its earlier investigation into premium content rights held by BSkyB (BTwatch, 2010.03).
The regulator had indicated in an earlier ruling on wholesale television rights, in which it ordered that BSkyB cuts prices it charges rivals to access its main sport channels, that it considered that the position of wholesale movie distribution was more complicated, and pointed towards a Competition Commission investigation to consider this instead. The availability and potential for video-on-demand services in relation to BSkyB’s subscription packages was one of the factors cited in deciding more consideration was needed.
“ The Competition Commission should impose remedies for the upstream supply of movie rights from the major Hollywood studios in the first pay TV subscription window and the wholesale supply of packages including core premium movie channels. “
“ [BSkyB] is restricting the distribution of premium movies and there is ineffective exploitation of subscription video-on-demand movie rights… The Competition Commission should consider all potential remedies, including operational and/or structural separation. “
– BT statement.
“ First-run Hollywood movies are particularly important to competition in the pay TV sector… Ofcom is concerned in particular that the way in which these movies are sold and distributed creates a situation in which Sky has the incentive and ability to distort competition. “
– Ofcom statement.
[Further reference: Ofcom refers Pay TV movies to Competition Commission -- Ofcom, 4 August 2010; Sky movie role see competition probe -- BBC News, 4 August 2010.]
Patterson: Fibre will make Vision a success
Gavin Patterson, Chief Executive of BT Retail, was interviewed by the Financial Times on strategy and targets for the company’s BT Vision television service.
Patterson said that, despite the well documented weak start to the Vision service, which missed its initial target of two-three million subscribers (BTwatch, passim), the launch of the BT Infinity fibre based broadband network will make BT Vision a stronger proposition to sell to the company’s 5.2 million broadband customer base.
“ We believe our vision for TV comes alive with fibre. Our service is much more than sport. The real competitive advantage comes from the breadth of on demand content and the interactive capability. ”
– Patterson.
He also underlined the importance of BT’s participation in Project Canvas for uniting content and interactivity. “To create a next generation TV platform, we need both [content and technology]“, he said, citing the potential ability to allow customers to chat on Facebook while watching football on the same screen.
“ I would anticipate all six partners taking a different angle in how to exploit [Canvas] to their customers. [But that will not undermine their collective power to compete with BSkyB and Virgin]. I think that marketing muscle, coupled with the reach in terms of [broadband] consumers… you are beginning to create scale. The TV business benefits from scale. ”
– Patterson.
However, scale is one thing that BT Vision does not have with fewer than 500,000 customers at present. Ian Watt of Enders Analysis estimates that BT will need two million subscribers to match Sky’s cost base and realise the benefits of scale — meaning more than two million of its broadband customers would need to sign up to BT Vision.
In defence, Patterson said it is an unfair comparison to just look at a single product, and pointed out that customers taking Sky Sports also had to sign up to a new broadband and voice contract. “They are locked in for longer, hence we are able to underpin the profitability of those customers”, he said.
[Further reference: Sleeping giant wakes up to technology -- Financial Times, 16 August 2010.]
Rivals unworried by BT Vision push
At the end of July 2010, a few weeks after the BT Sky Sports offer had been announced, TalkTalk said it had not noticeably been affected by customers churning for an offering with a television element.
“ We’re not feeling any pressure at the moment, either in terms of signing up customers or in terms of churn of not having a TV proposition affecting us. ”
– Charles Dunstone, TalkTalk Chairman.
Dunstone predicted that Project Canvas, the Internet Protocol television project in which both BT Group and TalkTalk are partners, could be launched by mid 2011, if not a little earlier, although the summer 2011 target appears to be the one the project is looking to, according to comments made at the unveiling of the YouView brand.
[Further reference: Event brief of TalkTalk Telecom Group PLC Q1 trading statement conference call -- final -- FD Wire, 30 July 2010.]
Project Canvas unveils YouView
Project Canvas, a collaboration between Arqiva, the BBC, BT Group, Channel 4, Five, ITV, and TalkTalk, announced the name YouView as the brand of its new free to air internet connected television service, set to launch in 2011.
The partners also declared the establishment of YouView TV Ltd and the appointment of Richard Halton, former head of the BBC’s Corporate Strategy team and founding leader of the Project Canvas initiative, as its first Chief Executive.
“ YouView is a brilliant new subscription free TV service, which combines the best TV with on demand services and internet content. I am delighted to be leading the team who will make it a reality, and think it will change the way we watch TV forever. We are creating an exciting consumer brand, which will stand for a better TV experience for UK homes. Connected TV creates all kinds of creative possibilities, for existing networks as well as local services, and new developers of interactive applications. It all adds up to great news for TV audiences. I look forward to working closely with the creative and developer communities to open up exciting possibilities for viewers to discover and enjoy content in new ways. ”
– Halton.
YouView will offer programmes from broadcasters like the BBC, Channel 4, Five, and ITV, and feature a programme guide that goes backwards as well as forwards, allowing viewers to watch any programme from the last seven days, with the ability to search for programmes by genre, interest, or locality.
Meek appointed to Chairman role…
Halton will work alongside Kip Meek, who was appointed Chairman of Project Canvas in August 2010. Meek is a former government advisor on Digital Britain and was a senior figure at Ofcom; he left the regulator after being passed over for the Chief Executive role in 2006. He is also Non Executive Director of the Broadband Stakeholder Group and Lead Non Executive Director of Phorm. Phorm is the controversial targeted web advertising company with which BT Retail held service trials that have led to long running investigations into potential breach of data protection legislation by BT (BTwatch, passim). BT has since shelved plans to roll out Phorm solutions.
…and Channel Five gets back on board
The announcement of YouView closely follows the return of Channel Five to the joint venture, after it was acquired by Northern & Shell. The new owners of the channel explained the decision to reverse the withdrawal from the project (announced in July 2010) as part of its commitment to interactive television services.
“ Project Canvas is set to shape the future of broadcasting, and open up new and exciting possibilities for viewers. This is important to the future of Channel Five, and having an open internet connected TV platform fits closely with our plans to bring brilliant new content and interactive services to viewers. We’re delighted to renew Channel Five’s commitment to supporting Project Canvas following a review of our digital strategy. ”
– Richard Desmond, Chairman, Northern & Shell.
[Further reference: ‘YouView' unveiled as the future of television -- Project Canvas, 16 September 2010; Kip Meek to become chairman of Project Canvas -- Project Canvas, 23 July 2010.]
Device manufacturers express interest in Canvas
Project Canvas also announced it has received more than 40 expressions of interest from consumer device manufacturers in response to its invitation to develop and bring Canvas devices to market in 2011.
“ The response from industry has been phenomenal, and we’re really excited by the strong desire to work with Project Canvas to bring internet enabled set top boxes and TVs into people’s homes next year. For us, this is a great endorsement of our open approach to working with industry partners. Consumers need the assurance that they will get the best experience, whatever device they buy. This industry engagement programme will ensure that high standards of quality will be deep rooted throughout all of our supported products. We look forward to working with further manufacturers as we roll out more phases of this programme. ”
– Halton.
Project Canvas said it has worked with the Digital Television Group (DTG) and its members to develop a set of core technical specifications to support the launch of its first consumer equipment, and plans to select a number of manufacturers to move through to the next stage of evaluation by the end of September 2010. However, earlier in the year, DTG had expressed disquiet at the plans for the Project Canvas initiative (BTwatch, 2010.02).
Halton said he aims to bring more device partners on board over time to deliver the “widest possible range of Canvas devices”.
[Further reference: Industry gets behind Project Canvas -- Project Canvas, 9 September 2010.]
Objections to Project Canvas continue to mount
Virgin Media, the UK’s cable network operator, submitted an objection to regulator Ofcom regarding Project Canvas, the Internet Protocol television (IPTV) joint venture that is creating a new television platform, which is backed by broadcasters the BBC, Channel 4, Five, ITV, network infrastructure company Arqiva, and communications providers BT Group and TalkTalk.
Virgin Media claims the consortium partners have failed to create a platform that will work with other internet television platforms, including Virgin’s on demand product.
“ Collectively, the BBC, ITV, and Channel 4 account for around two thirds of all television viewing in the UK, while BT and TalkTalk control over whalf [of] the national broadband market. Canvas will stifle future innovation as well as eliminate existing consumer choice for home entertainment. They are establishing a single new TV platform of their own with a considerable incentive to favour this over other TV services. This could severely affect consumer options for watching public service programming in the future. “
– Virgin Media statement.
IP Vision, the operator of web television platform Fetch TV, also submitted an objection, and claims the consortium of industry “goliaths” would have the power to dominate the IPTV market.
“ The removal of competition between the Canvas joint venture partners with respect to platform, application, and service development for the delivery of video content to broadband related TV devices restricts competition in the market in general. ”
–Eddie Abrams, IP Vision Chief Executive.
The Open Source Consortium (OSC), a trade body comprising open standards software developers, is among the organisations voicing its opposition to Project Canvas to Ofcom.
The OSC claims the Canvas platform will have “adverse consequences for the device and software sector, diminishing consumer choice, and causing inevitable consumer harm.”
“ Project Canvas in its current form is going to lead to the BBC having unprecedented influence in the market for computer hardware and software; and not enough people seem to be worrying about the scale or impact of that. Project Canvas exceeds the BBC’s public service remit, and should be prevented from further distorting the market for devices and software. “
– Gerry Gavigan, Chair of the OSC.
BSkyB is also rumoured to be pondering a complaint to the regulator about the Canvas plans. Project Canvas rejected the concerns.
“ Our proposals remain unchanged and will create an open standards based internet connected TV environment that will deliver the best results for consumers — giving them the greatest choice of devices, content services, and applications within a competitive market. “
– Richard Halton, Chief Executive Project Canvas/YouView.
A regulatory review is expected to consider the complaints, with a decision on whether a formal investigation is needed into the competitive impact of Project Canvas expected in October 2010.
[Further reference: Open Source Consortium opposes Project Canvas -- eWeek, September 2010; "Goliaths" running Canvas will hurt web TV competition -- PCPro, 19 August 2010; Virgin Media demands Ofcom probe into Project Canvas -- Digital Choices, 5 August 2010.]
BSkyB wages campaign against Vision
BSkyB highlighted BT’s use of 24 month contracts linked to its cheapest BT Vision rates for Sky Sports subscriptions in the telco’s own advertising for its Sky TV sport packages. The satellite broadcaster stressed its twelve month terms and, in fairy tale-themed advertising, warned consumers of being “gobbled up” and “trapped” by lengthy contract terms from BT.
BSkyB also published a price comparison table for sport packages that includes its own prices alongside those for BT Vision and Virgin Media services. The table highlights information such as the number of channels available — BSkyB is still not obliged to wholesale all of its sport channels at regulator mandated wholesale rates — and the availability of high definition (HD) content on the BSkyB platform — HD is not yet available on the BT digital terrestrial television BT Vision platform.
BT’s pay-TV offering is dwarfed by BSkyB, which has nearly ten million pay TV customers. The satellite operator has had greater success in encroaching on BT Retail territory in recent years than the telco has had with its efforts to take share from BSkyB. The television company undertook an acquisition-spurred entry, which has seen it establish itself firmly as a leading broadband player.
More than a quarter of BSkyB’s customer base is already taking high-definition (HD) services from the broadcast company, which suggests the telco will continue to struggle to make much of an impression with the high-value customer interested in the latest technology, and BT’s plans look like they will only see HD made available when it is essentially industry standard. However, BT has tended to put forward the strategy that it is not looking to compete with BSkyB in the premium customer segment, but is focusing on a lower spending customer base with a value product.
The percentage of BT’s broadband customers that also take television services has reached around 9%, and will provide an effective barrier to churn among this group, however.
[Further reference: Faster fibre-optic rollout will boost BT's plan to become major Pay-TV player -- Telecommunications Insights, 1 September 2010; Sky ramps up BT customer grab drive -- Marketing Week, 25 July 2010; Sky offers comparison table for sports packages -- BSkyB, 22 August 2010.]
About BTwatch
Report: #216
Covering: August/September 2010
Published: September 2010
Next report: October 2010
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