Maxime Saada, Managing Director, Canalsat

With more than 5 million subscribers, Canalsat is the leading pay-TV operator in France and the second biggest direct-to-home operator in Europe behind BSkyB.
As part of the Canal+ Group, a major producer of French pay-TV channels and one of the top channel brands in Europe, Canalsat also will be one of the key players in bringing high-definition (HD) TV to France.
Maxime Saada, managing director of the Canalsat platform, talks with Via Satellite about what role he expects Canalsat and Canal+ to play in bringing HD services to a wider audience.

Via Satellite: Do you expect HD growth to really accelerate in France at some point or continue at a steady pace?

Saada: One of the key differentiators in France compared to other countries is that HD is now on several platforms, and this is only going to increase. We are offering HD over satellite as well as over DSL (digital subscriber line) with Orange. We are also offering HD over fiber with most of the DSL operators. In terms of [digital terrestrial television], the authorities will soon be deciding which HD channels will be on this platform. I don’t know of any other country where HD is on so many platforms. We have great expectations as far as the growth of HD in France. Every one of the [set-top boxes] that Canalsat now puts out in the market is HD compatible.

I think HD growth will be strong in France. Although today, we are very keen on HD, the offer needs to be developed further. … The problem with HD content is that it is still extremely expensive to produce. You are talking about a 30 percent to 40 percent increase in programming costs to make programs in HD. You have to change the whole organization, use different equipment, etc. Because of this, the number of content providers ready to produce a significant amount of programming in native HD is still relatively low. This extra cost is borne by the customer. We charge 9 euros ($12.30) a month for HD, but we don’t sell the box the way BSkyB does. The costs associated with producing HD content will eventually go down. As a result, the numbers of HD channels will increase. This is a supply market. When we supply the product, it is going to sell. Customer costs will also go down.

Via Satellite: Do you think the French consumer is really embracing HD?

Saada: I don’t think at this stage that we are completely embracing HD services in France. The numbers of households accessing HD services is still relatively small. However, we expect this number to increase quickly. The reasons we think this will happen is because the price of HD TV equipment is going down steadily, which will make it a very popular product to buy at Christmas. It is also worth noting that it not just acquiring a replacement set for the living room. People are buying TV sets for other rooms in the house. This gives us a double opportunity: HD and multiroom.

The reason why I don’t think customers have embraced HD services yet is that initially there has been a lot of confusion surrounding HD. Before HD was used as a label. We have asked a lot of questions to our potential customers, and we are seeing a lot of confusion in the market. A lot of people who have flat screens think they are HD, for example. The percentage of our customers who have flat screen TVs is very significant, but a large number of them are not accessing HD content yet.

We are seeing that even with customers that have taken up the HD option with us, they actually haven’t set it up correctly. For example, they are not using an HDMI cable. I can tell you of one extreme example, where we had one customer who took HD services from us, but still had a CRT television.

Via Satellite: How are you looking to address that confusion?

Saada: One thing we are planning to do is include the HDMI cable in the package once a subscriber takes HD services, which we have not done in the past. We want our customers to test the technology. Customers need to be convinced by seeing HD technology in action, so we are going to let them trial HD services for free. Sound is also an important issue and this can dramatically improve the viewer experience. But the main driver will always be content.

Via Satellite: What role will Canalsat and Canal+ play in increasing the amount of content?

Saada: First of all, we believe in HD native. We don’t want to put a number of upscaled channels on our HD bouquet. We could do that immediately, if we wanted. We could have 20 upscaled channels, but that is not our strategy. So we want to be a driving force in bringing native HD content to market.

We are also very demanding in terms of technical issues. The reason why we are offering HD exclusively with Orange over DSL is because they have been the only player to agree to our technical standards. We don’t want to go below 9 to 10 megabits per second. That is what is required for HD. On satellite, we do 12 megabits per second. One way to address customer confusion is to establish a difference in terms of overall picture quality.

Via Satellite: What are your plans to develop the HD channel line-up over the next 12 months?

Saada: In the next 12 months, I think we will still have less than 20 HD channels available to our subscribers, but the channels we have will be strong channels with HD native content. In the immediate future, HD will still be a technology reserved for major broadcasters who have significant financial resources and a strong presence in the market. For example, in sports, the leading sports channels will move to HD. In France, I don’t see us having the 100 to 150 HD channels that you see happening in the U.S. I think France may reach the 50-HD-channel mark in 2010 or 2011.

Via Satellite: Is there a sense of frustration that you will have less than 20 HD channels by this time next year?

Saada: No. I don’t think people want huge numbers of HD channels. Obviously, it would be great to have all our content in HD, but it would be too expensive for us and our customer base. An expensive HD service would mean attracting fewer customers. I would rather have a strong HD product, with less channels at a sensible price so we can drive penetration. To do that, we need high-class content. I would love to tell you that out of the 300 channels we have on our bouquet 100 of them are of high quality. But that it not true.
I think by the end of the year, we will have the HD channel line-up we need to push penetration. However, it won’t be perfect, as we will not have every different genre covered. We will be able to do that in 2008. By the end of 2008, we will be where we want to be in terms of HD content and channel line-up.

Via Satellite: When do you expect to see HD set-top boxes becoming more affordable?

Saada: It depends on your starting point, but for us, costs are already coming down. It will be a continuous process. All of our [set-top boxes] are now HD compatible. In terms of volume, we are seeing significant figures already. We have over 100,000 HD [set-top boxes] already in the market.

Via Satellite: Do you think satellite players will lead the drive for HD take-up in Europe?

Saada: Yes, I think satellite players will lead the way. It is in their interest to do so. They are competing with cable, DSL, fiber, etc. It is one of the key competitive advantages of satellite over these platforms. We have to play this card. There are obviously technical issues with HD on DSL today. The key factor behind HD on satellite is that it works all the time, covers 100 percent of territory and you have the technical ability to offer HD as one of a number of advanced services.

Via Satellite: Would you look to acquire telecoms infrastructure like BSkyB?

Saada: We are not exploring that possibility. We believe the partnership route is actually a better model for us than going head on with telcos and competing against them in their traditional markets. Moving into the telecoms space could deteriorate our relationships with key customer providers.