BSkyB Ready To Fight At The Low End

By | June 21, 2004 | Feature

BSkyB [BSY] has signaled its intention to be much more of a player in the lower-end segment of the U.K. digital television market. It will launch a Free-To-Air (FTA) satellite service at the end of the year from which viewers can pick up more than 200 television and radio channels. Consumers will have to pay a one-time charge of around $272 for installation and equipment, but there will be no monthly fee.

The move could be the first indication that there now is saturation in the high-end, fee-paying subscriber market for BSkyB. In the first quarter, it added a bit fewer than 70,000 subscribers to mark one of BSkyB’s lowest quarterly figures in a long time. While it will continue to milk additional revenue from its existing subscribers through probable price hikes, it’s clear BSkyB is setting its sights on the price-sensitive end of the market.

Ultimately, the company’s move to a FTA satellite offering also will enable it to persuade consumers to move to its pay-TV services in the future. With Freeview homes now closing in on four million subscribers — a quite staggering figure — it is clear BSkyB has decided it no longer can remain inactive in this segment of the market. Top Up TV, a BSkyB rival that caters to the low end of the pay-TV market, recently launched an additional 10 channels for $14.50 a month on top of the existing Freeview channels. BSkyB’s basic family package costs $34.50 a month.

Sarah Simon, a media equity analyst at Morgan Stanley, believes BSkyB is unlikely to drop that price. “Sky could reduce the cost of its basic package, but this would cause a substantial revenue shortfall, which would drop straight to the bottom line,” she detailed in a recent report. “We think this is highly unlikely. The alternative is therefore to demonstrate to consumers the benefits of taking Sky basic, rather than Freeview or Freeview and Top Up TV.”

Top Up TV CEO Ian West is not concerned by the new FTA proposition. He told Satellite News’ sister publication Inside Digital TV, “I don’t think there is anything there that is really gripping. If it was more channels like ITV2, MTV, things like that, [it would be different] but they are not. There are a lot of shopping channels as part of the proposition.”

However, BSkyB’s announcement could have other ramifications, particularly in terms of analog switch-off.

Nick Bell, a media equity analyst at Bear Stearns, said in his research report, “In our view, Sky’s announcement that, later this year, it will offer a free-to-air satellite service will allow the government to follow [regulatory body] OFCOM’s advice to make an early announcement (probably before the end 2004) to switch off analogue TV by 2010.”

–Mark Holmes

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