Direct-to-home satellite television operator Canal Digital is getting set to launch a number of high-profile business efforts as it bids to maintain its position as the leading pay-TV operator in the Nordic region.

The company is getting set to launch HDTV (high-definition television) service in September in conjunction with the C-More Group, a premium channel content provider. Initially there will be a single channel with movies and sports, but a lack of set-top boxes and lack of enthusiasm on the part of broadcasters could hold up the progress of offering in the region. “The main problem at the moment is that there are no [HD-ready] set-top boxes in the market,” said Christian Albech, CEO of Canal Digital. “The start-up will be quite slow.”

Albech believes it will be 2006 before HD becomes widely available in the Nordic region, most likely receiving more interest as soccer’s World Cup draws near. “When it comes to the World Cup in soccer, that will be produced in the HD format, and I think that will be the real launch in the HD format,” he said. “A lot of people would like to have that quality. From Oct. 1 until next summer, there will be one more channel surprise, but I don’t think it will be one of the national channels. I spoke to Norwegian public broadcaster NRK about it and they are not even thinking about (HD).”

Latest Numbers

Canal Digital reported 853,000 subscribers at the end of June. The company added just 2,000 subscribers in the second quarter of 2005, down from 4,000 subscribers additions during the same period a year ago and a large drop from the nearly 30,000 subscribers added during the 2005 first quarter. While it may appear on the surface that Canal is struggling based on its second quarter subscriber additions, the performance is in line with at least one analyst’s expectations.

“I don’t really think Canal Digital have performed above expectations, although they are performing well,” Frank Maa, a telecommunications equity analyst at DnB NOR Markets told Satellite News. “There is increasing competition, not only in the end-user market but also for content. For instance, they bought the rights to the Norwegian football league. That was quite expensive, but they needed to do it, otherwise it would have been a catastrophe for them if MTG (whose wholly owned subsidiary Viasat Broadcasting competes with Canal Digital for DTH subscribers) had acquired those rights.”

There will be opportunities on the horizon for Canal Digital to grow, such as the impending switch from analog to digital signals in Sweden, Maa said.

“The new markets will come from the switch-off of the analog signal,” Albech said. With the analog switch-off “the market now has to make a choice either to go on the satellite platform or stay on digital terrestrial. On that battle, I think both Viasat and Canal Digital will be very competitive to Boxer and other DTT (digital terrestrial television) operators. I don’t think it is possible in the first stage (of the analog-to-digital conversion) to sell premium channels. It will be more about entertainment and basic packages.”

PVR Deals Close

Even with the slow growth in the most recent quarter, Canal Digital still maintains its leadership position in the in the Nordic DTH market, and like Viasat, Canal Digital will be concentrating on new product launches to help boost subscribers.

As well as launching HDTV later this year, Canal Digital is close to naming which vendors it will work with on its personal video recorder (PVR) strategy. “In terms of the PVR boxes, they will have 80 gigabytes [of storage capacity] in the first generation of boxes,” Albech said, “We will have three different vendors. We are close to making that decision for the vendors for the set-top boxes.”

The operator also may follow the lead of other satellite operators and explore opportunities in the mobile space. Canalsat in France recently signed a deal to provide a bouquet of channels to SFR‘s mobile service and BSkyB in the United Kingdom also launched a mobile application.

Albech said he hoped Canal Digital would make progress in this arena soon. “I think that mobile is quite interesting,” he said. “We recently met up with some people from South Korea and they had just started up with TV on mobile. … Of course, there will be a market for those kinds of services. I hope we will a comprehensive Canal Digital offer on mobile within a year, but there are rights issues to be overcome. At the moment, there is not specific launch date.”

One area not expected to see huge gains is interactivity, Albech said. He cites a lack of enthusiasm on the part of the public broadcasters as to why interactivity has not been a success.

“We have spent a lot of money on interactivity, but it will not be a big issue over the next two years,” Albech said. “The big issue in terms of interactivity is that no one is really producing it, and people are not asking for it. We tried to launch interactive services together with Zonavi, an interactive company, and we had betting and gaming, but it has been hard to get a high penetration on that. Before we can get high numbers of subscribers on interactive TV, the public broadcasters must be much more active than they are today.”

–Mark Holmes

(Ingrid Schiefloe, Canal Digital, ingrid.schiefloe@canaldigital.com; Frank Maao, DnB NOR Markets, e-mail, frank.maao@dnbnor.no)