Written by TV

ITV Multichannels Going Subscription Only?

According to a report in Media Guardian, ITV has been considering taking its channels from free to view to subscription only.
The reasoning is that despite losing out in terms of viewers and their associated advertising revenue, there’d be enough gains to be made in getting a small share of the Sky revenue to make it an overall win.
There is a very fundamental flaw in this plan. As we speak, homes across the country are converting to digital as switchover gets properly underway. The most recent Ofcom figures published less than a couple of months ago, tell us that digital penetration has now reached 88.9% of the population. But free-to-view digital – largely Freeview, but also free-to-view satellite such as Freesat – accounts for 39.3% of households. In other words, these are 10.1m homes that won’t be able to receive the channel. That’s not 10 million people. That’s 10 million homes.
Furthermore, there are 35m secondary sets in the UK. These are TVs defined as not the main one in the household. So they tend to be in places like bedrooms, kitchens, and other smaller rooms. 40% of these have yet to be connected to a digital device, and they’ll all need to by 2012. That’s three years away.
DTV Secondary TV Sets
The chart above shows a chart from that Ofcom report which explicitly points out that the vast majority of secondary sets are connected to DTT (aka Freeview) boxes, with very few connected to Sky (Multiroom) and even fewer connected to cable.
This isn’t surprising a surprising result as additional Sky or cable boxes invariably cost more money.
Those are a lot of TVs that ITV is potentially going to be missing from.
Currently ITV’s digital channels are available on approximately 43.4m of the nation’s 60m sets. This move would reduce that figure to something like 17.6m sets. Furthermore, or the 16.6m or so sets that have still to be converted, the vast majority are likely to be free to air sets. There’s relatively small opportunities for growth.
Then let’s look at multichannel performance. Below is the share for the last two years for ITV’s digital channels.

Source: BARB
Although those numbers look quite small, they’re actually very impressive.
Compare them with some other relatively successful digital only channels.

Source: BARB
Living is probably the closest direct competitor to ITV2, and is pay TV only. While I don’t know any of these channels’ budgets, Living does commission new programming on a fairly regular basis. It’s total share of 1.1% isn’t nearly as good as even ITV2 on its own.
Sky 1 and Sky 2 are different proposition altogether. I’m pretty confident that their budgets far exceed those of ITV’s digital channels with exclusive imported programming like 24, Lost and recently House. Yet ITV3 on its own has a bigger share.
GOLD also commissions a limited amount of new programming, yet is relatively low.
Even Dave which is available on Freeview, struggles to meet the success of ITV’s channels.
The scale of the potential audience loss by ITV taking its digital channels pay only is massive. This would be a brave, not to say foolhardy, decision to make.
It would, however, mean that a significant amount of Freeview real estate would be freed up. I believe that much of the space on Mux 2/PSB2 where ITV’s digital channels currently sit on Freeview could not be replaced with encrypted channels – not that I’m sure who would want to launch such a service. ITV Digital anybody?
Anyway, I suspect that this whole thing is moot anyway. This sounds like another piece of posturing by ITV in the run-up to Digital Britain. The success of ITV’s digital channels means that the Government is unlikely to want to see them disappear from the Freeview EPG as switchover gets a proper head of steam up. Sky, on the other hand, would love it. Although with the seeming implosion of Setanta, the fact that it’s not yet rid itself of its ITV shares, the potential of it buying Virgin Media’s channels and so on, I wouldn’t be surprised if it doesn’t get yet another investigation into monopolistic practices if it’s not very careful indeed.