BSkyB apparently expects big things from Picnic. If all goes according to plan, it will not only be the company's major focus for activity in 2008, but also its biggest source of revenue growth. There's many a slip between cup and lip, however, which is why (officially at least) the company is continuing to play down expectations.
After all, the centrepiece of the Picnic proposition - Sky's plan to withdraw the three free-to-air channels it offers on Freeview and use the transmission capacity to offer three subscription services - hasn't even been given Ofcom approval yet. That's not likely to be forthcoming until January 2008.
Picnic is the brand name Sky has chosen for a package that will (given the go-ahead) bundle together these digital terrestrial television subscription services with broadband internet and telephony - and, as such, it will mirror the triple-play package it offers with Sky Digital TV as the core proposition.
A separate brand name will, according to Sky sources, ensure there's clear product differentiation between its satellite and digital terrestrial families of services; but the main issue here, according to some observers, is to avoid diluting the main Sky brand.
It's an unswerving item of faith in the company hierarchy that satellite (bolstered by a high-capacity broadband connection) is a future-proof entertainment delivery technology. So, the main Sky package remains the real deal, while Picnic will only ever offer an inferior TV product that presents limited potential for upgrade in the future.
Digital terrestrial TV transmission has a comparatively low bandwidth capacity, so the number of services on offer will always remain small, and it's unlikely that the platform will be able to offer high-definition services.
It's not, Sky would argue, a winning long-term proposition. In the short term, however, this is not an opportunity to be sniffed at. If, say, one million Freeview viewers can be persuaded to cough up £100 a year, that will add up to something a little more pleasing than a poke in the eye for Sky.
As James Murdoch, Sky's chief executive, puts it: "The launch of Picnic will be a big step forward for customers who are hungry for value and simplicity."
1. BSkyB currently offers three channels on a free-to-air basis via the Freeview platform - Sky Three, Sky News and Sky Sports News. It wants to replace these with Sky One, Sky Sports 1 and Sky Movies SD1 on a subscription basis.
2. The Picnic offering will include these channels, plus broadband and telephony services delivered over the infrastructure Sky acquired when it bought Easynet for £211 million in 2005. The Easynet structure covers around 70 per cent of UK homes.
3. Sky also hopes to gain permission to introduce a new compression technology that will allow it to add Sky News to the Picnic package.
4. On 4 October, three days after Sky revealed its Picnic proposals, Ofcom announced it was instituting a consultation process, canvassing views from the industry and the public. Its statement read: "It is essential that Ofcom considers how it can best ensure fair and effective competition for the benefit of consumers in the light of the development of the DTT platform, Sky's strong market position in pay-TV and the specific aspects of the promotion." Deadline for submissions is 14 December.
5. The DTT platform already features pay-TV services provided by Top Up TV Anytime, which provides 100 hours a week of subscription-TV programming from a number of sources, plus the PictureBox film service and Setanta Sports.
6. Sky Digital has just over eight million subscribers, and there are another million homes watching free-to-air multichannel via a satellite dish. Virgin's cable networks have 3.4 million TV subscribers. But the fastest-growing digital platform is terrestrial, which now has 12.9 million homes.
7. Despite Sky's assertions that it is not getting ahead of itself, the company has already begun putting the internal structures in place. Picnic will have its own standalone marketing, IT and customer service functions. Its incumbent agencies, WCRS and MediaCom, have already been told to prepare for action - Picnic's advertising budget across 2008 is likely to be around £25 million.
WHAT IT MEANS FOR ...
- According some cynical observers, if it gets permission to launch Picnic, it just can't lose.
- If Picnic attracts even a modest level of customer interest, the company will have succeeded in squaring a particularly challenging (though not quite dish-shaped) circle.
- One of the biggest potential barriers to growth is the fear that from here on in, as we head towards analogue switch-off, most of the latecomers to multichannel TV will sign up to digital terrestrial. Now Sky might have found a way to monetise the DTT market.
- But even if Picnic fails miserably, it will have succeeded in damaging the Freeview brand, not just by confusing what was previously a crystal-clear proposition (previously, DTT was pretty much synonymous with Freeview), but also by depriving it of two of its most popular channels, Sky News and Sky Sports News. Disillusioned Freeview customers could yet end up opting for satellite.
- In the short term, this has minimal implications - commercial impacts will not be greatly affected one way or the other if Picnic goes ahead. Longer term, though, it has potentially worrying implications for the future of free-to-air commercial television, which could be increasingly squeezed by, on the one hand, a Sky with even greater powers in pay-TV, and, on the other, the BBC, already the dominant programming force on Freeview.