MEDIA FORUM: Is Top Up TV a digital terrestrial saviour?

Top Up TV gives some Freeview users the chance to take more paid-for channels. Will it work, Alasdair Reid asks?

Getting multichannel TV through your old-fashioned TV aerial has always been complicated. With cable and satellite, it may be expensive but you know what you're getting and after a confusing start-up period things have settled down and the branding has been as consistent as the product proposition.

That's hardly been the case in digital terrestrial. With DTT, you somehow expect something solid and basic - utility digital for when they switch off the analogue signal.

But no. First there was ONdigital. That mutated into ITV Digital before going belly up. Third time lucky - Freeview, in which the BBC plays a dominant role, has since come to the rescue. Sort of. DTT has yet to become the reliable workhorse of the digital TV age: distribution is still patchy and there has also been a nagging worry about whether the "multi-channel lite" package it offers represents a cul-de-sac or a useful staging post for the large numbers of digital ditherers it's seeking to target.

That's why a new service called Top Up TV will be welcomed in many quarters.

From March, those who have the right decoder equipment (in the first instance, that will be those who've hung on to their old ITV Digital boxes rather than those with new Freeview boxes) will be able to pay £7.99 a month to subscribe to an additional ten channels - UK Gold, E4, Cartoon Network, Discovery, UK Style, Bloomberg, Boomerang, Turner Classic Movies, Discovery Home & Leisure and The Fantasy Channel.

Top Up TV is run by two former Sky managers, Ian West and David Chance.

Chance says its breakeven target of 250,000 is achievable, despite the DTT sector's reputation as a graveyard for laudable ambitions and cunning plans.

Chance says: "Current estimates are that there are between 2.5 million and three million people receiving Freeview. Of that three million, we believe more than 800,000 are receiving on ex-ITV Digital boxes and they can clearly be upgraded to take Top Up TV. Of the remainder, the people who have bought new Freeview boxes, the majority are not compatible, but 300,000 are. The numbers will change here too though. The large retail groups forecast they will sell around 2.4 million Freeview boxes during 2004 and the retailers will increasingly be offering top-end boxes with Top Up TV capacity. The price difference will be small and you will have a future-proof box, so I can see that being a popular option."

Is Chance right? Marc Sands, the Guardian Newspapers' marketing director, is not only a substantial TV advertiser but also, in a previous life, was ITV Digital's director of brand marketing. He thinks that the notion of being able to add more channels to a basic package is a good one, though he does believe Top Up TV will have to address the same old potential pitfalls.

He cautions: "The great attraction of Freeview is that you make a one-off payment and you never ever receive a bill. We found that the potential customers for DTT were those who were scared of long-term commitments. There were many reasons why that might have been, not least the scare stories that were doing the rounds. The satellite and cable people were believed to be tough cookies if and when you wanted to cancel your contract. So Top Up TV is probably going to have to approach the whole area very carefully."

Mark Palmer, the managing partner, strategy, at OMD UK, reckons it could be an attractive option for some families with children - as long as the children don't start saying "but it's not the real thing Dad". That's when Dad might start realising they have a point, especially as he's paying for multichannel TV but still not getting the football. And Palmer reckons you'll see people trading down as well as up. "It could be people looking for a budget option and for those looking to trade up, that this will be attractive because it's plug and play. There will be people receiving Freeview who will want to get more in the way of family viewing."

Andy Duncan, who is the chairman of Freeview as well as the BBC's director of marketing communications and audiences, says that the BBC is neutral where the new service is concerned - he says he has no view either way on whether it can help drive the sale of Freeview boxes. But he clearly has potential concerns on the downside. "I think everyone can agree that Freeview has been an outstanding success - and one of the biggest drivers has been the simplicity and clarity of the message. It's important for everyone in the market - Freeview, cable and satellite - that that clarity is preserved because digital in the past has sometimes been confusing," he states.

David Chance: "The price point that we are aiming at is one that Sky isn't going to go for because it would drag down their ARPU (average revenue per user) targets down. It's just not interesting for them. Ours is a pure segmentation play and the former ITV Digital customers are the low hanging fruit."

Marc Sands: "One of the problems we (at ITV Digital) had was differential coverage. People at one end of the road could get it but not down the other end. At one point we were getting more enquiries than Sky but we could only fulfil 35 in 100 of those. That's damaging. They could face a something similar because not every box can be upgraded to take Top Up TV."

Mark Palmer: "From a purely consumer view I can see this playing well. The likes of Dixons could do well with this. It's like when you're buying a car and they ask you if you want them to throw in the leather seats and you go, 'Oh, all right then.' And why not? You pay a little bit more for your box and then £8 a month is just a little bit on top of that. It's just a nice little extra."

Andy Duncan: "We will maintain a neutral view. Our concern is to continue the success of Freeview and if people want to take this service in addition, then good. But we must make it clear that the BBC has no direct interest in Top Up TV because it will not be carrying any of the BBC public service channels, all of which are of course already on Freeview."

- "The price point we are aiming at is one that Sky isn't going to go for because it would drag down its ARPU (average revenue per user) units. It's just not interesting for it. Ours is a pure segmentation play and the former ITV Digital customers are the low-hanging fruit." - David Chance chairman, Top Up TV

- "One of the problems we (at ITV Digital) had was differential coverage. At one point we were getting more enquiries than Sky but could only fulfil 35 in 100 of those. They could face something similar because not every box can be upgraded to take Top Up TV." - Marc Sands marketing director, Guardian Newspapers

- "From a purely consumer point of view I can see this playing well. It's like when you're buying a car and they ask if you want them to throw in the leather seats. And why not? You pay a little bit more for your box and then £8 a month is just a little bit on top of that." - Mark Palmer managing partner, strategy, OMD UK

- "We will maintain a neutral view. Our concern is to continue the success of Freeview and if people want to take this service in addition, then good. The BBC has no direct interest in Top Up TV because it will not be carrying any of the BBC public-service channels." - Andy Duncan chairman, Freeview.

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