Media: Forum - Will Freesat backfire on Sky?

Will Sky's free-to-air digital platform make a big impact, Alasdair Reid asks.

At Sky last week, it was calling this a soft launch, which was the media understatement of the year - the debut of Freesat From Sky was a launch so soft it was almost a secret. Can it really be so embarrassed about its latest offspring?

Well, of course it can. Down at Osterley, they love the "sat" word - they live and breathe it - but the word "free" that precedes it, this tastes like bitter ashes. You would have thought Sky could have found a brand name that didn't give the game away - although, on the other hand, Freesat From Sky is a rather less-than-catchy tag - which is, you suspect, no accident.

Because, of course, Sky was bumped into this back in the summer by the BBC, which began to muse publicly on whether it might be no bad thing if there were a satellite equivalent of the free digital terrestrial service Freeview. Freeview, it pointed out, will never offer total coverage of the British Isles - and a free digital satellite platform may be the only way the digital TV revolution can finally be completed.

This, in turn, was music to the ears of the Government, which is determined to achieve analogue switch-off by 2010. Thus, Sky faced a stark choice - either it launched Freesat From Sky or faced the prospect of rival broadcasters doing it. The BBC, for instance, would not have opted for a mumbled launch. It would have stretched at least to a brass band and a couple of fireworks.

Matt Blackborn, the executive buying director of Starcom Mediavest, agrees that the nature of the launch shows how awkward Sky feels about the situation.

He explains: "From one perspective, it is a classic spoiling tactic against Freeview, whose continued success must be worrying. But also, in the context of the pressure Sky is under in the City to keep delivering favourable numbers, I think we can expect at some stage to see it combining the penetration of Freesat From Sky and Sky Digital to give the impression of continued growth. Sky is very strong on data capture and is good at targeting people with offers - but the fact it's not putting anything in the way of a marketing budget behind it shows it's not entirely confident here."

Sky Digital has reached a rather worrying phase in its development. In fact, many observers believe its growth has hit a natural ceiling. To reach its target of eight million subscribers in 2005, Sky Digital will have to attract in excess of 120,000 new customers per quarter. It is currently managing around 50,000.

So what do other broadcasters think of Sky's launch? Surely, for instance, ITV should be as worried as anyone about this latest development. ITV's viewing share is weaker in multichannel homes and each box sold represents a further erosion of its audience.

Mick Desmond, the chief executive of ITV Broadcasting, would certainly agree that ITV's digital strategy has to be considered carefully. He states: "We ideally want the greatest number of homes to have the fewest number of commercial channels. Long term, we'd like everyone to have Freeview."

From ITV's point of view, there are fewer rivals with strong programming on Freeview and, Desmond can reveal, ITV still believes that a second free-to-air satellite platform backed only by the BBC, ITV and Channel 4 may still be an option. This would offer the same free accessibility as Freesat From Sky and it might actually be cheaper. The emergence of such a service would be greeted with fear at Sky.

But would it be much of an issue for advertisers? Steve Huddleston, the head of media operations and trading at BT, says in general digital presents just as many opportunities as difficulties. He explains: "Put bluntly, we've traditionally been big supporters of ITV and these days you can't hit so many people in the centre break of Coronation Street as you could in the past. We're not afraid to switch stuff around. We've started using outdoor in a bigger way and the use of econometric modelling means we can spend less on TV without diminishing the punch we achieve in the marketplace. And the upside of audience fragmentation is that we can target more tightly defined audiences."

Mark Jarvis, Carat's head of media, tends to agree the focus is moving on. He observes: "Unless your job involves platform-specific planning, you sort of assume everyone has digital because everyone you know has it. Platform-specific planning is already important and will become increasingly important, but, to be honest, there are more important issues there - such as the impact of personal video recorders."

MAYBE - Matt Blackborn, executive buying director, Starcom Mediavest

"Once you have access to paid-for sport and movies, it is difficult to give that up. An increase in digital penetration is a good thing for advertisers, as long as it doesn't give Sky too much dominance."

YES - Mick Desmond, chief executive, ITV Broadcasting

"You can see why this has been such a low-profile launch. Sky wants to give people considering Freeview a satellite option but the danger, obviously, is that existing subscribers start spinning down to the free option."

MAYBE - Steve Huddleston, head of media operations and trading, BT

"There must be some people at Sky who are scared of Freeview and what its long-term impact could be. As for our attitude to digital as advertisers, anything that helps keep the BBC in check has to be a good thing."

NO - Mark Jarvis, head of media, Carat

"This should make Sky focus more on the refuseniks. Sky's macho approach has put people off. I think mums worry about exposing children to some of the content and dad spending too much time watching football."

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