SPOTLIGHT ON: DIGITAL TV: Is there safety in numbers in the digital television market? - Richard Cook wonders who stands to benefit the most from the BSkyB-C&W deal

There is safety in numbers. For smaller companies faced with a bad-tempered behemoth of a rival, a show of solidarity can sometimes provide just about the only crumb of comfort going. The cable industry believed a united front against the might of BSkyB might just see it through.

There is safety in numbers. For smaller companies faced with a

bad-tempered behemoth of a rival, a show of solidarity can sometimes

provide just about the only crumb of comfort going. The cable industry

believed a united front against the might of BSkyB might just see it

through.



Indeed, these cable operators had formed a group called On Demand

Management, to compete against BSkyB to negotiate rights with Hollywood

film studios for all their forthcoming blockbusters.



Unfortunately, solidarity relies on rivals burying their hatchets for

the greater good and, frankly, that can often be a bit too much to ask.

And so last week, the biggest single member of this informal cable

consortium broke ranks (Campaign, 14 November). Cable & Wireless

Communications - the company formed by the merger of Mercury

Communications, Nynex and Videotron last April - controls a cable

network with the potential to reach six million homes. And, for the next

two years at least, this network will seek to embrace digital TV with

BSkyB.



’I am not a great believer in making a point of principle at the expense

of giving customers what they want,’ was how C&W’s chief executive,

Graham Wallace, defended the unlikely alliance to the press. Under the

terms of the arrangement, trials of the new digital services will be

held in Lewisham, south-east London, before Christmas and then roll out

throughout the network from next year. Wallace expects around 100,000 of

his one million existing subscribers to upgrade to the new services in

the first year of operation, which will officially start with an

all-singing, all-dancing joint launch of the service together with

BSkyB.



C&W has also had to agree to take Sky Box Office, the planned

pay-per-view movie service that will compete with video stores in

showing the latest films. They start at staggered times on different

channels, so that viewers will never be more than half an hour away from

the beginning of a movie.



Both companies will work together to promote and market the benefits of

digital television to their customers. If that doesn’t make little pound

signs appear in the eyes of their advertising agencies, then not much

else will. C&W has already embarked on a massive marketing campaign to

promote and market its cable TV and telephony services.



But leave aside the potential advertising and marketing windfall that

this joint venture will produce and it becomes difficult to see it

making too big a difference to the media landscape. Zenith Media is

still looking for a ’gradual, rather than dramatic take-up of digital

TV’, and is not yet including digital in its UK TV forecasts. C&W admits

the service won’t be extended to all its viewers until 2000.



However, Alan Wilson, the joint managing director at J. Walter

Thompson’s Advance Technology Group, counsels advertisers against

indifference. ’Much depends, of course, on how these digital companies

position their services, but already they are talking about finding 80

per cent of their revenues from subscriptions and just 20 per cent from

advertising,’ he says. ’But some of these channels will be high-quality

film services with an attractive audience demographic.



The worst scenario is that these will start to pull quality audiences

away from existing channels, while at the same time the advertising

opportunity on digital remains limited.’



Wallace says: ’The key thing about the Sky deal is the joint launch. If

you have competing platforms, all it does is confuse the customer.’



All of which makes the reasons behind his decision to deal with BSkyB a

little clearer. The satellite giant has a little experience at launching

competing platforms.



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