Media: All about ... Sky+ and emerging PVR services

Sky talks up its Sky+ service as rivals look to strike.

Sky hasn't wasted any time in getting its New Year PR machine rolling. It hardly gave us the chance to scrape the pine needles and tinsel off the carpets before putting out a triumphant press release announcing subscription levels to its Sky+ personal video recorder service had breached the two-million mark ahead of schedule. The number of Sky+ boxes in homes also grew by by more than 50 per cent.

We shouldn't be that surprised Sky is making the most of this milestone, since it coincides with a number of potential threats to its position as the dominant pay-TV provider in the UK.

Setanta is muscling in on its football and golf coverage; there's new competition in the form of BT Vision, and there are also predictions that Freeview will be in more homes than Sky by the end of 2008.

There is also a renewed challenge from ntl:Telewest, soon to be part of the relaunched Virgin Media, which developed its own rival PVR to Sky+ last year, and will soon offer a "quadruple play" of TV, broadband, fixed-line and mobile.

It is against this backdrop that Sky is talking up the impact of Sky+, comparing the effect of PVR's on TV viewing habits to that of the iPod on music. However, it is also at pains to point out that the meltdown for TV advertisers predicted in the first half of the decade has yet to materialise.

Past research has indicated that PVR owners see 30 per cent less advertising than other viewers, but while Sky has done some research into the levels of ad-skipping, it has not been particularly forthcoming in publishing these statistics.

Anecdotal evidence suggests ad-skipping is one of the plus points for the people investing £99 plus a £10-a-month subscription in a Sky+ box, but Sky argues that because Sky+ owners tend to watch more TV, the picture is more complex. Certainly Sky has long been making conciliatory noises to advertisers, pointing out that it is not likely to do anything to jeopardise any revenue source.

Last year, the chief executive, James Murdoch, indicated that all the Sky+ boxes currently being installed have the capacity for enhanced services, including space for a local ad server, which can be used to deliver ads that are relevant to individual users based on their stated preferences.

1. Sky+ first appeared in autumn 2001, when a set-top box sold for £300. In 2003, it was backed with a £20 million marketing push, including an ad campaign created by HHCL/Red Cell. This featured unlikely duos such as Ronnie Corbett and Alice Cooper, in an attempt to show how Sky+ could help keep everyone happy - at least in terms of viewing habits.

2. Sky's "Sky View" panel reveals that 12.2 per cent of all viewing through Sky+ boxes is time-shifted. This rises to 22 per cent of programming aired between 9pm and 10pm, and 17 per cent of programmes scheduled between 10pm and 11pm.

3. In the US, TiVo and PVR seem to be interchangeable terms, and TiVo received a lengthy, free promotion during an episode of Sex and the City, when one of the characters heaped praise on it. But it bombed badly here, with TiVo withdrawing from the UK market in 2003, not quite two years after its £8 million launch. The company didn't reveal sales figures, but estimates at the time were as low as 5,000 units. A confused marketing campaign and TiVo's go-it-alone approach were blamed.

4. The cable TV company ntl:Telewest launched its service, TVDrive, in Telewest areas last year, with ntl areas due to have access early this year. The difference between TVDrive and Sky+ is that ntl:Telewest rents the boxes out for a flat fee of £15 a month. It also boasts three internal tuners, as opposed to the two tuners in a Sky+ box. This means people can watch one show and record two others at the same time. In its most recent figures (November 2006), there were 40,000 subscribers to TVDrive.

5. Tiscali, which acquired Homechoice last year, is developing a PVR, but has yet to reveal its release date. In the meantime, it continues to offer "network PVR", where subscribers have free access to 100 hours of programming from stations including BBC One, Two, Three, Four and FX, up to a week after it has been shown.

6. Freeview has been a massive success in the UK, with more than 6.4 million households now using the service. There are a number of Freeview-compatible PVRs on the market, which require no subscription.

WHAT IT MEANS FOR ...

ADVERTISERS

- BSkyB is keen to assure advertisers that time-shifting won't mean that viewers never watch their ads. While Sky+ devotees have been known to boast that they haven't watched a single ad since they installed the boxes, media agencies say that they are "encouraged" by viewing patterns. Toby Roberts, the head of strategy at OMD UK, says: "It's not the danger scenario everyone was talking about."

- The amount of television consumed by viewers increases once they own a Sky+ box, but media planners would like more in-depth research to provide a clearer picture of what is actually going on.

- In the longer term, the onus will be on advertising agencies to create brilliant ads. "If you don't have the safety net of being able to bash people over the head (with big media spend), you've got to make ads that people want to watch," Roberts says.

BSKYB

- BSkyB says that by 2010, it wants to have 25 per cent of its subscribers hooked up to Sky+, a target it is well on the way to beating.

- Its focus on Sky+ is obvious. Jeremy Darroch, the chief financial officer of BSkyB, says "there's no going back" once viewers have experienced Sky+, and the company clearly hopes that the product will reduce customer churn.

- Although the company won't be drawn on where Sky+ fits in to BSkyB's growth plans, a spokesman admits it will be "interesting" to see what comes along in terms of competition from Freeview and other rivals.

- Sky+ is being improved with new features in 2007, such as the ability to use the internet to set a show to record when viewers are not at home, and an on-demand service.

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