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Last Updated: Thursday, 10 June, 2004, 07:16 GMT 08:16 UK
What Sky's free digital deal means

By Torin Douglas
BBC media correspondent

Sky is to launch a new digital service with 200 TV and radio channels for a one-off payment of 150 - and no monthly fee.

Sky Digital remote control
The government wants to switch off analogue broadcasts by 2010
Until now, satellite TV has meant pay TV.

Sky viewers pay a monthly subscription to watch its services, a development that has revolutionised television in this country in the last decade.

A whole new revenue stream was brought into British television, complementing the BBC's licence fee and the advertising that funds ITV and other free-to-air commercial channels.

With seven million homes paying up to 400 a year in subscription and other charges, BSkyB became the most profitable of British broadcasters.

Now Sky has changed its policy. Later this year, it will offer 200 TV, radio and interactive services free-to-air, for a one-off payment of 150. That includes the cost of a satellite dish, a set-top receiver box and installation by Sky engineers.

Sky will not make much money on the free service - but it hopes many of the new customers will later upgrade to the pay channels. So why has it made the change?

The move was prompted partly by a slow-down in new satellite subscribers. There's been evidence for some time that Sky's subscriber growth had plateaued.

Those households that wanted - and could afford - the sport and movie channels, or the music and children's channels, had already got Sky. Those that were left either did not want to pay or did not want a dish on their house.

Sky could no longer afford to ignore the free-to-air option
The success of Freeview was another factor. The free digital terrestrial service, which rose from the ashes of the ITV Digital pay service, showed that many people wanted more channels but were not prepared to pay a subscription.

The simple concept of a one-off payment for a box you could plug into your existing TV and aerial has proved remarkably attractive. More than 3.5 million boxes have been sold.

Sky could no longer afford to ignore the free-to-air option.

But equally significant has been the government's desire to switch everyone over to digital broadcasting in the next few years.

The Freeview service, which uses ordinary TV aerials, cannot be received in a quarter of UK homes. The satellite signal can be picked up everywhere... provided people are willing - and can afford - to install a dish.

The BBC's own view [is] that free-to-air digital satellite is an important missing piece in the jigsaw
Andy Duncan
BBC director of marketing, communications & audiences
Ofcom, the broadcasting regulator, recently called for better access to free digital satellite broadcasts in order to speed up the move to digital switchover. It said it might even have to consider whether it should intervene to secure a viable free-to-air satellite service. Now it does not need to

Andy Duncan, the BBC's director of marketing, communications and audiences, said the move followed "the BBC's own view that free-to-air digital satellite is an important missing piece in the jigsaw to achieving a fully digital Britain".

He said it also meant more viewers would have access to the BBC's new digital services without having to pay for the subscription channels: "This is good news for our viewers as it provides another route to all the BBC's digital services without subscription."

So will it attract many customers? And how will it affect Freeview sales?

The BBC will benefit from its new digital channels being more widely available on satellite television
Sky viewers already have access to many free-to-air channels, such as those of the BBC, ITV and Channels 4 and 5. They have also discovered lots of free radio channels, in high quality, which is why around a quarter of all radio listeners now claim to have listened to a station through their TV set.

Now those channels will be available to those people not willing to pay a subscription. It seems an attractive proposition, with many more TV and radio channels - and greater interactivity - than Freeview.

Sky says it will be offering 115 free TV channels (including all the regional variations of the BBC) and 81 radio networks, compared with Freeview's 26 TV channels and 21 radio stations.

Sky's free channels will include the five terrestrial channels, BBC digital channels such as BBC Three, BBC Four, CBeebies, CBBC and News 24, as well Sky News , the ITV News Channel and CNN.

It also includes more esoteric stations like the God Channel and Exchange and Mart TV. But it does not include ITV2, E4 or those satellite channels that are part of a Sky subscription package.

Greater choice

Sky's price - 150 - is comparable with that of the top-of-the-range Freeview boxes, though a perfectly good Freeview box can be bought for around half that price.

And as more people get used to a greater choice of channels, many households may choose both, with the Sky system in the main living room and Freeview in the kitchen or a bedroom.

In fact, Sky and the BBC have an interest in both systems. They are both shareholders in Freeview, while the BBC will benefit from its new digital channels being more widely available on satellite television.

The big question is how far the new service will boost the overall penetration of digital television, bringing the government closer to achieving its ambition of full digital switchover by 2010.

Sky's free satellite vs Freeview
10 Jun 04  |  Entertainment
BSkyB launches rival to Freeview
09 Jun 04  |  Business


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