The Race For Digital Dominance
Technical innovation is frequently touted as a unique selling point for digital TV, with PVR, video on-demand and interactive services all cited as reasons to make the switch. But Simon White, TV Group Head at WWAV Rapp Collins Media explains that marketers may be missing the point in convincing consumers…
Many comments have been made about the direction each multichannel provider is taking, and who will be the market leaders by the time analogue switch off arrives.
Sky Plus, video on-demand and other content-led add ons are the main talking points at the moment, and whilst they will of course take a part in the consumer’s purchasing decisions, I think we are missing a couple of very big points.
Most platforms and providers, over time, will no doubt all include applications which will allow people to watch what they want when they want. To most customers, as long as the service they are considering has such a function, there may be little importance as to which provider they will choose based on functionality alone.
As marketeers we are concentrating a great deal on new developments, but also need to take into account the simpler aspects that will also motivate the general public.
At one time or other we have all sat sharing a coffee or a pint with friends when somebody mentions they are “thinking about getting satellite,” and a discussion ensues. More often than not the opinions and anecdotes are about the good or bad customer service received, or about how much is paid for a package, rather than the providers’ future programming or on demand possibilities.
Which brings me to my point. The two main purchase considerations for people getting digital will be service and price.
Freeview is a prime example of this. It is a cheap one-off buy and all you have to do is plug it in. No worries about sitting in phone queues waiting for technical help, billing advice or service changes. It launched in 2002, 13 years after Sky, and 10 million boxes have been sold, versus Sky’s current penetration of 8.1 million homes. Whilst boxes versus homes is not an exact comparison, this still displays phenomenal growth in a very short space of time.
In the past, Sky and some cable operators have had reputations for poor customer service. Sky have been featured on BBC One’s Watchdog several times, and along with the cable providers have had to seriously look at phone waiting times and the service that is available. Recent articles in national and trade press have suggested there might still be room for improvement here.
An indication of the importance of price is what has happened to Sky over the last year. In early 2005 as freeview continued to grow, Sky’s penetration slowed, reaching 7.5 million households. Various offers (free Sky Sports, Sky Plus box etc), backed up with a heavy marketing campaign, have brought the figure up to 8.1 million.
This indicates that price and offers can win people over, and this will probably have more success as analogue switch-off draws nearer. But it also shows that a hefty marketing budget and lower profit margins on product may be necessary to succeed in the long run.
We also need to keep in mind the fact that at present 12.5 million adults seem quite happy to be without multichannel at the moment. Penetration will no doubt continue to grow, however there is likely to be a last minute rush at the back end of this decade.
Keeping in mind the fact that 31% of homes are yet to go digital, and the speed at which multichannel penetration has grown since Freeview’s launch in October 2002, it is likely that Freeview will pick up a large proportion of these homes, as the early-adopters and those seduced by the 300+ channels on Sky and cable have already been snapped up. Sky and cable could be left to pick up some of the spoils, unless of course Freeview change their offering and make upgrades a part of their package – in which case they could become runaway leaders.
Broadband and telephony will also play a very big part in the race for supremacy, hence Sky’s recent investment in Easynet, and ntl’s current marketing of its broadband, telephone and TV package. It is therefore likely that many purchase decisions will be based on the overall package available, again putting the onus on price and service.
As all providers will by then have had to bow to the pressure of the need for programming on demand, the winner between Sky and cable is likely to be the one that provides the best overall value to the customer in terms of both outgoing cost, and provision of service.