Annex 1
REPORTED COMMENTS REGARDING ITV1 AND ITVSPORT
GOING ON SATELLITE
6 June 1998, The Daily Telegraph
An ITV spokesman said: "Digital terrestrial
TV boxes will be available to everyone and it's a shame that the
BBC has felt the need to hedge its bets and go on digital satellite
as well, instead of putting the full force of their services behind
digital terrestrial TV."
30 August 1999, The Guardian
Steve Morrison, Granada Media chief executive,
said the issue of whether to allow the main ITV channel to be
on digital satellite was a "commercial and strategic decision".
22 September 1999, The Independent
Stuart Prebble was quoted as saying "I
think it's not fair that the viewer who buys multi-channel television
in order to be able to view the best football can't receive it.
I would like to move towards the situation where the most attractive
content is available on all platforms".
6 July 1998, The Guardian
WHY ITV SHOULD
SIGN UP
WITH SKY
ON BROADCASTING
Mathew Horsman
It is a truism that whenever bean counters and
strategists find themselves at odds, it is the bean counters who
win the day. That should be borne in mind by the ITV companies,
most notably Carlton and Granada, who have so far resisted the
idea of distributing their channels via digital satellite (or
DSAT as it is known by the acronym-mad broadcasting industry).
The reason? Both these companies are backing digital terrestrial
TV (DTT), which the short-termists within the pay-TV business
seem to think is in a head-to-head battle with BSkyB for digital
customers.
Why, they argue, should they put ITV and its
planned sister channel, ITV2, on Rupert Murdoch's digital satellite
platform? Why not keep these great services exclusively for digital
terrestrial TV, the better to drive take-up of DTT in the UK,
at the expense of DSAT? The `just say no to Sky' camp within ITV
think they have a further reason to keep the channels off Murdoch's
system. Why, they complain, should they spend at least £20
million or so a year on transponders and conditional access charges
(needed to scramble and unscramble the digital signal) to the
profit of Sky? For Granada and Carlton, it would be so much better
to encourage consumers to buy a DTT box, which—of course—also
allows viewers to tap into the pay- TV services offered alongside
the free DTT channels. And guess who owns the company—British
Digital Broadcasting—which will provide the pay-TV part
of DTT? Why, Carlton and Granada.
Alas, there is a flaw in the logic, and that's
where the bean counters come in. The ITC is now in the process
of calculating `fair' licence payments for those ITV licence holders
that have elected to apply for early franchise renewal. High licence
bidders will receive relief—collectively as much as £100
million in 1999. More to the point, when it comes to the `ITV
on Sky' debate, the ITC will provide additional incentives in
the new licence terms to hasten the transition to digital TV.
The most important of these involves the tax on ITV advertising
revenues (know as Percentage of Qualifying Revenues, or PQR).
In the next licence term, only analogue homes will count toward
the PQR calculation.
Whew! So far, so good. Obviously the ITV companies
will be happy to save money on tax, against which to balance their
spending on the digital transition. But they will only benefit
if the homes in question receive their ITV service in digital
form. So unless ITV goes on digital satellite, all those DSAT
homes will still count as analogue for the purposes of PQR. Put
another way, every Sky DSAT home is a potential saving for ITV,
but only if ITV is on the DSAT line-up.
So what, Carlton and Granada might say. After
all, they will be able to count DTT and digital cable homes. And
the savings from DSAT distribution alone won't be that great when
judged next to the strategic benefits of promoting DTT over Murdoch's
system. But don't forget the bean counters. Let's play with some
numbers. Assume that PQR, which in practice varies licence by
licence, is on average 15 per cent in the digital future. ITV's
qualifying revenue is about £75 per home. So if DSAT is available
in three million homes by 2001 (that's what HCIB forecasts) ITV
would bank net savings of £11 per DSAT home (that is, 15
per cent of £75). On my three million homes, that translates
into £33 million. I don't count any incremental earnings
from advertising on ITV2, as these may in fact cannibalise advertising
revenues on ITV1. But even if there are no additional ad revenues
at all (unlikely), ITV still stands to gain £33 million in
saved PQR on three million DSAT homes.
"Now let's work out how much it would cost
ITV to go on to DSAT. The companies themselves argue that as they
are a free-to-air broadcaster with public service obligations,
they should not have to pay at all. But there is a problem, as
the BBC, which has already agreed to go on DSAT, long ago understood.
If a broadcaster merely leased transponder capacity and showed
its service for free to anyone with a dish, then the signal would
show all over northern Europe (the Astra satellite footprint is
a big one). ITV shows programmes to which it has only UK and not
continental European rights, so it risks being in breach of contract
if it shows programmes elsewhere. The only way to stop this `spill
over' is to scramble the signal and provide viewers with a `smart
card' to decode the service. This is known as `conditional access',
and it costs money.
"Sky, quite rightly in my view, will not
take on these costs. So let's add up the bill. Three transponders
on Astra, enough for ITV's regional services and then some, would
cost about £l2 million a year. Conditional access, at least
to the level required by a free service (ie no need for billing),
would cost a flat 20p-25p per subscriber per month. Sticking at
my three million figure, and assuming the higher of these two
rates, the annual bill would be in the region of £nine million.
"So that's £21 million a year. Set
that against the £33 million in savings on PQR, and I know
the strategists will lose the debate. As digital rolls out, that
sound you hear is of accountants sharpening pencils".
Mathew Horsman is a media analyst at the City
firm of Henderson Crosthwaite
Mediaweek (25/06/01): Gerry Murphy, Chief Executive
of Carlton stated ITV Digital would have more sport than any other
platform because of its exclusive distribution of the ITVSport
channel.
Daily Mail (26/07/01): Rob Fyfe, Chief Operating
Officer of ITV Digital, said that he had "been fighting long
and hard" to keep ITV Sport exclusive to ITV Digital.
Financial Times (16/01/02): "Some ITV executives,
led by chief executive Stuart Prebble, are thought to be reluctant
to share the content with BSkyB, as they see it as key to attracting
new (digital terrestrial) subscribers." Also quoted an ITV
executive stating: "There are some people at ITV Digital
who have the mistaken belief that it is in the company's interest
to see talks (with BSkyB) break down."
The Daily Telegraph (16/01/02): "Champions
League football will not be made available to Sky viewers after
the ITV Sport channel pulled out of talks to join the broadcaster's
digital platform."
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