Magazine article Marketing

TV in the Digital Age

Magazine article Marketing

TV in the Digital Age

Article excerpt

Digital TV is well on its way, but what is it all about and why is it important for marketers?

The phrase 'digital television' has the sort of sedative properties more usually associated with party political broadcasts. But a subject that can inspire a seismic shift in the activities of Europe's largest media groups is one that the UK marketing fraternity must quickly wake up to.

The key point to grasp in all this is that digital technology will significantly increase the number of television channels that we can receive. In addition to a basic programming proposition, we will be able to use the tube to shop, bank, gamble, play games, buy tickets and access the Internet. This is true for cable, satellite and terrestrial services.

So, for example, Rupert Murdoch's satellite service, British Sky Broadcasting, intends to beam around 200 separate channels into UK homes from autumn 1997. At the same time, the BBC, ITV, Channel 4 and Channel 5 have been guaranteed the right to broadcast additional services over digital terrestrial networks, to be up and running by mid-1998. Elsewhere, numerous advertisers and their agencies have participated in interactive trials conducted by BT and cable companies.

Much of the UK debate has focused on BSkyB. Despite Sky's vast investment in the satellite television market, Murdoch's close ties with Margaret Thatcher have ensured that his activities continue to draw a barrage of criticism.

Monopoly player

Critics have two main complaints. The first is that Sky repeatedly outbids rivals for sports rights, denying the likes of Premier League soccer to those who do not have satellite decoding equipment. The second is that Sky is close to developing a new set-top decoding box which will be needed to access the array of channels available in the new digital environment.

Although there is nothing to stop the BBC, Granada, Carlton or MAI from building boxes, the cost is, in reality, prohibitive. This raises the spectre of Murdoch acting as the digital gatekeeper, summarily dismissing services that belong to rivals. Sky chief executive Sam Chisholm hotly denies the accusation, pointing out that the current Sky package of 40 channels contains only 11 of Sky's own services.

Those who view Murdoch as the bogeyman underestimate the key roles played by rights holders and alternative technology platforms. Repeatedly, he must compromise in his bid for expansion, most recently in Asia where Star Sports was forced by market prices to form a joint venture with Disney's sports network, ESPN.

Equally, Murdoch's long-term grip on the European marker will depend on his ability to accommodate the likes of Disney, Microsoft, Leo Kirch and BT (now a News Corporation shareholder).

Bill Sinrich, senior vice-president of sports producer Trans World International, believes there are great opportunities for sports rights holders as "the likes of Murdoch and Leo Kirch link with cash-rich players such as Disney to create sports programming for mature and emerging markets". With rights to sports already commanding vast fees, he believes that "BT and the cable companies will also be in the market to acquire rights".

The issue of digital decoding has had spectacular implications for Europe's pay-TV heavyweights, which have formed and reformed alliances. Initially, Sky worked on decoding technology with France's Canal+ and Germany's Bertelsmann. A rival system was being developed by Germany's other major player, KirchGruppe.

Cracks within the Sky alliance appeared early this summer, leading Sky to defect to the Kirch side - in the process taking a 49% stake in Kirch's digital platform, DF1. When Bertelsmann also sheepishly switched sides, an infuriated Canal+ struck back by acquiring Europe's only other major pay-TV player, Nethold, for $2bn ([pounds]1.3bn). This gives Canal+ a dominant position in France, Spain, Benelux, Scandinavia and eastern Europe. …

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