Where the Screens Are

August 31, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

BT Vision has come in for some harsh words from shareholders and analysts alike since its 2006 launch. If nothing else had changed in the home entertainment market in the meantime, last week’s announcement of a deal with Disney by Chief Executive Marc Watson should have boosted its fortunes. But for BT, the announcement smacks of too little too late.

The agreement to deliver the enticingly branded ABC TV On Demand that Watson outlined on Thursday comes 14 months after then-CEO Dan Marks quit in frustration at his inability to move the service beyond half a million subscribers. By the time Q1 2010 figures were published on July 30 this year, the number stood at 481,000.

Thursday’s news that “Desperate Housewives”, “Criminal Minds” and “Lost” are among the titles available on demand will do little to persuade the missing 1.5 million to sign up. The VOD service will be available from Sept. 15 at £6.99 per month or 99 pence per episode.

On the same day that BT Vision proclaimed the “second window” availability of ABC TV VOD, Lovefilm CEO Simon Calver announced that his company’s digital catalogue would expand to include MGM titles, with new titles available instantly on a transactional basis. Lovefilm has 1.4 million members currently.

Unlike the BT offer, which is a traditional IPTV package available to landline broadband subscribers, Lovefilm can be accessed on an extensive range of consumer electronic devices – from Blu-ray Disc players and connected TVs to smartphones and laptops – thanks to an agreement with US technology provider Widevine, which was inked at the end of July.

Lovefilm Group Digital Officer Lesley Mackenzie says, “Our agreement with Widevine signifies our passion for offering high-quality digital content to our members by giving them the widest possible platform choice, value and convenience.”

Therein lies the fundamental challenge for IPTV in general and BT Vision in particular; the future is in multi-platform delivery. Content consumption is no longer based around the large screen in the living room; it extends to every room in the home and beyond. While telecom companies struggle to find new revenue sources for their fixed line infrastructure, the audience is discovering the freedom of wireless communication.

Perhaps that should be re-discovering wireless. Portable radios date back many years and the transistor was a key component of the teenage music revolution in the sixties. By 1971, applying the BBC licence fee to radios that were no longer tethered to a power outlet became unworkable and from that year onwards it became the TV Licence. Now TV is itself in the process of being “unplugged” and the same logic is eating away inexorably at the justification for taxing every household in order to finance public service broadcasting.

In many ways, the BBC is itself the architect of the decline in support for the licence fee. Having almost single-handedly invented catch-up TV with the iPlayer, the Corporation has created the paradox that watching or recording TV on any device as it is transmitted, either broadcast or online, is the sole criterion for eligibility to pay the licence fee.

Watching on iPlayer subsequent to transmission is exempt as is ownership of a device that is technically able to receive live programmes but not used for that purpose. Otherwise almost all modern laptops and smart devices would require a TV licence.

Nothing is for nothing and the corollary of opting out of live broadcast programming in order to avoid the TV licence is higher bandwidth charges from your ISP. Uncapped bandwidth is expensive, whether you are watching live sport or last week’s edition of “Homes Under The Hammer”.

A report in the FT last week attributed part of the decline in US cable operators’ revenues to the loss of teenaged viewers. A New York student is quoted as saying “We can watch everything we want on our laptops using Netflix and Hulu, which means we don’t have to buy a TV or pay for cable.” Had she been about to enter university in the UK, she might equally have said, “We don’t have to buy a TV licence.”

Since most students are conjoined with their smartphone, iPad or notebook, the amount of time they spend in front of a television is minimal and they no longer consider it an essential. The cost of a TV licence, or for that matter a subscription to Sky, is just one luxury among many that students might have to let go while they are away from home. Once they have moved online, it will be hard to bring this generation of “legal TV licence avoiders” back into the fold.

The financial logic that applies to American cable companies can also be applied to the BBC. For subscriber base read licence fee payers and then consider the implications of declining income from a generation that doesn’t cheat the system but simply bypasses it.

A significant proportion of the 445,000 university entrants this September will prefer to spend £145.50 on a TV licence, rather than face a £1,000 fine. Many others, however, will be content to view programmes after they have been broadcast or search out other sources for their online video entertainment. They will not be short of options.

They can catch-up with iPlayer and SeeSaw, check out the latest videos from YouTube or Dailymotion, buy short-form and long-form entertainment from Blinkbox and iTunes, or simply access free content from Crackle.

Football enthusiasts will no doubt find the solution to their problem in a local sports bar on match days, and pay accordingly. And for homesick Scots, there is always the advertising-supported STV Player, which generated £1.6 million in revenue for the Scottish broadcaster last year.

Packaged media suffers from the move to online, both directly and indirectly. No TV often means no DVD player, so no discs are needed, rented or otherwise. The ultra-portables used by many students rarely come with battery consuming optical drives, so no discs there either.

Film fans weaning themselves off Blu-ray and DVD could turn first to Lovefilm for their online entertainment. It’s an established brand that could follow students from physical disc rental at home to online rental and the LOVEFiLM Player, at Uni.

Competition to Lovefilm might appear in the UK next year in the shape of a streaming-only alternative from the much larger US operation Netflix offering a multi-platform service that will include content from Paramount and MGM. It will have to perform well if it is to match up to the customer loyalty engendered by Lovefilm.

Then there is Hulu, which has had an on/off relationship with Britain since this time last year. The online aggregator is rumoured to be planning a UK launch in 2011, but the company has struggled to licence material for the UK market. The conventional service is available already to American audiences on Mac and Windows computers, connected TVs and mobile phones. A “preview version” of Hulu Plus, an iPhone application that is compatible with the iPad, was released at the end of June.

Hulu currently is under the joint ownership of Providence Equity Partners, News Corporation’s Fox, NBC Universal (soon to be acquired by the biggest US cable operator, Comcast) and Walt Disney’s ABC. Hulu reportedly intends to go public in an autumn buy-out valued at $2 billion, after which it might go on a content spending spree.

The activities of Netflix, Hulu and others are already providing a welcome boost to the coffers of content owners, as they attempt to outbid each other. Streaming rights are perceived as a new source of profits for an industry that until recently viewed the internet only as a threat. Netflix Chief Content Officer Ted Sarandos tells the Financial Times, “We’re here to show Hollywood that it can make money online.”

But the organisations that should really benefit from multi-platform wireless video are mobile broadband operators. Just watching a 30-minute “free” video can eat into broadband data allowances and students on a budget would do well to tap into wireless LAN services at their university accommodation or the nearest coffee shop – while it lasts – rather than pay for a 3G or LTE connection.

The rule that bandwidth costs money is as applicable to cash-strapped university networks as it is to Starbucks, and capping connections or restricting bandwidth is the inevitable result. It would be ironic if the consequence of bypassing the TV licence fee in order to save a little over £12 per month results in data charges of twice that or more.

Students are less likely to fall for the appeal of HD video and surround sound, and even 3D TV is a very optional extra. The licence fee seems set to seduce the younger generation away from broadcast television and into the arms of online delivery. Perhaps it is time to reassess a system based on rooftop aerials and move instead to a tax on broadband infrastructure that is used to fund content production at the BBC, Channel Four and elsewhere.

For that matter, when was the last time BT Vision made a programme?