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Freesat’s upgrade increases competition in the UK’s free-to-air TV market

Nick Thomas, Principal Analyst at Informa Telecoms & Media

Nick Thomas, Principal Analyst at Informa Telecoms & Media

Free-to-air DTH has been a small but persistent part of the TV landscape in the UK, as elsewhere – and despite competition from emerging connected-DTT providers, subscription-free satellite operator Freesat is not planning on departing from the stage any time soon. Its latest makeover creates further competition in what is becoming a crowded market for UK TV services.

Freesat was set up by the BBC and the UK’s leading commercial broadcaster, ITV, to offer a free alternative to BSkyB. The need to install a satellite dish remains a barrier to attracting new clients, but selling set-top boxes to disenchanted or money-strapped Sky TV customers (and reusing the installed dish) has proved successful, with half of Freesat’s customers coming via this route.

In the four years since launch, Freesat has, without much fanfare, sold 2.6 million set-top boxes and enabled TVs, while steadily improving the product: For example, it already offers about 150 channels (including five HD channels) and (for viewers with broadband access) the catch-up services from BBC and ITV.

Its latest incarnation puts a new TV guide, Freetime, at the core of its next-generation Freesat Plus boxes. Although it incorporates the backward EPG seen on the likes of Tivo and YouView, Freesat’s guide eschews the personalized recommendations (as seen on Virgin Media’s Tivo box) based on what viewers already watch. With a focus on simplicity, Freesat has chosen a more traditional editorial approach, with its Showcase option picking out highlights from both upcoming and catch-up menus.

Those wanting game-changing technology might be disappointed, but Freesat managing director Emma Scott makes the valid point that although there is generally more choice for viewers than ever before, it is “difficult to make choosing easy.” Installation, requiring both a dish and a broadband connection (there is no Wi-Fi option on the initial boxes), might not be entirely user-friendly.

But on-screen, the focus is on a simple, easy-to-use experience, and although there is little that is truly unique on offer, the user interface is well-executed and clean, unlike some of its rivals. Moreover, unlike YouView, with its proprietary software, Freesat is built on open standards, including HTML5, HbbTV and OIPF. So the manufacturers making Freesat boxes – including Humax, Sagemcom and Manhattan – can offer them in other markets with little adjustment.

The upgrade to Freesat is yet another example of the free-to-air sector stepping up to offer enhanced TV experiences – including HD channels and on-demand content – to target the 50% of UK TV homes that don’t have pay TV.

Alongside the launch of YouView and the heavy promotion of the latest generation of Freeview HD, the latest version of Freesat reinforces the view that the connected free-to-air market in the UK (both DTT and DTH) is providing real competition to the pay-TV providers.

A strong free-to-air segment is not just a brake on pay-TV operators’ growth; it is potentially a threat to their market share. Free services that combine HDTV with streamed on-demand content from the main channels are enough to meet many viewers’ needs, especially if the user experience is attractive.

The UK’s leading pay-DTH provider has, characteristically, seen this coming and has started to evolve its own offerings accordingly. Sky has already launched Now TV as an untethered “lite” version of its core pay-TV service, delivered via IP, and also leads the market in two areas where Freesat has yet to launch: multidevice support (a smartphone app from Freesat is in the works, but not yet live, alas); and paid on-demand content. Freesat’s rumored deal with Netflix is not yet in the bag, so competing with Sky’s strong movie offer (or even Lovefilm on YouView) is not an option for now.

But if the next step for Freesat is to add on paid-for movie or music services – promised but not yet available – it will be interesting to see how Sky responds to this much more direct threat to its revenues. Once Freesat becomes a provider of paid content, it (or rather its owners, BBC and ITV) will be seen to be parking a small tank on the Sky’s lawn.

Those who do so can normally expect an aggressive response, perhaps involving an appeal to the communications regulator, Ofcom. But perhaps Sky will prefer instead to identify Freesat as a new opportunity to sell Now TV. It is already set to offer Now TV via the YouView platform, so why not embrace another potential rival and become the cuckoo in yet another nest?

One thing is for certain: The competition between nominally free-to-air and pay TV in the UK is heating up. But as it does, the distinction between the two is set to be increasingly blurred. Other markets will note this trend with interest.

We’ll be publishing new research shortly into the growth of connected free TV – watch this space for further updates.

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