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The secret plot to stop Murdoch

The prospect of Rupert Murdoch gaining total control of digital television
is alarming even the Prime Minister. Previously unreported meetings have
taken place at Downing Street to draw up battle plans. Saeed Shah
investigates

In a couple of months' time, high-street shops will start selling a £99 box
that can bring free-to-air digital channels to every home. The machine is
part of a drive to convert the nation to digital television by a new
alliance of BBC and ITV.

The genesis of that alliance is as remarkable as the technology in the new
£99 box. It springs from a series of secret meetings at 10 Downing Street.
Those meetings, sanctioned by the Prime Minister and involving figures as
senior as the BBC director-general Greg Dyke, had one overriding aim: stop
Rupert Murdoch.

Mr Dyke, as well as executives from ITV and senior figures from the City,
were called in to Downing Street to discuss with the Prime Minister's media
policy adviser Ed Richards, ways of stopping Murdoch's inexorable drive to
control all paid-for digital television in Britain.

It is not just Rupert Murdoch who has been kept out of the new secret loop.
Tessa Jowell, the Secretary of State for Culture, Media and Sport, has been
bypassed. The industry figures went straight to Downing Street with their
concerns – a damaging snub to Ms Jowell. The background to these meetings is
the Government's commitment to switching off the traditional analogue TV
signal between 2006 and 2010. After that, only a digital signal will be
available. There are three ways to get digital TV: via cable, satellite or
through an ordinary aerial (terrestrial). The cable network will never cover
the whole nation. That leaves only satellite (BSky:cool: or terrestrial,
available from ITV Digital, as the national platforms.

The trouble is that, despite the success of its monkey ad campaign and
attracting 1.2 million subscribers, ITV Digital is in dire financial
trouble. So the BBC and ITV have come together in an initiative dubbed the
"digital coalition", with the support of government, to reinvent and save
the terrestrial platform. The clandestine grouping, which insiders admit is
an "anti-Murdoch alliance", began over the summer. Charles Allen, the
chairman of Granada, one of the two main ITV companies, wrote a private
letter to Tony Blair in June. In it he said that ITV Digital was bleeding
cash and was threatened with closure. This was disastrous news for Downing
Street. The Government needs ITV Digital to survive, both to provide an
alternative to Sky and to bring on board the majority of the population that
still don't have digital TV.

"The aspiration of Digital Britain was in tatters," says one senior TV
source. "Since it realised this, No 10 has been involved and kept briefed."

Ed Richards, No 10's newly appointed special adviser on media, and a former
BBC policy researcher, took the lead. A procession of executives from ITV,
the BBC and the City were called in to Downing Street, including Greg Dyke,
to discuss a way to save ITV Digital. By late September, the BBC and ITV
were convinced that a solution to both their problems lay in joining forces,
and serious talks between the two broadcasters began.

For the BBC, this is a crucial project. The corporation has launched a
series of channels that are available only on digital TV, and with more
planned, such as BBC4, to start next month, it must ensure that there is a
way of getting these stations to the licence-fee payers that have funded
them. The new channels are free; but, to see them, viewers have to sign up
to a pay-TV service. For the last year, Greg Dyke, has been trying to
resolve this conundrum.

The Government knows that 15.5 million households do not have access to
digital TV, and that, as things stand, the majority of these citizens will
still not have it by 2010. How can it then switch off analogue TV, and sell
off this spectrum? Furthermore, Mr Blair was as horrified as the BBC by the
prospect that all television in this country may soon have to depend on
Murdoch, to be beamed into our homes on Sky.

So a rescue plan has been hatched by the BBC and ITV. The proposed way out
of this mess is to break the link between digital TV and pay-TV. Although
Britain leads the world in digital TV, with almost 40 per cent of the
population signed up to one of the pay-TV services, take-up is now slowing
down. Sky launched its services in 1989 and has gained over 5.5 million
customers. But it is feared that most of those that can be tempted have
already forked out for a subscription – the most popular Sky package costs
£444 a year. Not everyone wants 200 channels and the financial drain of a
subscription. Getting the rest of the country on board requires a different
approach, according to the digital coalition, which has spent months
plotting a new course. An announcement confirming the coalition is due in
the next few weeks.

Instead of getting a free set-top box with an ITV Digital subscription,
which costs an average of £225 a year, consumers would be asked to spend a
much smaller amount, say £100 or less, as a one-off payment to buy a basic
digital terrestrial box themselves. This would enable them to receive all
the free-to-air channels and then, if desired, this box could be upgraded to
subscribe to the premium channels available on ITV Digital.

Last week, Mr Dyke told a Commons select committee that BBC research showed
that two million homes would be willing to buy a cut-price box. All the
pieces of the digital terrestrial rescue plan are, then, falling into place.
A marketing drive to promote free-to-air content is imminent – with the BBC
alone committed to spend £20m on the campaign.

Rupert Murdoch will be furious if the new campaign specifically promotes
digital terrestrial rather than digital television generally. But if the
plan comes off, Sky may just be forced to give one or two of its channels
away for free, too.
 
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[updated:LAST EDITED ON 31-Jan-02 AT 09:55 PM (GMT)]I'm not convinced that Rupert Murdoch (or the people who really make the decisions) will be upset by this at all, I'm sure he/they will be quite happy to allocate a couple or more of his/their channels to the free to air system, Sky News, Sky Sports News etc and all will be carrying heavy advertising for the premium services.

The remaining non-digital homes in the UK are not likely to be premium package Sky Digital subscribers, at least not in the short term anyway. Sky have made incredible progress with their 5 million subscribers, certainly far more than I thought they'd achieve, their growth in the next few years is going to be much slower and I think that they are fully aware of this.

Their priority now is to increase the per capita spend and through steady growth pick up the rest of the pay TV audience. Those that are at present subscribed to a failing ITV digital, will either jump upwards to Sky, or downwards to a free to air package.

Even more coverage with Sky's free to air "donations" and the possibility of giving a constant taste to the unconverted of the forbidden fruits, simply a phone call away :)

Is the glass half full, or half empty?

Rolf
 
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