ITV dips its toe into paid content

Last week ITV announced that it will become the first commercial broadcaster to give mobile viewers the option – at a price – to watch catch-up content without ads. It’s an interesting test of an increasingly important part of the media eco-system, but is it really going to work? Whatever happens, you can bet ITV’s competitors will be watching like hawks says Dominic Mills.

Here’s a thing: after offering the nation’s grateful viewers free TV for more than 50 years, ITV is politely offering us the chance to pay for it.

But don’t panic: this isn’t a sudden reversal of direction, more an experiment in testing the consumer appetite to pay for stuff.

Last week, ITV announced that the latest version of its iOS ITV Player app would have a paid-for option.

Cough up the princely sum of £3.99 a month and you can watch ITV on your iPad, iPhone or iTouch without any of those beastly ads.

Now we know what’s going on here. Anticipating the long-term decline of its traditional business model (actually, it’s currently in rude health, but that doesn’t mean it’s always going to stay that way), ITV is expanding and diversifying its revenue streams.

It’s clear a lot of thought has gone into this. The key is in the difference between the free offer and the ‘premium’ one.

Go for free and you get the standard seven days’ worth of catch-up plus live simulcast on ITV 1 and ITV2.

Go for the ‘premium’ and you get a whole lot more: 30 days’ worth of catch-up, the full range of ITV channels (all five if you include CITV), and no ads. The app also supports viewing via wi-fi and 3G. The catch: it doesn’t include simulcast – presumably on the basis that this is not technically possible (yet).

So, is that a big enough gap between free and ‘premium’ to justify £3.99 a month – given that you can also fast-forward through the ads or use ad-blocking technology? ITV has an installed iOS user base of 7 million, which suggests that it has a robust and wide enough range of viewers on which to test the proposition.

If you’re looking for clues as to whether people will pay a) to escape ads and b) for something they used to/can still get free, there aren’t that many exact parallels out there. Yes, there’s evidence from the print world that consumers will pay for tablet apps when they can access web sites for free. It’s (more or less) the same content, but you’re paying for a better user experience, not an ad-free one.

Then there’s Lovefilm and Netflix (both more expensive), plus Sky – but the content propositions are different.

Perhaps the best parallel is Spotify, where the latest figures suggest it has over 6 million paying users, about a quarter of its total user base. And while it’s a different medium consumed in a different way, the key is that it has successfully moved a significant number of users from free to paid.

It would be an exaggeration to say that ITV’s future depends on the success of this move. But it’s an interesting test in a small part of the media eco-system that competitors – and other media owners – will watch with interest.

The mutation of Tesco

There used to be an army of analysts and commentators who studied every move Tesco made – as a retailer.

Now, as it ramps up its digital activities, it’s the turn of media analysts to focus on its move into entertainment.

Putting Blinkbox (80% owned by Tesco) boss Michael Cornish in charge of digital operations is a statement of intent. Setting up a digital hub in Farringdon (almost Tech City) is another, as is the hiring of 150 digital staff.

As of now, Tesco has four digital entertainment brands: Blinkbox, We7 (music streaming), Mobcast (e-books) and Clubcard TV, which together add up to a multiplicity of routes into its massive shopper base.

The logic is clear. Why shouldn’t it use its powerful relationships with its customers – built, via Clubcard, on a huge knowledge of their consumption habits – to hook itself into them even more firmly? Look at what Amazon’s done.

If I was a shareholder or institutional investor though, I wouldn’t be so sure about the giant, mutating Tesco. Am I buying into a retailer or a media/publishing/entertainment company?

It’s in retreat from a disastrous retail expedition in the US, and the repair of its damaged UK (the key profit generator) retail operations remains a work in progress. Tesco might be better off focusing on that for now.