Freesat is not the only terrier nipping at Sky’s ankles
Raymond Snoddy on Freesat hitting one million customers and the long-awaited results of Ofcom’s investigation into the pay-TV market.
Sometimes we place too much emphasis on big, symbolic, round numbers: The Daily Telegraph falling below one million circulation – that was some time ago – and the precise moment that BSkyB hits its 10 millionth subscriber – something that is surely not far off later this year.
Or is it?
Today’s notable landmark is that Freesat, the free satellite television service beloved by second home owners everywhere, has reached the 1 million mark.
Time for a celebratory press release and bottle of champagne and then on to the next target?
Yes but this one has a little sting in the tail, because of its timing and where some of those new Freesat supporters had come from.
The announcement arrived on what will probably be the eve of the publication of Ofcom’s three-year investigation into the pay-TV market.
As Ofcom deliberated on the UK’s longest regulatory investigation the suffering intensified at BT Vision, Virgin Media and poor Setanta, and flared for a time before coming back to earth with a sickening thud.
But now as soon as the Budget is out of the way, Ofcom will finally deliver, with consequences for the entire television market, including niche players such as Freesat.
The intriguing thing about the Freesat announcement is the claim that 40% of its customers are former Sky subscribers.
The BBC-ITV owned Freesat may represent a mere nip at the ankles for Sky but it is not the only small attack terrier running around.
Freeview, which can boast about a big number of its own – 10 million users on the prime set – last month indicated that it too would like a slice of the Sky action.
Unsurprisingly, Freeview said it was winning a disproportionate number of the very late adapters to digital and also claimed it had identified 350,000 Sky subscribers prepared to trade down to its free HD service.
If that were all, Sky would probably just shrug and get on with its business. After all its most recent returns showed the strongest subscriber returns on the back of everything from its expanding HD service to broadband provision.
Ofcom could change everything. Sky will not only have to wholesale its sports and movie channels but the communications regulator will, in effect, be able to set BSkyB’s profit levels by determining wholesale rates to potential rivals.
A last hurrah from Ofcom before a potential Conservative government clips its wings?
What’s not to like about that from the consumer point of view?
More choice of operator as even Freeview and Freesat come into the market for pay sports and lower prices for all.
A triumph of economic regulation in action.
Except that Ofcom’s perfectly rational action will unleash a firestorm of unintended consequences, the most predictable of which will be litigation from Sky that could last as long as the original Ofcom investigation.
The real problem surrounds the strange and mystical properties of exclusive sports rights. There is a huge premium value on exclusivity, just as the worth of live sports rights plummet the moment the action is over.
If every man and his dog has access to the “exclusive” rights and the wholesale price is tightly controlled, as in “low”, the no longer exclusive rights cannot be worth anything like what they were before.
The results for the Premier League are very predictable.
You can criticise the clubs as much as you like for becoming totally dependent on the drug of television rights cash, most of which gets handed over to mercenary foreign players.
Yet what the flawed system has created is the best football league in the world. Let the air out of the balloon rapidly and you kill it off – one way or another.
In the short term there could be more clubs going into administration like Portsmouth. In the medium term the danger is greater polarisation at the top of the league – increasing dominance of those few clubs lucky enough to be owned by billionaires followed by a boring league.
Consumers would pay less. It would be unfortunate if they ended up getting very much less.
But we can be sure that the very clever folk in Ofcom would have taken all that into consideration.
There is another small matter to take into account – something that probably doesn’t appear on the Ofcom spreadsheets.
It is the extent to which the profits of exclusivity have funded innovation in the television market.
Sky has no known connection with Mother Theresa. Its interests are selfish and wholly profit-orientated. But the consumer has benefited mightily from the stream of innovations that began with digital satellite itself and this year will run to 3D television.
Again it would be unfortunate if the search for a fairer market for rivals and consumers undermined the economics of such forward-looking investments.
Another unintended consequence? The numbers could turn out to be chilling.