ITV a premium provider?

The Telegraph recently stated that ITV was looking at moving into the PPV market for its digital channels. I’m assuming this is just lazy journalism and in fact what they meant was that they were considering moving into the ‘pay for’ market rather than the more distinct PPV market. There is no logical reason why ITV would look at the PPV market, but the prospect of them moving into the ‘pay for’ market offers some very interesting possibilities.

Let’s be clear there are three main business models when looking at premium television, by which I mean channels that individuals purchase distinctly rather than just as an extension of a platform package.

PPV – Pay Per View is where a distinct program is purchased. This is normally a film and the conditional access allows people to watch the film for a set period of time. The main distinction is that it is one program; Sky Box Office is perhaps the best example of the PPV in action.

PPN – Pay Per Night is where a channel is purchased for a set period of time, which normally finished around 6am in the morning. This is the corner stone of the Adult channels on all platforms.

Subscription – this is where a monthly fee is paid and the conditional access to the channel is opened until that subscription runs out. Sky Movies, Sky Sports and again the Adult channels all use this model to varying levels of success.

From the above you can see that The Telegraph obviously did not mean PPV (and yet so many other sites copied the obvious error) but it’s worth considering why the PPN option would also not work for a network like ITV.

Scheduling – the way you schedule a PPV/PPN service is very different from a normal linear channel. On a linear channel you have to expect that people will come back on certain days/times to watch specific programs. With a PPN service you can assume that a maximum of 4 purchases will be made in a month, therefore you can repeat your schedule on a much more frequent basis.

Purchase Behaviour – PPV/PPN consumer behaviour is all driven by instinct. There has been a multitude of research undertaken, and it all points to the fact that there are no real ‘appointments to view’ but that if the impulse is there the consumer will surf and make a purchase of the content that best fits their mood. This works well for films and adult, but would fail in a more mainstream and short form environment.

Margins – I can’t talk too much about this to be honest, but the way that premium channels work the margins in a subscription service are much higher than on a PPV/PPN service. The fee’s that are charged for allowing a consumer access to a channel are paid each time access is allowed. So if someone makes 4 PPN purchases in a month, you pay 4 times. If they subscribe, you’ll only be paying once.

However the move of these digital channels to a subscription service is much more interesting and poses many questions and possibilities. With the information still very vague it is hard to know the exact route that the new management team are contemplating, but my guess is that they’ll follow a similar strategy to Sky Movies.

This would entail one of the channels (most likely ITV2) becoming a true premium channel much as HBO is in the US.

They would then add ITV3/ITV4 as make weight channels into the subscription package to justify the price point; my guess is you’re looking at around £7 per month.

There are a couple of key questions that this raises though:

–          How would they position the 3 channels to highlight true differentiation?

–          What content would they invest in to persuade the UK consumer to change buying habits?

–          With no Conditional  Access on Freeview, how would ITV make a premium service pay on the UK’s biggest platform? TopUpTV at present doesn’t really have the penetration, but could the addition of these channels drive the take up of that service?

–          How would this play with Canvas and their VOD ambitions? It would lead towards the assumption that ITV intend to go it alone in the new VOD market.

–          Would they work through the platforms, or own the consumer relationship (thus offering much better multi-platform opportunities) by working with external companies like MGT?

It’s a bold as brass idea – if ITV could become the UK equivalent of HBO, move away from advertising reliance and provide a true multi-platform experience through one billing mechanism…..Crozier could well reinvent a media giant.

One thought on “ITV a premium provider?

  1. Richard

    I quite agree with your comments and am an advocate in subscription – as we both know it works! More effort is required to ‘unsubscribe’ so its no brainer! How ITV would fair remains to be seen as it means completely changing their model for ITV3 & ITV4 and would need to add compelling premium content to make this work. Its also a lot harder for viewers to move from free to pay.

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