Kate Bulkley, Media Analyst.

Adam Singer. Non-Executive Director of SMG (Scottish Media Group)

For Digital News March 13, 2003.

By Kate Bulkley

Adam Singer

Adam Singer is non-executive director of SMG (Scottish Media Group) and recently was elected to the Content Board of Ofcom, the new umbrella media and telecoms regulator for the UK. Former posts include Chief Executive of Telewest Communications, Chairman of Flextech and COO of TCI International. He has braodcasting in his blood-- his father Aubrey was the BBC's deputy directro general under Sir Alisdair Milne. He is seen within the media industry as 'erudite, canadid and a fantastic speaker.'

Kate: The Communications Bill is in its final form. Do you think that it is a good bill?

Singer: My opinion is that the Communications Bill is the right way to go. The de-regulation in the Bill is a de facto acknowledgement of what the technological situation is. Given that roughly half the UK market now has access to digital spectrum, and digital spectrum is potentially private spectrum rather than public spectrum and clearly anyone can start a (digital) channel now and more easily than they could a year ago, this Bill makes sense.

Kate: But should there be some limits or quotas on how much non-British programming should be allowed specifically on the commercial channels, ITV and Channel 5?

Singer: No, I donít think there should be. The real universal issue is that a good native show always beats a good foreign show. And people like tales told in the language of their own culture and we in Britain have a very powerful domestic TV production industry which, by and large, satiates the UK audience very well. You can see this in the fact that it is very rare to see a US show in the top 20 TV shows. Of course that is slightly unfair cause they are scheduled in strange places when they canít find an audience. But the other thing is: can the British TV industry totally satiate its audience? No. Is there a demand for greater diversity? Yes. It is interesting that the UK TV industry has developed an incredible speciality in investigative, hospital and misery dramas and has a good line in comedy. But the one thing that UK TV doesnít do is to have the kind of diversity of US drama. For a country that produced Tolkein, CS Lewis, the science fiction talent seems totally incapable of producing any fantasy or science fiction TV programming. We have Mary Shelley who wrote Frankenstein. We have all this, and yet we have not produced Buffy the Vampire Slayer or Angel or Witchblade.

Kate: So you donít agree with Lord Puttnam and some others that there should be some British programming restrictions or minimum guarantees if, letís say, Rupert Murdoch or Disney take over Channel 5?

Singer: So they take over Channel 5, but what is to stop them or anyone else from taking over any free to air shopping channel or other digital channel and putting out as much American programming as they like with an infinite marketing budget and therefore getting an audience?

Kate: Yes, but you are talking about a niche digital cable or satellite channel. Lord Puttnam is talking about one of the terrestrial channels with 100 percent coverage. That is different, right?

Singer: Given the current take-up of Freeview and the already existing cable and satellite audience in this country you are not far off from having a majority of the UK population with access to digital signals. Today roughly half of the UK has it already and that 50% is under 50 years of age, so you can see where that trend is going. So Lord Puttnam can say this and there might be some kind of oversight built into the Communications Bill or into Ofcom, but then does this quota apply to ITV2? Does this apply to any other company starting their own channel? What happens if Sky One goes free to air? There is nothing to stop Sky One from going free to air (on satellite and/or on Freeview, possibly replacing Sky Travel) and competing with ITV. And then of course there is the question of what the audience wants. David (Puttnam) has got to have the confidence that by and large the British audience will gravitate towards its own programming. He doesnít need a quota.

Kate: It sounds like you are not making a distinction between a terrestrial channel or frequency and a cable/satellite channel. But eventhough I grant you nearly 50% of British homes have digital, multi-channel TV today, that is still only half.

Singer: The Communications Bill is to deal with the forseeable future and in the forseeable future, the next 5 to 10 years, all TV signals are rapidly turning to a 1 and a 0 (i.e. digital). So who cares whether the signal comes through a mast 200 feet up in the air or a piece of cable 10 feet under the ground or a satellite 23,000 miles up? Whatí's the difference? Itís all moving toward being about a 1 and a 0.

Kate: Freeview has gotten off to a good solid start in terms of take-up. Will it continue and how do you see it fitting into the puzzle of making the UK an all-digital TV nation by 2010?

Singer: Freeview is an amazing phenomenon. The boxes are roughly 100 pounds for 30 extra channels and no monthly subscription fee. They are already selling very well and the price will come down significantly. So once it is down to 45 or 50 pounds a box in a year or so, the second set receiver or those who have low interest in multi-channel TV, late-adopters, older people who have not embraced satellite, for all these it becomes very much more attractive. But the next thing that is important is that the BBC is now essentially creating a second satellite platform that unlike Skyís platform is free to air. If the two ITV companies merge then that will take out their regional issues and strengthen their proposition. But the really interesting question is, is the UK about to let go of the US cable model? By that I mean the dual revenue stream channel economics model (where a channel gets carriage fees from platform operators as well as advertising income) shifts. And instead, suddenly the market is hurtling toward a more German, multi-channel TV economic model where a number of significant channels are free to air. In this scenario, one starts to have 40% to 50% of UK homes picking up channels from cable or satellite or Freeview then it doesnít take much for a UK Gold or a Discovery channel or an MTV to suddenly flip to being free to air services. And as I said before, Sky One could go free to air in this model, in which case all of the basic programming (not the premium movie and sports channels) that drives cable and satellite becomes free to air. So suddenly there is a drift very much driven by the new BBC free to air satellite platform and Freeview where there are far more free to air channels. This in turn will effect the value proposition of basic on cable and on Sky.

Kate: This certainly does sound like the German model but in Germany, as you well know. all that free to air programming from satellite and cable as well as the terrestrial channels has put up a real stumbling block for the emergence of a strong pay TV business in Germany. Thatís why German cable is on the financial ropes, and why Premiere, the pay TV satellite company, only just emerged from insolvency.

Singer. Thatís correct. No where did I say that these models had to work for any particular delivery platform! Nobody is making a huge amount of money out of the basic pay TV proposition in the UK under the current model either. But you could see a market which is perfectly satiated with a package of 30 very good free to air channels. The Freeview thing is just beginning to destabilise the market in exactly the same way that basic pay TV channels like Bravo, UK Gold, Discovery did back in the mid-90s to the existing broadcasters.

Kate: So to carry this further, what does this mean for cable in the UK? One could argue that Sky has enough of a base that it can make money on premium services and advertising and interactivity and so is not so reliant on their basic channels. As Sky has shown recently with the plan to launch its own music channels, it feels it can do without buying in certain niche channels from other providers if the price is not right. But what about cable?

Singer: Well, some people are (still) going to take cable because it is the convenient thing to do. You will take it as a sort of one stop shop and you will take cable to get the extra speed from the cable modem for your internet access. But to get back to my prior point, there is the beginning of a shift taking place going towards free TV where there had been a trend going toward pay TV. And the BBC has been involved with both sides. When everybody was launching basic pay TV channels, the BBC got behind UK Gold and UK Horizons etc and now the BBC is getting behind a free to air pantheon.

Kate: Do you think BBC Director General Greg Dyke had this in mind when he originally said he did not want to pay the 85 million pounds over five years to Sky for conditional access? I mean do you think he saw where he would potentially be moving the market with this decision?

Singer: I think Greg has been very clever. Gregís issue is very simple. Greg needs to make sure that enough people are using enough BBC channels to continue to ensure that the license fee we pay remains in place. Therefore, the quicker he can get everybody to digital an the quicker he can make sure that all those BBC channels are being seen by a large digital base the more the license fee is secure because the license fee as you know rests on utilisation.

Kate: Hereís another related question: the BBC seems to determined to go free to air and set up in effect its own platform or package of free to air channels that, as you mentioned, channels like MTV or Discovery might join. Now in so doing this the BBC will lose its Sky EPG positions unless the government steps in. Should the government force Sky to let the BBC have its same EPG channels up at number 1 and 2?

Singer: I think that the BBC losing their EPG position is a worry but I suspect that the other thing is will the government say ĎHang about, you the Beeb have all this capability to move set top boxes, you have all this interactive TV and so are you really telling me that you canít come up with a second, alternative EPG? Shouldnít it be like the internet where you have a choice of search engines? I think it is inevitable that we will see more EPGs.

Kate: So are you predicting the potential end of Skyís dominance, or at least the end of Skyís dominance as we now know it?

Singer: Well yes, but the other thing is this: the UK market is a strange market, where everyone and anyone can come into play. Under the new Communications Bill it is becoming a much freer market than the US market. So there is nothing from stopping Sky from building its own serious competitor to ITV which then cross promotes as a free to air channel all its premium programming. A greatly enhanced Sky One would by definition take audience share from somebody and would lower the price (of buying) Channel 5. This would be a very powerful place to be for Sky. I would certainly not predict the demise of Sky in a hurry.

Kate: But for Sky this would be a very changed business model.

Singer: It would be a changed business model but if anybody is powerful enough to change its business model in these circumstances, it's got to be Sky.

Kate: The BBCís move changes the way we are looking at digital. We had been worried about how to get the people who live outside of the DTT footprint or who donít want to pay anything for digital to subscribe. With a free satellite proposition perhaps these concerns are of less importance?

Singer: Yes of course. And it is just time. I donít know if we can meet the government's 2006 to 2010 deadline for switchover, not does anyone else, but I wouldn't bet against it. The correct thing to say is that anyone who is still on analogue by 2006 to 2010 no advertiser is going to want to talk to anyway!

Kate: What about the problem of un-encrypting signals on a free Sat offer? The rights holders to those signals do no want to be un-encrypted. I am specifically talking about the Scottish Football League as they have come out against this, but I would think the Hollywood studios would also be keen to make sure that the programming they sell to different channels stays on those channels.

Singer: I don't actually see what the problem is there really. So Scottish games are transmitted across England. How is that going to affect the Manchester United supporters?

Kate: Point taken. The government has been keen on digital switchover as well as Broadband Britain. But of late more emphasis has been placed on the TV than on the PC. Is this problmatic?

Singer: I donít think so because there will be a lot of people who will use the telephone line to upgrade to DSL (fast internet) very easily. There are two routes to being digital, the TV and the PC. But the TV is going to be the more widely used at least in the near view.

Kate: So you think the digital switchover plan is on track?

Singer: It is on track and the market is working well for them. More and more Freeview boxes are entering the market and the prices are very low and it will work. There will be a recalcitrant rump of 10% to 15% of homes who no one will know what to do about, but up to that point Freeview is working very well and just needs a bit of time.

Kate: As the former CEO of Telewest you have a perspective on the cable business. Cable has become a high-speed interent access business with a little bit of TV tacked on. How will the cable business shape up now and given that the two UK players now have their financial houses in better order, how will the business develop and contribute to digital switchover?

Singer: I think from a consumer's perspective it goes like this. If you really want the very best TV service, i.e. the most channels the most ease in recording and storing those programmes, then as of today, Sky is the best service. If you want the best high speed connectivity for your PC then currently cable is probably the best because both operators are offering 1 Megabit services which is twice BT's 512 kbps. If you want sheer voice telephony you can get it from any of these or as more and more customers are finding you can get that from a wireless connection. If you are well-off, saavy consumer you'll take Sky for TV, cable for high speed internet and phone from whatever provider is most convenient or cheapest for you. The next issue that cable faces is cable ends up being essentially a signal utility and part of the problem with cable is that most of the technological premiums have shifted across to wireless, especially on the telephone side. People will use their mobile phones even when a fixed line sits right beside them because the mobile has their address book in it and they donít mind paying the premium. So there is a real technological premium that wireless has. The other key issue for cable is that it is two regional voices and everyone else from Sky to O2 to BT are all national voices, national pricing, national scale efficiencies for marketing. So cable has quite a significant problem. What cable has to do is to A. make sure it has enough financing to keep it going and B. that it has enough financing to come up with products that make it more interesting than other services. And C. there has to be enough financing to make sure the customer service experience is pleasurable, which is not the reputation of cable. So the single biggest issue for cable in the UK is, how does it rise above the plain vanilla, single utility business?

Kate: You mention wireless and how it is competing with fixed line telephony. What about Wi-Fi (wireless hot spots using short range frequencies like T-Mobile is providing in Starbucks coffee shops)?

Singer: One thing that has me completely puzzled is why Wi-Fi is so big in the US and has only just started here. Cable could really compete again and give itself a wireless premium through Wi-Fi. Wi-Fi would be a really good thing for cable to be doing if it has the money to do it. Just imagine, if you were a Telewest Blueyonder (high-speed internet) customer and for a few extra quid a month you could use your laptop in every single Starbucks because we've put in a Wi-Fi network, that would put some traffic on their network!

Kate: Sky could do it too through a deal with BT.

Singer: Sky could do it and so could BT alone. If I were BT, I would be doing two things, lower the price of my (DSL) broadband and start doing Wi-Fi in a big way and say "night, night cable!"

Kate: Digital in the UK is moving along at a good clip, is there anything else that needs to be done?

Singer: I think that all markets level out. With the arrival of Freeview The UK is ahead of many, no most others. There is no question about the Freeview technology especially since they have upped the power and the offer looks good as well. Remember in the US, cable took off for a variety of reasons but it was not in the early days because it had a maximum of channels. In fact, most early US cable systems started with only 13 channels. Imagining how Freeview is going to work, you get an extra 30 channels with a one-time pay box. This Freeview offer does take some of the flavour out of the multi-channel package! Not enough to end cable nor certainly not (end) Sky's business. But one thing we have learned in the UK is you donít have to be massively successful to make life miserable for everyone else!

Kate: This is a reference, I assume, to ITV Digital?

Singer: I wasn't going to mention any namesÖ.(laughs). The interesting thing is that Carlton and Granada now are working very hard to try and look like Telewest and NTL. But actually they are both successful, essentially profitable businesses so the question that they have to explain is why they should be allowed to merge to become a highly dominant air-time supplier in this country. They are playing up their woes a bit like the Japanese talk about their economy, but actually they are not doing that badly.

Kate: Splitting out the airtime into two separate companies is floated as one solution.

Singer: Well, this is a bit like privatising the railways. Down one track we will have lots of different people operating. It's not really feasible. The real question is even if the merger happens and I am sure it will and the government wants it to, but the idea I am outlining is that these two businesses would still be successful even if they weren't to merge.

Kate: And I wonít ask you who you think should run a combined ITV?

Singer: Better not, as I wonít answer that anyway!



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