By Kate Bulkley
Tuesday, June 24th 2002.
Broadband take-up in the UK lags behind that of the rest of Europe and America. Can service providers pull in audiences with music and sports channels? Kate Bulkley reports on the growing content war
Cable and satellite were a tiny blip on the UK TV map until BSB's cheeky bid to buy exclusive rights to Premiership football more than a decade ago. It was a move that began the content wars in Britain and led to BSB's early demise and Sky's success - with the result today that 40% of homes are now connected to pay television.
Similar content wars are now gearing up in the world of broadband. Internet usage is increasing and the cost of a high-speed connection is dropping, but it could take a BSB-style programming coup before broadband sees the kind of growth that the cable and satellite industry has enjoyed.
Last week, MTV, One.Tel and Real Networks announced services which they hope will speed broadband's growth. From July 1, internet service provider (ISP) One.Tel will exclusively offer MTV Live with every broadband subscription. One.Tel is betting that "I want my broadband MTV" will become a clarion call for young (and youthful) new subscribers. "It's the first time that broadband will appeal to a truly mass market because everyone loves music," says Phil Worms, MD of broadband for One.Tel.
The exclusive year-long deal puts MTV Live on One.Tel's homepage which means that UK subscribers can access this service for the first time. This follows MTV Live's successful launch in Sweden, Finland and Norway over recent months. One.Tel, which was purchased by Centrica last July, has 100,000 UK narrowband subscribers who pay £12.99 a month for a connection. The company's three-month-old broadband ADSL product costs £27.99 a month and already has about 3,000 customers. The company thinks that bundling in MTV Live and other yet-to-be-announced content services will attract more sign-ups.
Broadband in the UK has been handicapped by high connection prices and when BT lowered the wholesale price for its broadband ADSL lines in April from £25 to £14.75 per month the move was welcomed as long overdue by ISPs. The cuts have allowed ISPs such as AOL, One.Tel and BT's own BTOpenworld to construct more attractively-priced ADSL broadband offers, increasing demand from consumers. Telecommunications regulator Oftel says that the new prices are having a positive effect with the number of UK broadband subscribers on cable and ADSL phone lines now reaching 600,000.
"For us, the interesting thing is that everything in broadband has been focusing on speed," says Russell Craig, One.Tel spokesman, "but what we're trying to focus on is content as well. After you have gotten your emails faster, speed is sort of 'So what?', but if you can provide things like big music names, then that's going to drive broadband. MTV is the biggest name in music broadcasting so we really think this is a new stage of broadband."
MTV Live is not just another MTV music video channel. It is specially formatted for broadband, and airs only live performances from the popular acoustic MTV Unplugged series, which sit alongside rich text information on bands and concert dates. There are virtual tours around backstage areas, interactive games and opportunities for users to compose their own tunes. One featured game created for MTV Live is Trashotel where the players can "trash" a hotel room while consuming virtual bottles of wine. The "score" is the cost of the damage done to the room in the allotted time, which is presented in the form of a hotel bill.
It may not be for everyone, but MTV believes this will hit the right chord with rock fans. "What we want is more interactivity and engagement with our target audience," says Anthony James, head of programming and production at MTV Live. "We've been unable to do that on television because of the stage that interactive TV development is at around Europe."
In the UK the cost to the consumer for MTV Live is being folded into the basic cost of a One.Tel broadband subscription. In Finland, however, broadband provider Sonera bundles the new MTV channel along with a CNN video feed and charges customers an extra 3.90 euros (£2.50) per month on top of their connection.
Meanwhile, US streaming media company Real Networks last week launched the European version of its successful American product, RealOne SuperPass, which has 600,000 subscribers and a package of streamed audio and video services in the US. The new European offering includes streamed versions of the BBC's News 24 (or BBC World for those outside the UK), information from CNN.com, Uefa Champions League live audio coverage, cricket (audio and video) from CricInfo, Wimbledon highlights and delayed games, 250 classic MTV music videos on demand, BBC archive programmes such as Top Gear and The Old Grey Whistle Test and the latest series of Big Brother. All services are English-language at the moment and Real Networks charges £9.99 to £14.99 per month depending on the level of service - but this does not include an internet connection.
Both MTV Live and the new Real Networks service can be viewed with any internet connection, including the normal dial-up 56k. It is likely that Real's next step will be to partner with various broadband providers across Europe (it already has a marketing deal with pan-European ISP Tiscali) and, as One.Tel and MTV Live have done, bundle its content with a broadband connection service.
"We think that people will recognise that, while the net started out as free, content providers can't afford to create content for nothing," says George Fraser, director of consumer and media for RealNetworks. "We are working with a number of partners from a distribution perspective. We obviously want to work with broadband providers because good content makes broadband much more interesting to subscribers."
Adding more compelling content is intended to increase consumers' appetite for broadband. The high cost of connection has been an early handicap and is why the UK lags behind other big European countries in the number of connections. Broadband's faster speed and price cuts from various providers to below the crucial £30 a month barrier has boosted take-up, but simply getting web pages faster will not bring in mass audiences. It is the classic chicken and egg scenario; content providers need large numbers of broadband subscribers, but the broadband industry needs large amounts of good content to get the necessary numbers.
Zwillenberg believes that because the best content is local, European countries will have a harder time solving the economics of broadband. "In the USA, there are 300m people and that's a lot of displaced sports fans, for example. But scale that down to somewhere like the UK where the market is one sixth the size and there is significantly lower broadband penetration and the cost of acquiring rights doesn't make a lot of sense. That's unless it is a big one-off event like Big Brother."
As far as more broadband programming goes, the likes of MTV are still using the medium as an experiment. MTV Live launched in Scandinavia in March and has already generated more then 100,000 subscribers. MTV expects to boost that number to half a million by the end of this year and that would constitute, for them, a successful broadband first step.
"Broadband is important for us to have because a two-way path between us and our audience is by no means established yet," says Brent Hansen, president and CEO of MTV Networks Europe. "But we want to be up and playing with it, not just talking about it. MTV Live is like a living laboratory."