Kate Bulkley, Media Analyst.

Rivals fill the YouView gap

By Kate Bulkley

Broadcast News

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For Broadcast April 20, 2011

The delay of YouView set-top boxes until 2012 is allowing manufacturers of TVs and other internet-connected devices to steal a march on the broadcaster-backed service, says Kate Bulkley

When YouView admitted it would have to delay its launch a second time and wouldn’t be in the market until early 2012, it ignited a debate about what is going to happen to the connected TV market in the UK in the meantime.

Even with all the major UK broadcasters behind it and a new, high-profi le chairman in Lord Sugar, the internet-connected TV world is spinning ever faster. Every day that goes by is a lost opportunity for YouView, allowing rival platforms to come in and fill the gap.

YouView supporters, however, say that the promise of a subscription-free platform that will provide a seamless integration of on-demand TV and internet options with linear broadcast channels will be the ultimate in connected TV offers, and YouView chief executive Richard Halton says it will be worth the wait.

So what is the state of play right now? Clearly the connected TV and device market is ramping up fast, with literally dozens of manufacturers bundling an internet connection into their TVs and other devices.

Similarly, dozens of companies are offering content providers ways to launch their content onto internet-connected TVs and set-top boxes. “We are seeing a flip in the priorities of the content providers we are talking to, from web first and then connected TVs,” says Bill Scott, chief operating officer of Easel TV, a connected TV app development company. “The broadcasters want to get TV-style revenues not web-style revenues, which are far less lucrative.”

The big TV set manufacturers are leading the charge, with the likes of Sony, LG, Samsung and Panasonic eager to not only sell more TV sets but also to create new revenue streams from offering content. Each has created its own on-demand environment and is busy signing up content providers like LoveFilm and BBC iPlayer to make its connected TVs more attractive to punters.

Connected TVs

“The gap YouView has left by not launching is being plugged by TV set manufacturers,” says Lloyd Mason, a strategy analyst at media consultant Decipher. “These TVs have bundled in Freeview with a load of connected apps like iPlayer, and we see others like Demand Five and the ITV Player coming on soon.”

Meanwhile, the number of set-top boxes with internet connections is rising. There are 86 models of Freeview

HD boxes with internet connections available today, and with switchover progressing apace, by the end of the year, every UK home should be in an area covered by Freeview HD.

“We are on the cusp of a fundamental shift where the hybrid delivery of TV and internet services is going to be huge,” says Ilse Howling, managing director of Freeview. By the time YouView launches, she says, there will still be “plenty of consumer appetite” for connected TV.

Clearly, the broadcasters who are the shareholders of YouView are not waiting around. The BBC is launching iPlayer on all sorts of devices and has a proposal to put everything on a browser. The relatively new head of digital media at BBC Future Media & Technology, Ralph Rivera, told the Guardian Changing Media Summit last month that he was “particularly interested in dual-screen companion devices.”

He is not alone: Channel 4’s head of VoD Sarah Milton is also pushing 4oD onto many devices, with an iPad launch within the month and another games console (it is already on Sony’s PS3) before Christmas. “When YouView arrives, we expect it will be a good platform for us, but we are expanding our availability for 4oD on many other platforms and devices,” she says.

Of the 9.9 million TV sets expected to be sold in the UK this year, 25% (2.6 million) will have internet connections, according to analyst Futuresource.

Total UK TV shipments

Connected TVs

Connected Blu-ray disc players

Games consoles

Freeview HD TVs

Source: Futuresource

Meanwhile, 100% of Blu-ray players and games consoles already have internet connections, and 2 million Blu-ray and 3.1 million games consoles will be sold in the UK this year.

“TV manufacturers are putting a big push behind connected TVs and investing a lot in training retailers,” says Dave Watkins, research consultant at Futuresource. “When consumers start to get the message about what these sets can do and how they can bring the brands they know, like iPlayer, onto the big screen, they will jump at it.”

At the moment, he says, the proportion of people using their connected TVs to access the internet is just 25%, but he predicts this could jump to as high as 40% by the end of the year.

Of course, YouView is designed specifically to target the free-TV market and the 10 million or so households that so far have opted for Freeview over a subscription to Sky or Virgin Media. But in the connected TV stakes, both are making strides that could have an impact on YouView.

Although they are not yet widely available, Virgin Media’s new Tivo boxes include all kinds of whistles and bells, from browsing by genre or actor to offering recommendations based on past viewing. Crucially, the Tivo box offers a backwards EPG so users can catch up on programmes they forget to record.

Sky also has plans to put its content onto other devices and, in a move that took many in the market by surprise, is also one of YouView’s recently announced ‘content advisers’, meaning that Sky may also join the YouView platform.

This could pose an interesting dilemma for BT and Talk Talk, the ISPs that, alongside the broadcasters, are YouView’s other shareholders. Both have ambitions to use YouView as a way to regenerate their pay-TV ambitions. “Suddenly you have Sky, the gorilla of pay-TV, on the same platform, so potentially you will find using a wholesale Sky product as the centre of your proposition a little difficult,” explains Dan Cryan, head of broadband at Screen Digest.

With the market for connected devices growing at a clip and the routes to market for the key broadcaster shareholders of YouView so numerous, their commitment will continue to be questioned.

But that said, YouView has some key advantages, not least the extensive marketing power of the broadcasters backing it. But there will be some big things missing too, including crossplatform recommendation capability, social tools like Twitter and Facebook, and apps.

The YouView user interface (EPG) will allow users to look across all providers by genre and see the most popular content that is trending, which for the Freeview audience will be “mind-blowing”, says Halton.

“For the web-savvy Apple TV user, there will be things [like social recommendation] that they will be waiting to see.”

He won’t put a timetable on social apps like Twitter but says they are “not diffi cult” to add. “Our view is you have to judge functionality against what is most useful for the Freeview audience.”

YouView’s hopes of blasting into the market early next year will be dependent not only on the technology working well but also on how much the boxes cost. Of course, YouView doesn’t control retail costs, but by 2012, the platform will be launching into a very competitive marketplace. Sony could well be launching TVs complete with Google TV technology built in, and Vestel will be well into shipping its connected Yahoo! Widget TVs. Costs for connected TVs are predicted to fall by 25% in 2011, so the pressure will be on.

“There are 10 million Freeview users and they are quite tech savvy but also value driven,” says Halton. “They will be looking at what they actually need and want to buy. YouView can’t be delayed forever because the market moves too quickly for that, but early next year, I think we will look pretty compelling for 10 million homes.”

There has been a lot of back and forth between YouView and Digital Television Group, the organisation responsible for setting the UK’s digital TV standards, over the past two years. But last week’s publication of YouView’s final core technical specifi cation brought the two groups almost into line.

YouView’s spec is based on the DTG’s own interoperability specification for connected TV functions, and will help manufacturers build devices with a common standard.

But YouView chief executive Richard Halton says the spec is “not like a Lego kit. You can’t follow it and in the end get a YouView box. You still have to come to us to get hold of our software and back-end systems.”

The YouView spec builds on the European connected TV standard HBB-TV, which also forms the basis for the DTG’s spec. “HBB-TV is directionally similar to YouView but does not go as far,” says Halton. “We have added a software environment that allows content owners to know their content is available and browseable across different devices in a consistent way.”

In contrast, HBB-TV is more like Red Button interactivity, where every TV channel has its own, siloed interactive, on-demand service.

Richard Lindsay-Davies, director general of the DTG, says the important thing for YouView now is to get to the market “safely and quickly”, and with a technology platform that serves customers’ needs. “YouView has realised that you don’t easily replace the stability and 10 years of experience of digital TV, and if they want to go higher and build further, they need to do it on the back of what’s gone before.”

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