Kate Bulkley, Media Analyst.

New deal for Sky cards

By Kate Bulkley

The Guardian

Monday March 21, 2005

Kate Bulkley finds a use for the second slot on your set-top box

The red button on Sky digital boxes will be old hat from next month. The new phrase to batter viewers' eardrums will be: "Put the card in."

All Sky TV viewers know there is already a viewing card slot that sits in the set-top box that allows access to Sky's pay TV channels. But there is also a second slot, and that is the one that Sky hopes will be the focus of digital TV's next big step.

From April viewers could be buying things, have access to a members' club for favourite channels, be earning loyalty points for watching TV or even for watching a particular advertisement. Later in the year they will be able to use a new Sky credit card in the second slot to pay for interactive games or to take a flutter on a horse. It is all part of Sky's grand vision to make the second card slot a significant new development and revenue earner.

"My view as a member of the advertising community is we would be delighted to make commercials more transactional," says John Murray, managing director of PHDiQ, the interactive arm of PHD Media. "Advertising is fantastic and it works really well, but wouldn't it be absolutely lovely to be able to buy and pay for that product you see off the telly right then?"

Since Sky announced that it was activating the second slot on its 7.5m boxes about 10 days ago, lots of conversations have been taking place with broadcasters about loyalty and other schemes. A new company called MiCard is pitching loyalty smart card ideas to broadcasters and retailers, including Channel 4 and Five.

"The great thing about this is if you are 17 and you can't have a credit card, but a cool channel you watch says 'Here's a card with your name on it and you can get free stuff with it as well', you are going to say 'Fantastic, that's me almost being grown up'," says David Sanderson, director of MiCard. Cartoon Network is said to be very interested in creating a loyalty card, but executives there could not be reached for comment.

"For us at Five, we buy into the concept, but it is early days," says Damon Letzer, interactive business controller at Five. "We have to be careful about managing our viewers' expectations. Sky own the infrastructure and the technology and they have a lot more to gain from this than Five. But we are interested. It's just one of those things that is more than one or two conversations."

Even Sky admits that there will be no services or loyalty programmes ready when the technology starts working next month. The new Sky credit card will not be ready for several months, says Jon Florsheim, Sky's chief marketing officer.

He says the launch will be a big part of the commercial equation behind the second slot. "The Sky credit card is the commercial catalyst."

Sky says the second slot will be free to broadcasters or retailers, but if it is used to generate revenue, there would have to be negotiations about a revenue-sharing agreement with Sky.

"It is really about allowing an element of personalisation so that third parties can create a personal relationship through the card with their viewers," says Florsheim. "When you put the card in the slot it will recognise who you are. But the data won't necessarily come to us if it is a third party's card."

Observers with slightly longer memories note that some of these strategies for the second slot have already been tried and failed. When the first Sky digital boxes were introduced in 1998, a consortium called British Interactive Broadcasting (BIB) that included electronics manufacturer Matsushita, HSBC bank and BT as well as Sky helped finance the cost of the box and run an interactive shopping mall called Open on the Sky TV service. The idea was that people would buy goods from retailers that were part of the Open service. HSBC was also eager to promote its Mondex virtual money cards for use in the Sky box and on special card readers.

All this was to some extent part and parcel of the internet hype of the time, but it all went wrong. Mondex never got off the ground and BIB was bought back by Sky in 2001 and effectively became the Sky Active service of today - but with a very different business model.

"The second slot is definitely not a reinvention of the Open model," says Florsheim. "This is far more of an enabling and a personalisation play. It is not trying to replicate other commercial models from the high street on the interactive platform."


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