ITV is preparing to launch its long-awaited micropayment system for online video. Fru Hazlitt, the managing director of commercial and online at the main commercial television broadcaster in Britain, said it was planning to roll out a pay version of its ITV Player to a consumer research panel soon. It plans to launch a beta version nationally by the end of August or in early September. Meanwhile the BBC is planning to retail archive programmes online, although unusually the plans do not involve its commercial arm, BBC Worldwide.
ITV first announced plans for a micropayment system two years ago, as part of a five-year transformation plan to derive half of its revenue from sources other than traditional television advertising.
In August 2010, Adam Crozier, the chief executive of ITV, said the company had “failed to equip itself to compete” and announced a three-year investment fund of £75 million, much of it to be spent on ITV.com. In July 2011, he reported “We plan to have a pay mechanism in place around the turn of the year so that we can test what viewers are willing to pay for”. Six months into 2012, and over two years into its five-year plan, the micropayment system has yet to be launched.
Once in place, online viewers will still be able to catch up on shows from the previous seven days for free, and will be able register to extend this window to 30 days. Beyond this, they will have to pay. A number of different pricing models are being tested. It is understood that purchased programmes will be free of commercials.
There are also plans to premiere programmes online, so that viewers will be able to watch them before they are broadcast, for a small fee. This sounds attractive, but could be problematic. The problem is not so much one of piracy as spoiling programme storylines, inadvertently or otherwise.
Payments will be implemented using the PayWizard platform from MGt, which is designed to support an electronic wallet for micropayment transactions across multiple platforms.
ITV reported 376 million long-form video views in 2011, up 44% on the previous year, with online revenues up 21% to £34 million. That is still a drop in the bucket compared to total external revenues of £2.1 billion. It works out about 11 pence gross revenue per online video viewed.
In the first three months of 2012, ITV reported 110 million long-form video views on demand, a 24% increase on the same period the previous year.
Reports suggest that programmes could be available for rent at 50 pence an episode, with a series for between £2 and £4. Some viewers may be prepared to pay such prices, but bear in mind that ITV plc as a whole generates around £1.5 billion in net advertising revenue, which works out at around £4.80 per television household per month. In other words, that is how much you would theoretically need to pay not to watch advertising or sponsorship on ITV channels.
Put another way, to derive 10% of its total revenue from online video, ITV would have to sell over 400 million programmes at 50 pence each. That is to say, it would need to convert all of its current online viewing to a paid model, which seems unlikely. Rights holders would not unreasonably want a share of such revenue, so making a material difference to the bottom line of the broadcaster will be challenging.
Meanwhile, the BBC is considering making archive programmes available on a download basis, for a small fee.
In March, Mark Thompson, the director general of the BBC, said: “Our ambition would ultimately be to let our audiences have access to all of our programmes on this basis and, over time, to load more and more of our archive into the window.”
The idea is known as Project Barcelona. Originally described as a non-profit venture, it is now understood that any surplus would go back into programming. Unusually, the commercial arm of the corporation, BBC Worldwide, does not appear to be involved. Any such proposals would need to go to the BBC Trust for approval and no doubt result in a lengthy consultation.
ITV and the BBC are both shareholders in the YouView platform, together with Channel Four, Five, BT, TalkTalk and Arqiva. Details of the long-anticipated launch of YouView, which will blend broadcast and broadband delivered programming, are expected to be announced this week.