YouView boxes finally went on sale the day before the opening ceremony of the London 2012 Olympics. Rather than paying £299 now, prospective purchasers may be better off waiting just a little longer and getting one free from BT or TalkTalk as part of a bundled broadband package. BT says it will launch a bundled YouView service in the autumn, while TalkTalk will give away YouView boxes to subscribers that commit to a broadband and telephony contract.
YouView digital video recorders are now on sale from a number of high street stores, including Dixons, Currys and Comet, and online through Amazon and Humax, which supplies the only available retail product.
Some have suggested that the price point of £299 is too high, but that may be academic if something similar is bundled for free as part of a broadband package.
BT and TalkTalk, the two largest broadband service providers in the United Kingdom, are both partners in YouView, together with the BBC, ITV, Channel Four, Five and transmission network operator Arqiva.
BT has 6.3 million retail broadband subscribers, representing a 37% share of the market. Its video service, BT Vision, now has an installed base of 728,000 homes, adding 21,000 in the last quarter. BT is now offering it bundled with broadband and phone calls for £13 a month, subject to a 12 month contract and conditions.
Alex Green, the product director for BT television and video service, said: “BT Vision is the fastest-growing digital TV service in the UK because it gives viewers exactly what they want: great TV, film and sport when it’s convenient for them to watch. We’re delighted to offer it free for a limited period so that even more people can see what they’ve been missing.”
What they have so far been missing is YouView, which BT says it will offer as a bundled service in the autumn and expects “to appeal to customers looking for the next evolution of the Freeview service.” That is exactly what BT Vision was supposed to do, when it was launched in December 2006.
BT, which is a major sponsor of London 2012, claims that missing the Olympics as a launch platform for YouView is no big deal. “We take a really long term view of YouView,” Marc Watson, the chief executive of BT Vision and a YouView board member, is quoted as saying. “This is a platform for the future — we do want to build it out to millions of people and we’ll take several years doing that.”
TalkTalk has meanwhile announced that it will offer YouView free for its million or so Plus customers, provided they sign up to a new 24-month broadband contract, reduced to 18 months for new customers. The Plus package currently offers unlimited broadband and calls to UK landlines from £24 a month.
For no additional monthly cost, customers will receive a free YouView digital video recorder with a 12-month free subscription to the Amazon-owned LoveFilm service. Initial customers will have to pay £50 for an engineer visit to install their YouView box.
Claiming that it has turned the corner in addressing customer service issues, TalkTalk now has 4.0 million broadband subscribers, having lost a further 19,000 over the last quarter, although the number on its own network rose from 2.8 to 3.0 million. That represents its current total addressable market for YouView.
It is difficult to see Humax selling very many YouView boxes for £299, while TalkTalk will be effectively giving them away, making it difficult for BT not to follow.
The number of boxes that BT and TalkTalk order from their respective suppliers, Pace and Huawei, will largely determine the success of YouView.
So how many YouView boxes could BT and TalkTalk possibly give away? Between them they have over 10 million broadband customers. Yet BT has only managed to convert three-quarters of a million of its broadband base to BT Vision in over five years.
Bizarrely, BT is continuing to promote BT Vision while it gets ready for YouView. It is not clear whether it hopes to convert its existing BT Vision customers to YouView or expects to find a new market for an essentially similar service. It currently appears that it will continue to promote BT Vision as its own brand, available through YouView — all very confusing.
TalkTalk, which acquired the original HomeChoice broadband television platform from Tiscali, although it never got any traction in the market, appears to be pinning its hopes for customer acquisition and retention on YouView.
TalkTalk says that the incremental cost of bundling YouView will be £140 per customer, which may be indicative of the cost of the box in volume. It anticipates recovering that over the 18-24 month lifetime of the contract. Thereafter it expects YouView will help it expand market share, grow revenue and drive incremental value. TalkTalk appears to anticipate providing access to YouView for the “vast majority” of its customers over time.
Dido Harding, the chief executive of TalkTalk, said: “We expect the market for broadband to grow as a result of YouView. There are 5 million households that don’t have a broadband connection. The launch of YouView will bring more of those households into the broadband market. In the long run we expect up to three quarters of our customer base to take a triple-play proposition from us.”
TalkTalk has talked up news that it has a commercial agreement with Sky to offer standard definition versions of Sky Sports, Sky Movies and Sky basic packages including UKTV channels on a flexible, monthly basis. No details of pricing were given.
It looks like good news for Sky. TalkTalk will market YouView to its broadband customer base, subsidise the box, and push Sky channels, which Sky will then use to promote its own services. The risk of Sky customers defecting to TalkTalk appears limited and the reverse more likely.
We should not then be surprised if Sky were to buy TalkTalk and become the largest broadband service provider in the country, although of course that would require regulatory approval.