Network Insight Institute

Bridget Godwin

Bridget Godwin, Manager, Regulatory & Business Affairs, Seven Network

I'm going to touch on a few points that have probably come up throughout the day, but in particular, to talk about Channel Seven's approach to some of these issues.

I think it's interesting that Graeme Barclay started his speech, and Stuart Simson also discussed, how we are going to realise the potential for digital television. That's something we're very committed to at Seven, and it's the reason we really support opening up the multi-channelling restrictions.

Debra Richards talked earlier about what's changed since she wrote her 1997 submission, and I've started with a similar question, and that was: Why was multi-channelling banned in 1998? And if you have a look at the Explanatory Memorandum, the reason given is: to protect "the fledgling subscription television industry". 

So what's changed since that time and why should we be reconsidering multi-channelling now?

The environment has changed dramatically since 1998.  Pay TV is obviously no longer a fledgling industry in need of protection.  I think, as Stuart mentioned, that digital penetration is at about 4% of television homes.  If you count all the televisions in Australia, that includes 2 and 3 set homes, we're really under about 2% penetration.

Consumers need a compelling reason to purchase digital equipment.  I agree with Graeme Barclay that greater choice of content is a critical part of this equation, and I also agree with Stuart Simson that the existing digital television rules are not working.

So, in pay TV, what's changed since 1998?

The number one change is that we've got a monopoly service provider. We've got well over a million subscribers and well over a billion dollars in revenue being generated every year.  This service provider is owned by the 3 largest companies in the media in Australia - News, Telstra and PBL, and I think, as we've heard from comments earlier, at least two of those are extremely profitable in their pay TV venture.  It's viewed by one in four Australian households, and I think it can no longer be called "a fledgling industry".

Some comments have been made that we can't just translate our UK experience to Australia, and I agree with that.  What we implement in Australia has to be suitable to the Australian market but I think we can look to the UK experience and draw some important lessons.

In terms of Freeview, launched in October 2002, 30 digital TV and radio channels are provided.  There are currently 3.93 million free-view units in the market, and that's a total of 3.5 million free-view households.

The growth for Q1 2004 was at 18.6%.  That's the fastest growing sector in digital television in the UK.  Set top boxes are costing about £50. 

While we are not the same market as the UK, there are some important lessons to be learnt, and the most important of these is that channel choice is the driver of digital takeup.  If you compare the takeup rates, we've got 17% penetration for Freeview in less than 2 years compared with less than 4% takeup in Australia in 3 and a half years.

Freeview is supplemented by Top Up TV, which I think Paul Walsh mentioned earlier this afternoon.  They've got a great tag line.  It's "a few more channels - a lot more TV", and that's something that we would be very interested in providing here in Australia.

Top Up TV launched on 31 March 2004, with 10 channels, at a cost of £7.99 a month.  There's no minimum contract and they've signed up 20,000 customers in their first month, and that's from a base of people who can only subscribe if you've got an existing ITV digital box.  At the moment there are no retail boxes for Top Up TV in the UK, and I think we could expect to see those numbers improve significantly (although they are already pretty impressive), once there's a greater retail market for equipment.

Top Up TV's business case is based on 100,000 customers to break even.  I think that's a number, that even here in Australia, a service provider could aspire to achieve.  And again, it's choice that is the driver for the service.  New and different services, and a service showing that you don't have to be a 500 channel behemoth to succeed in digital television.

There has also been a bit of discussion earlier today about how multi-channelling would affect existing free-to-air services.

We believe that current high quality free-to-air services would remain if multi-channelling services are introduced.  We already exist in a fragmenting market.  It's foolish to think that we can just sit back and hope that the market isn't going to change.  Free-to-air networks need to do something to address that development.

The UK experience is that, in March and April, the multi-channel share of viewing was bigger than that for BBC 1 and ITV for two consecutive months for the first time ever.  It just shows that multi-channel viewing share is growing and, again, we just can't stand back and ignore that fact.

Mass markets will, however, continue to be valued by advertisers and it's important for free-to-air broadcasters to continue to provide a primary service that meets those needs, and that also can support a vibrant content industry.

As the network with the biggest investment, and probably the proudest history, in Australian content in Australia, Seven definitely has a vested interest in a viable content sector, and in there being a strong demand for quality Australian content. We believe that multi-channelling on the terrestrial platform is a way to bring diversity into the market but also to protect those important elements.

The reason we think this is because we think free-to-air services will be complementary to our primary services, not directly competitive. As Ann Parsons pointed out in last year's digital television seminar, and I agree, this will present opportunities for new revenue for free-to-air broadcasters. The opportunity to sell niche and targeted services along with mass market audiences will enable us to diversify our revenue source.  Mass plus niche is a compelling proposition for advertisers.

Another point I would like to make is that, in the UK experience, there have been greater amounts of quality programming over the last 4 years since the introduction of multi-channelling on digital terrestrial.  News, drama, factual programming and sport, are all up.  And those are figures from the latest Ofcom Public Service Broadcasting Review.

Seven believes that both free and pay have a role to play in the multi-channelling equation and we are very much looking forward to the outcome of the Government's review and, I hope, opening up the sector to a little bit more service and a little bit more competition.

To download Bridget Godwin's powerpoint presentation click here.

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