Some new year revolutions

SBHD: In 1994 satellite and cable reached 4 million homes and newspapers locked horns in a price war – what developments can we expect in 1995?

As we enter 1995, the number of homes receiving cable or satellite television has just passed the 4 million mark – almost as many homes as take The Sun. By the end of the year, one of the regular non-terrestrial channels, UK Gold, will have started to make a profit. And BSkyB, which is already profitable, thanks to its massive subscriptions, will have started home trials of its long-planned pay-per-view service.

Add to this the launch of BT’s consumer test of video-on-demand in 2,500 homes in Ipswich and Colchester this summer and it becomes clear that the changes in the way we watch and pay for television are on the cards for 1995. Terrestrial TV’s most significant response will be the ITC’s selection of the Channel 5 licensee – and that will add further competition to the battle for viewers and advertisers.

The 4 million figure has, I admit, still to be confirmed. But on December 1, BARB put the multichannel universe at 3,956,000, and I cannot believe the pre-Christmas marketing push by BSkyB has not added at least another 44,000. According to BARB, 2.9 million of those homes receive their programmes by dish, 90,000 by SMATV, and 950,000 by cable.

How soon will the total reach 5 million? That depends on how badly Rupert Murdoch and his fellow BSkyB shareholders want it to. If he were to borrow the techniques of his newspapers and slash the price, that extra million could come quite quickly. Instead, the cost of extra TV choice is moving inexorably upwards, particularly as the cable companies try to recoup some of their billion-pound investment. What seems clear, however, is that despite the fact that growth rates have not met the more optimistic forecasts, the rise in the penetration of multi-channel TV has been absolutely steady over the past three years and BSkyB directors see no reason why that should halt.

With BSkyB now ranked in the top 50 companies by value, as a result of its recent flotation, no one can claim any more that this is some fly-by-night operation that could one day disappear up its own tube. Its defensive slogan, "No Turning Back", however suggests it still believes that fear needs to be tackled head on.

The flotation of BSkyB may have been insignificant in terms of its impact on the TV business, since most of the money raised is being used to pay back shareholders rather than invest in the company, but as a symbol of the way the media world is moving it may be ranked as one of the key events of 1994 – a year likely to be remembered more in terms of personalities than happenings.

Unlike other recent years, there were no ITV franchise decisions, no new ITV companies, no births or deaths of national newspapers or significant magazines, and no new national radio stations. Instead we saw several of the industry’s highest-profile names step down – Kelvin Mackenzie, Andreas Whittam-Smith, Greg Dyke, Andrew Neil, Eve Pollard and – at the time of writing – Maurice Saatchi.

Of course, 1994 had its other moments. The three large ITV takeovers saw LWT lose its independence to Granada after a doughty fight and Central and Anglia submit (more meekly) to Carlton and MAI. The Independent lost a good deal of its independence in the teeth of the broadsheet price war but survived, as an associate, if not a subsidiary, of the Mirror Group. It ended the year with its sister Sunday as the latest national newspaper group to be unloaded at Canary Wharf. There it joined The Telegraph, which finally hit back at The Times’ sustained price cut and slashed its own, sending its share price plummeting.

Elsewhere, the BBC got the thumbs-up from the Government’s White Paper, which ruled out the sale of advertising on its domestic airwaves but not on its burgeoning overseas ones. The corporation announced a global strategic alliance with Pearson, the first fruits of which will be seen later this month with the launch of two mainland European channels, one funded by advertising, the other by subscription. With UK Gold, their first joint venture, the partners can take comfort in its end-of-year profit forecast. But at home the BBC’s terrestrial TV ratings remained well adrift of ITV’s and its share of the radio audience dropped below 50 per cent.

All these stories remain to be continued in 1995, a year which is likely to focus attention even more closely on how much readers and viewers are prepared to pay for their media – and how far those media will have to rely on advertising to make up the difference.

The newspaper price war will end in 1995, though exactly when and at what price level is anyone’s guess. The Telegraph’s editor-in-chief Max Hastings says his paper will make its own decision as to when to put its price up, and not wait for The Times.

This may be just as well, because Times editor Peter Stothard says his paper won’t be the first to move, though at 20p it is now cheaper than The Sun. With the cost of newsprint ex-pected to rise, broadsheet prices will have to rise accordingly.

One of the ironies of Rupert Murdoch’s recent media price strategy is that he has been charging his readers less than before, while asking his TV viewers to pay more. Unlike newspapers, TV stations have trad- itionally raised all their revenue from advertisers, not the public.

The real media revolution has been the discovery that millions of TV viewers are prepared to pay directly for their television programmes, initially by renting or buying videos and then by subscribing to cable or satellite channels. This year that process will take a further step forward when BSkyB and BT invite viewers to pay not for channels but for particular programmes.

BSkyB has already held one trial of pay-per-view, when it showed a football tournament to subscribing pubs in Scotland. Now it is to test it on the public, though its head of programming David Elstein emphasises that all the films or programmes on offer will be additional to those subscribers receive already. One-off sports events and early premieres of films are the likeliest candidates for the treatment.

But the ground-breaking move of 1995 is likely to be BT’s test of video-on-demand. Forget the archives and the education, the films and home shopping. When viewers know they can watch one of this week’s programmes when they want to, without having to set the video-recorder, it will once again change the way they watch TV.

The key question then, as always these days, is how much they will be prepared to pay.

Torin Douglas is BBC Radio’s media correspondent