01 June 1998

The volume level blaring from the Sky Digital stand at the recent Cable & Satellite exhibition in London was a kind of first blast of what is going to be a very noisy and fraught retailing autumn in the UK high street.

As two presenters ran through their hourly rap, accompanied by a huge video wall of Sky Digital promotional tape, branded support staff handed out leaflets trumpeting "Britain's first and best digital TV service." Never mind that the June launch date is only a very limited one, targeting current Sky satellite dish subscribers. This is positioning.

But even the pre-launch hyperbole couldn't drown out grumbling from some in-the-know techies. Some complained about the picture quality of the test transmissions of Sky News, which by the company's own admission are running at two megabits a second, about half the bit rate of, for example, digital signals in the US. Although picture quality by itself won't necessarily move a lot of digital set-top boxes off retail shelves, picture quality will factor in other ways, like whether Channel 4 will even launch on Sky Digital. If the broadcaster is unhappy with the quality of the digital satellite picture it could limit its digital channel to the terrestrially-delivered rival service. The BBC is fitting five digital satellite channels into the same space that Sky will put eight.

Located down the aisle and round the corner at Cable & Satellite, a smaller and more brand-cluttered stand - BBC, ITV, S4C, etc - served as umbrella to Sky Digital's terrestrial competition, British Digital Broadcasting.

Crisp BBC News 24 pictures on widescreen TVs set the tone here. What the BDB service lacks in terms of number of channels - Sky Digital is advertising 200 versus BDB at about 30 - the terrestrial player hopes to make up in terms of "better" channels, ease of set-up and use - no dish - and creative pricing. Granada Television, one of the partners in the BDB venture, plans to offer its TV rental customers a digital set-top box at a much reduced rate, for example.

Sky's track record in selling multi-channel TV in the UK - it counts about 4.5 million dish customers alone - is a big advantage. Sky has a subscriber base and a well-oiled subscriber management system. But existing subscribers will have to be convinced that Sky Digital is really worth the extra effort it will take to adjust their dishes to capture the new digital signals.

Up to now Sky has essentially had the multi-channel market to itself, except for competition in some areas where cable is available. This autumn BDB will be marketing nationally, backed by known terrestrial TV brands.

To some it will look like better value for money with less installation hassle.

Which brings me back to the promotional noise. Despite efforts by the UK regulator, the digital set-top boxes to be offered by BDB and Sky Digital will not be able to carry each others services without the consumer buying another widget that will plug into the boxes (digital cable will also be incompatible but cable operators will likely lease these boxes to consumers).

At the marketing level, BDB and Sky are saying that box incompatibility is not going to be a problem, but the sotto voce is "in the long-term."

The techies admit that the first digital boxes offered by the rival services will not be compatible and that the underlying technologies that run the boxes are very different. And certainly as far as Sky Digital is concerned this gives it an advantage, particularly in terms of the interactive services it hopes to provide through British Interactive Broadcasting, a part-owned sister company.

The problem with incompatible boxes is that according to a recent study by UK research firm NOP, 29 per cent of those polled said that in the event of incompatible boxes, they would wait for an all-systems box before buying. Another 25 per cent said they would favour an all-systems digital TV set rather than a separate set top box, and another 30 per cent said they'd do nothing/don't know when confronted by the incompatibility issue.

Taken together that's a lot of people waiting as opposed to buying digital.

Meanwhile both Sky Digital and BDB are trumpeting their different strengths in the press and soon at retail outlets. Sky has an on-screen, interactive electronic programme guide, while BDB says its simple service offer won't need one, but it will offer "enhanced Teletext and Ceefax." Sky will have 50 digital music channels and 50 Box Office movie channels with start times of every fifteen minutes. Ironically perhaps, although soccer's heavily guarded Premier League trophy stood at one side of the Sky Digital stand, the company has yet to secure the rights to air these key football games on its digital service.

The result of all this may be that both services succeed, a bit like what is happening in France where there are two rival digital satellite platforms. The longtime analogue pay-TV operator Canal+ is ahead of its rival in subscriber numbers, but the number two player is not doing badly.