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The Digital Revolution

Speaker Transcripts

Digital TV - What's On
Ashley Highfield, Flextech Interactive

The penetration of the Internet in cable and satellite homes is around about 14%, about double the penetration in good old traditional terrestrial homes. But obviously the huge growth we have seen will, at some point, start to tail off. But the growth at the moment is quite explosive. This (slide) is the impressions across our Web site which has pushed us from a few hundred thousand through 8,000,000 impressions per month. Basically, the Internet outperforms the ratings on some of our TV channels, which tends to be slightly embarrassing! As for Digital TV penetration, our own forecast is 8,000,000 plus homes, so that's around about 20 million users of digital television by 2003. Obviously, that's heavily dependent on how effectively the different platforms market their services.

Travel. I think most people would believe that travel is the most significant online purchase at the moment, barring hardware and software and when we look at television, obviously hardware and software/sales probably won't be carried through to the same extent. Therefore we are looking at travel, followed by entertainment, books and so on as the most significant sales online and on digital television and the percentage of the market that travel is taking online, is actually set to increase as well. So clearly we as a broadcaster recognised that this was one market that we could not be out of. In fact, yes we are a broadcaster, but we are now very much a travel agent as well, due to the fact that 150+ of our employees are actually answering telephones in the call centre in Bromley for TV Travel Shop.

So what do we have currently? I won't dwell on this except to try and illustrate that we have a highly interactive platform on the Internet and we have high production values associated with broadcast television. But actually we have nothing up here (on slide shown) at the moment which gives us both a high production quality, (the entertainment factor) combined with the ability to go and look at the content that you want when you want to and that is the opportunity of digital. Maybe the point is that there are a number of players out there and it is a confusing market and it will remain confusing for a while. This slide shows the most significant platforms. The point is though that for us, as a broadcaster, (in fact for anyone who has got content that they want people to view and then make a purchase decision on the back of), we have a whole load of these platforms. If you assume that most people here (on slide) will have some Internet content either simple or sophisticated content, how do we get this content onto all the different platforms? Which ones should we be addressing as well because at the moment, in Q4 '98 there is only the Internet.

It is going to be relatively straightforward to develop the platforms that are Internet based. It's not going to be terribly difficult to re-version any content you have got. It's going to be very difficult to actually create content for digital satellite, for open TV. And that applies to TeleWest who are going with the same technology of open TV on digital cable. Unfortunately, we can't ignore those platforms because together they will occupy 50%+ of the digital market.

So how many homes are these services going to be in? I don't think I would be seen as a gambling person if I supposed Sky digital will be the largest platform. After all, they have the ability to take all their current analogue subscribers, 4 million odd, and churn them onto digital. But that platform isn't terribly interactive. The most interactive platforms are the WebTV or high speed Internet access, ADSL(Asymmetric Digital Subscriber Line). Maybe we don't even have a platform at the moment that will combine both of those (NTL might disagree there!). Maybe one of the platforms that will emerge will actually be digital satellite, high speed, high reach, national digital television, maybe using high speed back path. This slide shows that. There are a lot of players out there and it's a complicated market. Because our channels are carried on every platform, we are having to create interactive content for every platform, so we are currently going through this nightmare.

Who is going to win? If you had to select a platform to work with and develop content for, which one would you go for? There has been a lot of speculation. People saying that ONdigital is not going to succeed or digital cable has got a number of natural advantages over digital satellite. I think there may be an analogy with mobile telephony - in that we had an incumbent platform, BT and terrestrial TV, and along came two mobile platforms, Cellnet and Vodaphone, and in television, along came cable and satellite and both entered digital at about the same time and along came some new players, One-to-One and Orange in mobile ONdigital in digital television and they are using different standards in mobile, as they are in television and yet I don't think anyone would describe either Vodaphone or Orange as failures. In fact, both of those stocks have gone up about 25% just in the last month and probably doubled in the last year. But there are some differences. The fundamental difference is that obviously in television you have to create content and therefore the content has got to be put out across every platform and whilst the video is the same across every platform, that is simple enough, but what you do interactively is going to be different.

So, what are we doing about it? How are we as a broadcaster going to get our interactive services out there? We put all our programmes together at our broadcast centre, we broadcast them up to satellite and down to the set top box and you view it. We have to manage all the content so that it's no longer just video. There are interactive components, Web site pages, all the additional information with video clips and so on. But basically we will still get it out there in the same way as we have always broadcast content. The complexity is in the back part with someone using a set top box and saying, "Yes, I'm interested in that product". Pressing a button, making a phone call, being authenticated, picking up the subscriber details from the subscriber management system, handling the payment, managing which bits of software get allowed to stay in the set top box, how they work, making sure they don't fall over. The last thing we want is my grandmother watching TV Travel Shop and her TV crashes. We would then need to be asking her to reboot her PC and it's not going to work! This is obviously a major complexity and that's why I personally believe that initial services are going to be essentially one way. Almost enhancements of Teletext.

I believe truly interactive services are going to take longer to come. But, in the meantime, if you just have enhanced broadcasting, I believe that you are achieving a major benefit, at least we are at the TV Travel Shop. What it's doing is allowing people to find out more information about their holiday so that when they call up, they know more about what they want, what they can and cannot afford and therefore we are pre-qualifying them. Our call centres are having high conversion rates, lower call times and the economics stack up to more profit.

Some background on TV Travel Shop. TV Travel Shop is a 24 hour channel already broadcasting in digital, so we are already there. 24 hours a day, 365 days a year with a 24 x 365 call centre to back it up. This is already giving us a number of issues and it's content, content, content. That's where the issues are. Let's take a late break holiday and information comes in from one of the tour operators. We have to put that information first of all onto Teletext. Somebody types it. We have to post it up to our Web site which needs a different format. We have to get it onto the systems for the CSRs at the call centre. It's re-keyed again. We then have to get it up to our studios so that it can get put into a script that our on air presenters can talk to. So it gets re-keyed again, and so on. We actually calculate that for any new piece of content coming in that we are doing about six re-keyings of information. Obviously that's a crazy overhead and so what we've had to do is to completely re-engineer the way we are running in the call centre and we've only been going since April! We've put an Intranet in and from that Intranet we are aiming to capture the content once, whether it's holiday information, video footage or pricing information and then we can use that single Intranet to actually feed all the various platforms. So we will be using that to feed the Internet, digital television, Teletext etc. The idea is that when you are watching TV Travel Shop in a digital home (for example if you want to know about holidays in St. Lucia), when an interactive component becomes available, an icon will appear on screen indicating that by pressing your 'I' button on your remote control, you will get more information. It will take you through to additional information, context sensitive. So, imagine watching a programme on St Lucia and up comes the St Lucia information. Depending on the platform, it will either be a still or you can run it as a video clip. From here, you can then just use the remote control to pull up more detailed information. This has given you all the departures from St Lucia. It knows where you live and is giving the flight information relevant to you. You can if you want use a holiday finder (for example, if you want to know about holidays in Crete). It's not using the back path, it's not using all that complex back path infrastructure. We're using carousel pages. Exactly what Teletext is doing. The consumer thinks that they are selecting pages but all they are effectively doing is pulling out pages of enhanced Teletext. We will have this service up and running shortly after Christmas, maybe March 1999.

Significantly, we are not booking from the television screen. The research is bearing this out. People are using the Internet to do all their research but for package holidays they are still picking up the phone and we are still going to make sure that we are using telephony for booking. It's a costly exercise and the channel itself takes up quite a lot of band width quite a lot of satellite transponder and there is still a cost involved. Obviously it costs us millions to run TV Travel Shop as a TV channel. The transponder is not that significant a cost and the actual development of the interactive content is also not a terribly significant cost. You've got to pay the gatekeeper, the likes of NTL, TeleWest, BIB etc. There are a number of payment methods, for example you can pay either commission on holidays booked or you might pay them a percentage of ad revenues you take, or you might have to pay them a penny for every subscriber per month that uses your service. But the most expensive is going to be managing all this content. For us, the most expensive thing is going to be taking all this new interactive content, storing it somewhere, broadcasting it, making sure it works (because, unlike the Internet, if the Internet goes down it doesn't really matter). We have got to make sure everything works 100% of the time. So there is a big cost in terms of time x effort x money. So we are aiming across any interactive service to create the content, and I would advise any of you who are doing it to also try and do the same. Find somebody you can work with to actually take the content, work with you, store it and re-version it for every platform. There are a lot of platforms and I wouldn't like to bet which one is going to win and they might all win, as with mobile telephony. Particularly if you have a little interactive advert - and "Wish You Were Here" is a good example, because "Wish You Were Here" runs on UK style so you are able, if you wish, to put adverts into "Wish You Were Here". And the interactive content for a short advert is going to be different for every platform and I don't think that's necessarily your core business to create a Sky digital interactive advert, NTL interactive advert, TeleWest interactive advert, ONdigital interactive advert.

So why aren't we taking bookings on line initially? First, it requires the back path which is very complicated. Second, you miss the opportunity to sell more than the basic package, to sell "up". Also research has indicated that people actually would prefer to talk to somebody. We are going to do it, we've got to be there, we'll do it with tickets and flights initially, and we take an option on all late bookings.

The next stage going on from this is video on demand. We are operating a trial with our friends at NTL but I'm under a non-disclosure agreement so I'm not going to tell you about it. But I can try to indicate where I think the industry is going. One of the things we want to do is combine interactive television with the personal touch. It's all about providing additional information but allowing the subscriber/consumer to actually talk through the options with someone. We are developing this with a trial and are talking to one of the cable operators about implementing it. It has a fairly standard TV Travel Shop look and feel. In an analogue home you have the Fast Text button to use Teletext. And in a digital home, with no back path, you can call up pages of additional information. Where you have a back path enabled, you will then be able to get into the area of bookings etc. The idea is, for example, that you are watching a holiday programme at home, just watching without interaction, eg a holiday programme. But, gradually, you become more interested and want more information. You can see a hotel guide. A room guide. So you click on the prices button. It's now bringing up some price information and you just use the remote control to select some prices that you want. Then you press a flight information button. You can then press the book button and this is where we go into the realms of the not-here-yet technology. It's making a call to my customer centre which then rings me back. We now see Natasha down at TV Travel Shop in Bromley, she has a camera on top of her PC. She knows what I have been watching on television so she's now going to confirm and tells me my holiday details. Fantastic. All the while I am having a telephone conversation. (Natasha on screen booking holiday. She books flights, hotels, offers insurance, extras etc.). This is the kind of product we are working towards, probably a couple of years away, but we as a broadcaster firmly recognise the value of having this two-way dialogue. We are looking at products like this that we can launch in order to keep the two-way conversation going.

So, in conclusion. Obviously there are going to be a lot of new technology players entering the travel industry and we have already touched on those, like Microsoft. There's going to be a threat from disintermediation. There are going to be people who are under threat from this but there is a huge opportunity for people who can successfully crack the ability to book package holidays easily on TV or online. But, most significantly, we must maintain high levels of customer care and find ways in the digital world of doing that, whether through email, phone back-up which I have just shown you, membership schemes etc.

Thank you for listening.

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