Pick’n’mix TV: How ‘pay-lite’ could become the norm in the UK because of DTT

TV has evolved in many ways in recent years, but for consumers, the biggest improvement is undoubtedly choice. Viewers have much more control over what, when and how they watch.

And the result… a new kind of market.

Today’s audiences are picky. They are often no longer happy to pay for expensive catch-all packages just to access the few channels or services they want – nor do they need to. A new wave of ‘pay-lite’ services and platforms make it possible for consumers to pick and mix, choosing and paying for content as they go.

They are not doing it without support though, specifically from Digital Terrestrial Television (DTT).

Introducing ‘pay-lite’ TV

Traditionally, the TV industry had two main audiences to target – consumers who are willing to pay, and those who were not. The former would typically have either cable or satellite, with a choice of rigid premium channel packages and a significant monthly fee to consider, while the latter would enjoy free-to-air television, typically Freeview based on DTT, without paying anything more than the initial cost of the TV aerial and a TV licence.

Now, there’s a middle ground: the market that, as mentioned above, value control and flexibility. People want some premium content without having to pay for bundles full of channels they’ll never watch, and the freedom to scale up and down from month to month, or in some cases even day to day.

These needs have been met by a new wave of pay-lite services and platforms – services offering a modular approach which can be tailored very specifically for, and by, the viewer and which can be overlaid on traditional free-to-air TV services. A small investment in the right hardware – be it a connected TV set or a set-top box - and users are ready to choose their content for the month ahead.

Obvious examples are applications from the likes of Netflix and Amazon Prime which offer box-sets, movies and series and which can be accessed through most connected TV sets and which sit alongside the traditional channel line-up you get through Freeview by plugging the TV into an aerial. However, we have also been seeing an evolution of services such as Sky’s Now TV offering which is available both as an application but also through a set-top box.

Initially, the hardware option to access these services was typically a standalone bolt-on device – another AV input to cycle through. This has been changing over time and this is where DTT has been coming to the fore.

DTT as the underpinning platform to pay-lite

The most recent evolution has seen providers adopt a more integrated approach to pay-lite TV. Rather than offer it as a completely separate service, they’re laying it on top of DTT to create hybrid packages – and to great success (see my last blog about DTT as an underpinning platform here).

We are seeing pay-TV platforms such as BT TV and TalkTalk TV, which offer services built around a hybrid DTT and IP infrastructure, offer a flexible packaging structure to provide more choice. We have also seen Sky launch a version of its Now TV box which includes a DTT tuner so Free-to-air (FTA) channels can sit alongside its pay-lite offering. This means that people can stick with the standard linear experience they’re used to – namely access to robust and reliable live programming 24 hours a day – yet can still add box sets, sports and movies as and when they feel like it.

With all this new OTT technology at our fingertips, the fact that major broadcasters and platform operators still seek to embrace DTT is testament to its value, and it is not difficult to understand why.

I believe that Sky’s decision to integrate DTT within Now TV was a very sensible move and with its recent announcement (26th January 2017) that it will launch a full IP-version of its Sky Q service which, for the first time, does not rely on a satellite dish, I expect a similar evaluation of the merits of DTT to support some elements of that service – the cost savings could be significant when you allow for the likely Content Delivery Network (CDN) costs and payments to broadcasters it would need to incur versus the free access it could get through utilising DTT in some form. I expect that other providers will also follow suit over time as they realise the benefits that this hybrid model offers.

Freeview Play, the latest iteration from Freeview is also a hybrid DTT/IP service which offers the perfect environment to move between linear and catch-up services. Freeview Play will continue to build in the future as it adds new content and features and as content owners take advantage of the opportunities it provides to reach audiences in different ways within a single platform.

With these services, providers are simply targeting the new middle-ground audience through the platform they’re already using and which, by and large, they really like. Online services might be growing in popularity, but linear TV channels still account for around 80 per cent of the average UK consumer’s daily viewing. DTT is the primary viewing platform in the UK with around 11m homes using it on their main TV set and around 19m households using it on other sets in their home. DTT’s reach will remain high give that it - works through the existing TV aerials, is included in all TV sets sold, is very reliable and robust, provides access to free TV content and is available across the country. Crucially, this availability also permits the Public Service Broadcasters to meet their universality requirements.

Attaching these new paid-for OTT services to DTT, then, is just logical. You’re not taking anything away from subscription-shy viewers, but rather offering them additional services to consume if they want to and at their leisure – all the while bridging the gap between free-to-air and full, paid-for services.

Pay-lite’s likely impact on traditional pay-TV

We are on the start of a journey with pay-lite services and integration alongside traditional FTA services. User experience counts for a lot in TV and service providers know they must make things easy for their audiences. This means bringing linear and its alternatives closer together makes sense, so viewers are encouraged to switch between them more easily within the same environment and do not need to keeping switching AV inputs, or even scroll through layers of menus with their remote, to access services. Over time this will become even more important as more users adopt the services and competition grows between providers.

These hybrid, FTA and pay-lite platforms seem to tick all the boxes, so you might be left wondering whether they’ll cause the demise of traditional high-priced subscription TV services. The jury is out on this at the moment. To date, Sky has appeared to have been able to build its Now TV business without obviously undermining its traditional satellite pay-TV base. Whether it can continue to do that in the future is open to debate.

The genie is out of the bottle. Now viewers realise that they can have the best of both worlds – free linear TV through DTT with choice in pay-lite services from a range of providers on top they will increasingly adopt this model.

Now consumers have choice they are starting to see that they can put together a really great viewing package by combining traditional FTA TV alongside OTT services from one or more providers. I expect it will become increasingly hard for pay-TV providers to hold on to all of their existing subscribers as many households move to this new model. This is good news for DTT and its related platforms such as Freeview which can provide the free base for this new competitive environment. It is also great news for those broadcasters that offer TV channels on these platforms.