Morgan Stanley: YouView mixed news for rivals

July 4th was YouView’s launch day in the UK when Britain’s ‘TV Apprentice’ host, Lord Alan Sugar, unveiled the service and explained the project’s roll-out plans.

In a report issued just hours ahead of Lord Sugar’s early morning presentation, investment bankers Morgan Stanley issued their own comments on the impact YouView might have on the UK’s other major telecoms and broadcasting operators. In general the report is favourable, saying that initial ‘beta’ trials – with Humax boxes – have gone well.

The bank says that YouView is the natural successor to Freeview which has managed to capture around 10 million primary adopters. Overall, YouView should expand the pay-TV market, says the bank, allowing new entrants as well as new monetisation models (PPV, micro-payments, light subscriptions) to emerge.

To date anyone wanting to charge for their programming has had to deal with BSkyB and Virgin Media, and this new service could – in particular –benefit players like the ITV commercial network and British Telecom’s hybrid FreeView/Vision service could be a beneficiary, says the bank. “YouView has already created incremental demand from Lovefilm, Netflix and Sky Anytime for ITV archive and time shifted content. The Studios business also benefit and YouView is a key vehicle for ITV’s emerging pay strategy.”

But there are also concerns. “One of the issues that it was thought YouView would face is that of connectivity. The concern was that reliance on Wi-Fi might mean that the signal was too unreliable for TV use while physical connection by the householder might mean unsightly/ impractical cabling arrangements. YouView appears to have addressed this by including in the package a system to conduct the WiFi signal using the electricity wiring in the home. The package comes with a transformer pack which connects the Wi Fi router to the nearest three pin plug point which then carries the signal around the home. This makes YouView very effective for second/ third TV use,” says the bank.

“The risk of YouView for Sky is that customers unbundle from the DTH service and replicate it with a YouView plus added pay services alternative. Our view is that the experience from the US and from MTG in Scandinavia suggests that this is a limited risk. Sky has a good record in product innovation, increasingly in own content and in ‘value for money.’ NowTV offers an opportunity to build a pay TV business into the YouView base that could be incremental in defraying the sunk cost of Sky’s content. Meanwhile Sky has taken 50 per cent plus of broadband adds in the UK in each of the last seven quarters.”

The bank’s most negative comments are reserved for Virgin Media, the UK’s cable monopoly. “We think VMED’s strategy will be to push TiVo, but TiVo may not have as much content as YouView (eg, BT football matches), so we are doubtful about VMED’s longer-term ability to charge extra for TiVo or to increase penetration.”

 

 

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