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Cutting the cord UK-style: can the Brits succeed where the US has failed?

ecosystems uk

The idea of cord cutting — replacing your cable or satellite contracts with web services — remains an aspirational goal to many. In the US, thanks to services like Hulu Plus and Netflix, cord-cutting has never been easier, but without a cable subscription you’ll be unable to watch many programs on the day of broadcast, and accessing premium content from the likes of HBO is impossible. Over in the UK, however, things are starting to look a little brighter. The past five years has seen virtually all of the major players embrace digital content in some way, while American giants like Amazon and Netflix have invested heavily to capture the attention of the world’s second-largest (native) English-speaking population.

The state of play

The UK has around 50 free-to-air, terrestrial channels that can be accessed by anyone with an aerial or a satellite dish. Pay TV is fairly popular, with around 50 percent of households subscribing to cable, satellite, or other premium TV services. For comparison, in the US around 85 percent of households subscribe to some form of pay TV.

Sky is by far the most popular pay TV provider in the UK, with around 39% of households subscribing to its digital satellite service. Controlled by Rupert Murdoch’s News Corp., Sky has a huge amount of power in the UK industry as it runs the country’s most important sports network, encompassing English Premier League soccer coverage, along with multiple premium movie and entertainment channels. It leverages this enviable position by refusing its competitors access to many HD versions of its channels, and in some cases withholds both the SD and HD versions altogether. Perhaps the most egregious abuse of its closed loop is the Sky Atlantic channel, which holds the exclusive rights to many US shows like Game of Thrones, Mad Men, and Boardwalk Empire, and is only available to Sky customers.

Virgin Media is the UK’s second largest broadband provider and Sky’s main competitor, providing cable TV to around 14% of the UK. A partnership with TiVo (whose boxes aren’t commercially available in the UK) ensures a strong DVR option for its customers, and its on-demand options are more robust than Sky’s. It’s behind its competitor in both reach (cable isn’t available everywhere) and channel availability, though.

BT has been attempting to leverage its position as the UK’s largest broadband provider to sell its BT Vision service for the past six years with little success, and offers no options for would-be cord cutters. Of the 26 million or so households in the UK, only 750,000 subscribe to BT Vision. Another broadband and phone provider, TalkTalk, offers a similar service.

It’s impossible to talk about UK TV without paying attention to the BBC

It’s impossible to talk about UK TV without paying attention to the BBC, our publicly-owned network. In fact, it’s impossible to watch TV in the UK without paying the BBC, whether you like its channels or not: in order to receive live broadcasts (or watch live programming online), you must buy a TV license from the government. This £145.50 ($231) annual fee generated £3.6 billion ($5.7 billion) for the BBC last year, paying for all manner of programming while keeping advertisements off the air. Despite a steady stream of controversies over recent years, the BBC remains immensely popular and its signature channel, BBC One, is Britain’s most-watched.

The BBC has also been instrumental in shifting British watching habits by embracing new technology. In late 2007 it launched its iPlayer service, a website that offers live or delayed playback of almost everything broadcast on the corporation’s networks (some sporting events and syndicated content was, and still is, absent due to licensing restrictions). It’s now accessible through iOS, Android, smart TVs, PS3, Xbox, Wii, and pay TV providers. BBC iPlayer is now used by over forty percent of the UK, and its popularity has seen similar services launched by all of the major free-to-air networks, leading the way for cable and satellite providers to do the same. There’s also been movement towards consolidating the various free-to-air streaming sites into a single service. TVcatchup is the UK’s equivalent to Aereo. Like Aereo, it’s had quite a few legal troubles for its efforts, but the site is still going strong, and definitely has an audience.

Virgin recently launched TV Anywhere, a web service and iOS app (an Android app is coming in 2013) that offers remote viewing of live content on up to two devices. It’s undoubtedly the best option for Brits disillusioned with Sky, but as there’s no option to subscribe without cable, you’ll be paying around £65 ($103) for a full package. At launch none of Sky’s premium channels are available on Virgin’s iOS app, which makes it fairly useless unless you’re planning on watching through your PC.

Both BT and TalkTalk are hoping to increase their market share with YouView, the result of a collaboration between the pair, the BBC and other free-to-air media companies. Unlike competing services, YouView doesn’t sell much in the way of content, and is essentially an internet-connected DVR. It’s available as a standalone purchase at £279.99 ($445) or for free with a content package from BT or TalkTalk. The concept is sound: you can watch and record programs from all the free-to-air networks, while pulling in on-demand content over the web through apps. I’ve been using one of the boxes for the past few months, and although it has promise, the lack of third-party services has led me to watch more and more content through a laptop or tablet. Ultimately YouView’s app model should be the perfect TV companion for cord-cutters, but for now, a high entry price and poor content selection holds it back, and it offers few benefits over a smart TV.

How to (almost) cut the cord

So, those looking to totally cut the cord without losing content have just one option: Sky. It’s currently the only company to offer a full-featured package without a physical link into your home, with "Sky Go" available to non-satellite customers at a slightly reduced rate: the full Go package with ESPN costs £49 ($78) while a comparable satellite package (which includes access to Go) will set you back roughly £65 ($103). The content selection isn’t as big for Go-only customers, but you’ll still have access to plenty of channels, catch-up content, and on-demand movies. It’s available through iOS and web apps as well as a handful of Android devices and Xbox 360, but like Virgin’s TV Anywhere you’re limited to a maximum of two registered devices.

If you’re only interested in live sports, you’ll be paying for channels you’ll probably never watch

Sky Go is far from perfect. It essentially replicates the cable business model of bundling, just without the cord. There’s no way to pay for just the content you want, so if like me you’re only interested in live sports you’ll be paying for entertainment channels you’ll probably never watch. The la carte options are also lacking, and some shows disappear from its catch-up service quickly, so you’ll still be bound by the confines of network scheduling to some extent. Sky does offer subscriptions to some premium channels via standalone mobile apps, but you’ll be limited to viewing live broadcasts only, and who wants to watch the big game on their smartphone?

With Sky and Virgin slow to react to market demands for easily accessible a la carte movies, sports, and TV shows, other companies have stepped in to take advantage of the gap in the market. Amazon-owned LoveFilm, once a DVD-only rental service, offers a streaming package for £4.99 ($8) and has a large selection of movies and shows, but is hampered by a terrible interface and sketchy streaming quality. Its iOS and TV apps fare a little better, but there’s no option for Android users.

Netflix entered the UK market earlier this year with a great interface and high quality streaming, and its iOS and Android apps work very well. Unfortunately, despite clearly offering a better experience for its customers, Netflix has a relatively miniscule library of quality content when compared to LoveFilm, and it’s also £1 more expensive at £5.99 ($9.50). The pair have been aggressively signing exclusive deals with various distributors, so you won’t often find the same movie on both services at the same time. Because of this content fragmentation, Brits looking for a subscription-based streaming service have until recently had to either choose their compromise or stump up £11 ($17.50) per month for both.

Sky has a plan to tackle these upstarts, though: it has leveraged its strong position in the pay TV industry to sign cross-platform licensing deals that apply to its traditional channels, PPV, and streaming services. The result is the recently-launched NowTV, an on-demand movie service with either pay-per-view or all-you-can-eat £15 ($24) subscription options. Because of Sky’s content deals, it’s able to offer big-name movies up to year before Netflix or LoveFilm. For the moment, NowTV is lacking the TV series that its competitors have, and so can’t be seen as a direct replacement to either, but Sky will soon add live sports and TV shows for on-demand playback, again either through a subscription or on a pay-per-view basis.

The future of British television rests with Sky — for as long it can keep hold its content deals

The dream of paying for just what you want looks like it’s about to come true, but we’ll have to see how broad Sky’s content offerings will be and how much users will have to pay. As with Sky Go, the service is available through both web and mobile apps (although again, Android options are limited), and Sky is also offering NowTV through other platforms like Xbox 360 and YouView, and plans to extend its reach to Roku and PlayStation 3 soon.

Unsurprisingly then, the future of British television rests with Sky — for as long it can keep hold its content deals, at least. If it decides to put its full weight behind NowTV, the whole of the UK will have access to as much or as little premium content as they like without worrying about unnecessary subscriptions, cables, satellites, or schedules. Sky is holding all the cards here, but whether it truly wants to enable Brits to cut the cord remains to be seen.

Explore the ecosystems

This week we're taking a close look at the future of TV and the living room — the great unclaimed space of the technology world. Check back each day for a close look at all the major players, along with a full range of interviews with industry players and reports on everything from the state of remote controls to the future of gaming. Tune in all week for the rest. Here’s a sampling:

Tuesday:
Google, Microsoft, Aereo, Boxee CEO Avner Ronen
Wednesday: Amazon, Sony, live sports, TV apps, Condé Nast’s Dawn Ostroff, NBC's Vivian Schiller
Thursday: Apple, the state of remotes, Vizio CTO Matt McRae
Friday: Independents, New Yorker's Emily Nussbaum, Valve

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