Commercial broadcasters should avoid giving content away for free, Sky warns

The idea that content can be given free online and paid for by advertising has been criticized as short sighted by Sky’s COO Mike Darcey. Speaking to the Broadcasting Press Guild, a UK association of TV and media journalists, Darcey argued that commercial terrestrial broadcasters had been too quick to follow the BBC’s lead in making premium content available via online players such as BBC iPlayer. The risk is of cannibalizing their existing subscription revenue, with losses likely to increase further if they then make these online players available on TV screens, as is the intention of the BBC-led YouView project (formerly called Project Canvas).

UK commercial broadcasters such as ITV have felt compelled to follow the BBC’s lead into online services to avoid losing audiences, even though, unlike the BBC, the move costs them revenue. But the same trend has been evident elsewhere. In the United States, for example, TV networks such as ABC, Fox and NBC have invested in Hulu, which shows their content supposedly paid for by adverts. But according to Darcey, the networks are already regretting moving too quickly. The revenue gained from online advertising has so far failed to compensate for the loss of traditional subscription revenue in at least some cases; although, accurate direct comparison between the two sets of data is difficult.

Perhaps fearing that his audience might not shed too many tears over Sky’s possible loss of revenue, Darcey argued further that quality could suffer if UK regulator Ofcom was successful in opening content rights to large numbers of small, new distributors. This might be good for competition in the short run but would ultimately discourage the big players such as Sky from investing in original programming.