Interactive ads coming soon on Sky digital

By Keith Newman

Interactive advertising is likely to be among the first services Sky TV builds into its digital satellite network once it decides on a set-top operating system at the end of next month.

Sky is looking at three potential suppliers which develop software allowing the viewer to participate in a new level of consumer services.

Shareholders at Sky's annual general meeting in Auckland yesterday were shown film clips of advertising which "rewards" viewers for watching, allowing them to request further information or sample products using the TV remote control.

However, the idea of interactive advertising raised a challenge to Sky's board, which includes TVNZ chairman Rosanne Meo, about the level of ads creeping in. The reason many people subscribed to Sky was to get away from advertising, said one shareholder.

While there was no restriction on advertising levels, Sky chairman Craig Heatley said there were natural breaks and these had to be filled with something. While Sky would never interrupt movies it, was a "catch 22 situation" with revenue.

"Subscriptions are our business and we are mindful of the conflict," said Mr Heatley. Sky brought in $10 million in advertising revenue for the 1998 year, up from $7 million in 1997. Its total revenues for the year were $212 million, up 20 per cent on 1997.

Interactive capability will be downloaded to subscriber's digital decoders within six to 12 months.

Sky has been talking long and hard with the business community to define uses for the system, including home shopping, banking and TAB betting, purchasing concert tickets. Pay-per-view movies were likely once it had access to a third transponder, possibly next month.

While subscriber growth hasn't kept pace with the 1997 figures, 10,000 of Sky's terrestrial 280,000 UHF viewers migrated across to the new digital service during 1998. The company is hopeful of accelerated growth this year with all terrestrial pay-TV users eventually moving across to the new digital service. Sky hoped to continue growing at 40,000 subscribers a year.

Mr Heatley said Sky was robust and operated well below its debt levels. There was plenty of headroom to move forward, either with further acquisitions or a "more aggressive roll-out of digital boxes".

However, he flatly denied a suggestion by the Business Herald that Sky might consider giving away its set-top boxes and decoders like its British counterpart, BSkyB, but conceded the price may come down from its current $600 mark.

Sky has taken a 30 per cent shareholding in internet provider Ihug which has its own TV set-top boxes for fast Internet and pay-TV. Asked how many set top boxes the market could sustain Mr Heatley said Sky had not suffered in Wellington where Saturn had its own boxes for pay-TV.