Interactive TV Providers Must Improve Offer

“I led the first online grocery shopping experience on interactive TV, a joint venture between Sky and Asda”


Revolution UK – January 30, 2002

Asda Interactive TV

Interactive TV Providers Must Improve Offer

The mainstream media has long propagated the notion that we are a nation of TV-obsessed couch potatoes – so turning that much-loved box into a shopping mall seemed to be a guaranteed money-spinner.

Yet retailers Woolworths and Argos have both decided to axe their iTV services – the latter, according to a spokeswoman, to focus on its e-commerce activities on its web site for “commercial reasons”. Both retailers have ditched Sky digital, and Argos has pulled the plug on Telewest, too.

So what has gone wrong?

Sky digital has been accused of levying expensive rates and prohibitive revenue-share deals for shopping partners. Henning Dransfield, senior analyst at research firm Ovum, explains that when Open, the predecessor of Sky digital’s Sky Active shopping service, was unveiled, one retailer he worked with faced a one-off cost of about £700,000 to enter the service, with a revenue-share deal on top.

“It was a steep investment, but it was the first and biggest platform doing this, had limited space for retailers and was operating on a first-come, first-served basis,” he says. “Others who came later had to pay a lot less because the strategy didn’t work.” Although there were certain fixed costs at the beginning, it is understood that low-functionality iTV sites can now be set up for £100,000. And Sky digital now uses WAP-based text language WML for some content providers, so the structure could change further.

But while there would be greater compatibility with its other channels, it would initially require another layer of investment for partners. Woolworths’ move away from iTV is perhaps not so surprising. After it demerged from parent Kingfisher, the retailer reviewed its e-commerce strategy and decided to fulfil its own site through Streets Online.

But Woolworths head of corporate affairs Nicole Lander says the service on Open/Sky Active succeeded, particularly in reaching a new target audience of males aged 25 to 35. “The contract comes up for renewal on 31 January and would have required further investment. The capital
return on investment was not viable,” she explains. “But we believe in the future we may well return.”

Supermarket chain Asda is making a definitive move to ramp up its home shopping and has just unveiled a limited service on Sky Active. It will be the first supermarket to feature there, and will have access to Sky’s 5.5 million subscribers. A roll-out across the UK to include Asda@Home
stores is planned.

Iain Spence, director of new channels at Asda, believes the supermarket will perform well through iTV because it’s using an extended platform, allowing access to a real-time catalogue of 11,000 products. He says this contrasts with the bulk of Sky Active’s retailers, which use a standard platform and can only offer a limited range of products at any one time. “It’s analogous to having static web pages,” he explains .

“Those moving off iTV are probably on the standard platform. If you can only offer 200 products, and only update it every two or three weeks, it’s not that exciting,” he adds. Asda will hope to follow the success enjoyed by Domino’s Pizza. Of all its e-commerce transactions, 60 per cent come via iTV platforms, which equates to about £2.2 million in total gross sales last year, and 13,200 orders a month.

It regularly uses interactive ads to entice viewers to click through when they are slavering over a double pepperoni on screen. It also sponsors Sky One favourite The Simpsons, and features a little tomato-like button every time Homer appears on the channel.

Dan Clays, director of interactivity at Domino’s digital agency Quantum New Media, explains that it struck a good commercial deal, and adds that Woolworths and Argos leaving should act as a wake-up call to some platforms about the commercial terms they offer. “Platform providers also need to promote their interactive services so they become part of the viewers’ consciousness,” he says. E-business consultant Howard Unna, who helped set up Woolworths’ digital TV service in 1999, believes there needs to be more collaboration between platforms, agencies and content providers, and also more creativity.

“Retailers and banks need to come up with a business model that works. Sponsorship and TV programming is key,” he argues. “The principle of dTV is to catch viewers’ attention, so it has to be creative, quick and very easy to use. Too many have made it complicated.

“The experience from a user’s perspective is pretty grim – it’s still slow and clunky,” he adds. “And expectations are so much higher because of the quality of the broadcasting.” In the three months to 30 September, Sky digital’s pay-TV average revenue per user (ARPU) was £317, with interactive ARPU hitting £13. Its target for 2005 is to reach £50 per user from interactive services, where retail is part of a mix that includes betting, gaming, email and SMS.

In December, Sky One aired WhatUWant4Xmas, which showcased goods that viewers could click through to buy. And last week, Sky digital revealed that it will add interactive sales to its Sky Travel channel through a partnership with The First Resort from April.

A Sky digital spokesman says the broadcaster is looking at further opportunities around TV programming, and points out that its Sky Buy service gives smaller retailers a place to sell their products without the expense of a dedicated shop – although it also means their branding is more hidden. “Digital satellite is still the most successful provider, and we think that is a significant draw for partners,” he says. “Retail is one part of a broader portfolio of services, and the focus is to exploit the potential. It hasn’t been fully tapped yet, and we’re learning along with our partners. As we grow, so will the transactions.”