Broadcasters get into downloading picture

When Michael Grade announced this week that ITV would increase its online revenues fivefold by 2012, the broadcaster's executive chairman provided both an aggressive growth target and a reminder that, in revenue terms, programming over the internet would remain a niche business for some time.

The £150m ITV hopes to be making online within five years is equivalent to just 7 per cent of its revenues last year. Of that, much will come from Friends Reunited, ITV's social network, rather than from the new ITV.com.

However, Mr Grade's decision to make ITV's programming available online, either streamed live or as a catch-up service, comes as every other big UK broadcaster is rushing to exploit broadband's potential.

The BBC launched a public trial of its free iPlayer catch-up service in July; Channel 4 is combining free and paid-for on demandprogramming on its 4oD site; Five is selling episodes of CSI Miami online; and British Sky Broadcasting's Sky Anytime download service is providing football highlights and full-length films.

The traditional TV companies are jostling for attention alongside YouTube clips, social networks' mini-soap operas, Apple's iTunes store, launched in the UK two months ago, and online-only video aggregators such as Joost and Babelgum. New television-based video-on-demand or IPTV services such as BT Vision andTiscali TV are providingfurther competition.

All are chasing the promise of a fast-expanding market. Screen Digest estimates the download-to-own part of the online video market alone will expand from a meagre £277,000 in the UK last year to £14.8m this year and £65m by 2011. Online advertising, which underpins many of the broadband initiatives, is particularly strong in the UK.

Analysts are becoming increasingly convinced, however, that such new models will not take off fast enough to replace traditional television in the way that downloads have threatened the music CD. Several also warn that the UK is lagging behind in making use of such new distribution.

According to Screen Digest, just one in 100 UK households will be taking IPTV by the end of the year, compared with one in 10 in France. Similarly, Enders Analysis argues that PC-based video services "will remain niche in the short-to-medium term. The TV is the locus of family entertainment and the PC cannot replicate its appeal."

While free content would serve a brand-building purpose for broadcasters, Enders concluded: "Pay services are likely to have narrow appeal" because of the availability of pirated material and free substitutes such as personal video recorders.

The big broadcasters have agreed that they must put their content online, but they have shown no agreement about how much to make available.

On some sites, the range of content remains limited. Five offers only Grey's Anatomy and the CSI franchise for download, and on iTunes, seven of the 10 most popular videos are South Park downloads.

Clashing business models are also creating a confusing picture for online viewers. While the BBC is confined to a free model with no advertising and ITV committed itself to an advertising-funded free online service this week, pay sites are charging a bewildering range of prices.

While iTunes is charging £1.89 for each episode of Grey's Anatomy, for example, the same programmes are available on five.tv for 99p each - the equivalent of the price of a music download on iTunes. Although Living TV also airs the series in the UK, it does not allow online downloads.

Sky Anytime is in effect free for existing subscribers, depending on which package they take, but also offers pay-per-view programmes priced from 50p to £1.50, and download-to-own versions of shows such as Lost and 24 for £2.50. Channel 4 is offering its past 30 days' programming for free, plus shows costing 99p or more.

Andy Duncan, chief executive of Channel 4, said he was "very, very pleased" with the performance of 4oD.

He added, however: "I think we do need to have a standard for the industry, a way that everyone uses TV content on the internet that is common to all providers and platforms." At present, each broadcaster is using a different technology. The BBC and Channel 4 require users to install applications on PCs, while ITV's play in a browser window. Most work only with PCs with the latest versions of Microsoft's Windows operating system.

An industry standard "will come", Mr Duncan said. "I think it will take about five years, maybe 10, but it is needed and it will come."

Jeff Henry, director of ITV Consumer, agreed with Mr Duncan's assessment, saying: "It has to happen because what we are talking about here is not money as much as volume. Cashfollows volume and it is just a question of when and how it happens."