The number of TalkTalk customers paying a regular monthly subscription for TV channels could be as low as 125,000 according to evidence recently heard by the Competition Appeals Tribunal.
The ISP is a shareholder in the YouView set top box business and has spent the past four years aggressively distributing boxes to its broadband customer base. For much of that period TalkTalk was reported as the UK’s third largest pay-TV provider – behind Sky and Virgin Media – until it was overtaken by fellow YouView shareholder BT earlier this year.
As of its latest market update TalkTalk claimed its TV base was “1.3m” however evidence given in October by John Petter, the head of BT’s consumer division, suggests the actual number of customers with an active subscription is around 10% of this figure at “125,000.”
Petter, who was giving evidence as part of BT’s unsuccessful appeal against Ofcom’s dropping of a rule requiring Sky to wholesale its sports channels to rivals, referenced the number several times during his appearance before the tribunal and suggested TalkTalk only made money from the remainder of its customer base if they purchased pay-per-view content.
In response to a description of TalkTalk as “a serious pay TV player,” he replied: “The term “serious” I think needs to be considered carefully, because whether a player that has 125,000 subscribers can ever be considered serious when Sky has got 11 million, for example, I think that’s open to doubt.”
Asked by counsel whether “the point that the majority of TalkTalk’s pay TV customers haven’t taken a monthly subscription is simply a product of TalkTalk’s different business model,” Petter answered: “The margins in this category are from subscription. I think you’ll find every player in the market strongly agrees with that statement.
“It is very hard to make money off pay-per-view customers, and I’m sure if TalkTalk could sell more subscriptions and get more margin, they would, but the fact is, they are unable to and the number of subscribers is only 125,000.”
Although BT has also previously provided set top boxes without a monthly charge, meaning its own headline figures could include non-subscribing customers, it currently charges a minimum subscription of £3 per month for a non-recording box and a mix of Freeview and pay channels.
According to Petter’s evidence the 125,000 subscriber figure was provided by media analysts Mediatique and, while the executive accepted it was only an estimate, he suggested data from YouView gave him “more knowledge of TalkTalk’s business” than was in the public domain.
Boxes but no guaranteed revenue
Petter told the tribunal that the distinction between subscribers and customers was important when assessing the success of a company or platform, saying: “Subscribers are people that commit to taking services from you that they pay for on a monthly basis, and, therefore, they are the main source of profit in this category, and customers are merely people who have accepted a set-top box and thereby the means of access from which they may or may not at some point in the future choose to purchase subscription services — there is no guarantee that they will — and they may periodically choose to purchase services on demand as well, on a per-occasion basis.
“The distinction matters because the value in the category is in subscribers, and the customers per se are almost like a marketing cost to access the subscribers, effectively.”
During his evidence Petter also revealed that recent changes in how BARB collates audience figures showed that “the number of viewers that TalkTalk typically has for key Premier League football matches on Sky Sports is between 60 and 70 per cent of the equivalent number for BT.”
He added that the viewing data allowed an inference that the number of customers accessing Sky Sports on the TalkTalk platform is “about 40,000, probably.”
Commenting on Petter’s evidence, a TalkTalk spokesperson said: “We have over 1.3 million subscribers to TalkTalk TV, enabling customers to watch both free to air and paid for content.
“Our recent launch of our next-generation YouView Box and Fixed Low Price Plans means that even more customers are currently taking advantage of the most flexible way to watch TV at Britain’s lowest price.”