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Ovum recently attended both the YouView retail product launch and a separate demo of BT’s ISP-led take on the YouView experience.

The launch marked the arrival of yet another connected TV option onto the shelves of UK consumer electronics retail outlets, and yet another potential decision for consumers to make about which box to use as their main source of home video entertainment.

Integrating the linear and on-demand experiences is YouView’s USP

YouView has been so long in the making that it no longer looks like the innovative proposition it first set out to be. While the user interface (UI) looks sleek and straightforward, and the expected line-up of content partners is impressive, there is nothing particularly revolutionary here (although it could be said that revolutionary features are rare in the free-to-air market).

What sets YouView apart from most of the other OTT TV options currently available is that it pulls together baseline linear TV services – which are still very much in demand among UK consumers – and a range of web-delivered, on-demand video options in the same device and, more importantly, via the same UI. This is something that even the most widely-adopted of today’s large-screen OTT alternatives have so far failed to do.

A limited retail offer leaves ISPs as the main YouView sales channel

The initial price point of £299 (approximately £70 more expensive than a new top-of-the-range PlayStation 3, for example) is clearly not aimed at the mass market at this stage. If YouView is to work as a retail proposition it will require entry-level set-top boxes (STBs) to be both available and affordable. While lower-end retail devices are clearly part of the roadmap, no timelines were given for their introduction. The venture appears to be banking on its ISP members, BT and TalkTalk, to handle most of the required marketing, promotion, and customer education, at least during the early stages of implementation. Most importantly, the two initial ISPs will inevitably offer STB subsidies to attract consumers to their YouView propositions.

The imminent expansion (if not migration) of telco TV from the IPTV subscription-based model towards a semi-tethered, broadband value-added services proposition may well be the most significant implication of the arrival of YouView. The ISPs are expected to position YouView as a value-added enhancement to their broadband packages rather than as a standalone TV offering. BT plans to offer a dual proposition, aiming its recently revamped BT Vision 2.0 product at the pay-TV market, while using YouView to target existing Freeview consumers, who want digital TV without the commitment of a subscription. BT will also use YouView to enhance its broadband offering, in terms of both value and ARPU-generation, by attaching it to a higher-tier access package. The benefits to BT’s broadband customers of taking YouView include the absence of STB fees and data usage charges, and guaranteed quality of service.

YouView could make BT Vision redundant

BT is employing a “bolt-on” strategy as an alternative to committing to a BT Vision contract. This allows YouView customers to top up their free baseline service with transactional or subscription-based video on demand components. Both the retail model and the forthcoming BT YouView STB feature a BT button, enabling cross-promotion of pay-TV content and services, as well as most of the functionality that is available through BT Vision 2.0. In essence, based on current packaging and pricing, there will be little to distinguish BT YouView from BT Vision. If BT is to keep the two products separate, it will have to work hard on its marketing and pricing to make it clear to customers which product is right for them. In Ovum’s opinion, a better long-term strategy might be to combine the offerings so that Vision content simply becomes an upgrade on the YouView STB.