Our take...
Universal's move has created a two-tier subscription TV movie window in the UK for the first time, with Sky taking the initial run on subscription TV and PictureBox showing films after the conclusion of the Sky Movies window. In many ways, this mimics the two window system seen in France prior to the TPS-CanalSat merger. In the French system, CanalSat would show the first run of films on subscription pay-TV, with rights transferring to TPS following the conclusion of the CanalSat run.

Creating a second window is an interesting and potentially lucrative strategy for Universal. While films would normally simply end up in the library catalogue following their Sky Movies run, either sold to free-to-air channels, or in the bargain-bin of on-demand services, the creation of a new subscription window adds further value to blockbuster titles. Universal is targeting the lower-potential customers taking IPTV - those not willing to shell out for a Sky Movies subscription, but willing to wait and spend a little less each month for a service bringing a limited range of movies (single studio supplier vs. all the studios' content on Sky). While still valuing the films at substantially less than their PPV rate (£2.99 a title on BT Vision), the assumption is that high-value customers will already have viewed the films in the PPV-only window and any slight cannibalisation of PPV will be more than offset by the number of customers drawn in by the subscription 'unlimited views' offer.

PictureBox service has previously been available in the UK through Top Up TV's push to the PVR service, although this has been a cut down version offering just seven films at any one time. It is also available on UK IPTV service Tiscali TV (formerly Homechoice) the nine year old IPTV pioneer that has struggled to reach just 50,000 customers. PictureBox is also available as a push service on Polish DTH service, 'n', but this is the first launch as a true SVoD offer on a mainstream Western European TV platform, and in a market where a powerful content gatekeeper (in this case Sky) has an exclusive hold on studio content. The move suggests that Universal is now confident that the business model is sound.

While an important step for Universal, the deal is also critical for BT in further enhancing its TV offering. BT Vision offers all of its pay content on an on-demand basis, with subscriptions available for sports and TV series. Movies, however, have in the past been available only on a pay-per-view basis. While still representing the budget end of the UK pay-TV services, having the second subscription movie window places BT in a better position than before to compete directly with its peers.