By Paul Sandle
LONDON (Reuters) - YouView, a free UK television service combining digital channels with on-demand programming, launched some two years behind schedule on Wednesday, hoping to appeal to households unwilling to shell out on pay-TV from BSkyB <BSY.L> or Virgin Media <VMED.O>.
But the service, backed by the BBC, ITV <ITV.L>, Channel 4, Channel 5, Arqiva, BT <BT.L> and TalkTalk <TALK.L>, is entering a crowded market and its initial offer of catch-up services like iPlayer and digital channels available on the rival Freeview service may not make an impact, analysts say.
Lord Sugar, the businessman and TV personality bought in as YouView chairman last year to bring leadership to the floundering project, said it was aimed at the 13-15 million British households without a pay-TV deal.
"The Freeview audience don't want to be tied to a contract, they only need this box," he said.
"The audience to me is Mrs Smith on the 17th floor of a tower block in Newham."
YouView will have just one model of set-top box on sale by the end of July, made by South Korean manufacturer Humax <115160.KQ> and priced at a relatively expensive 299 pounds ($470).
Sugar, whose Amstrad computer company supplied satellite dishes for the launch of Rupert Murdoch's Sky TV in the late 1980s, said cheaper set-top boxes would follow.
"Will I be surprised if in two years there are boxes in the retail channel at 99 pounds?' Not really." he said on Wednesday.
YouView will also be packaged in broadband subscriptions from BT and TalkTalk, but software glitches meant no launch dates were unveiled at Wednesday's event.
Dido Harding, chief executive of TalkTalk, said at the event that the group would unveil its YouView plans at an investor day on July 26.
Despite the hitches, Sugar, who judges the business skills of young people in the UK edition of "The Apprentice" reality show, said he saw plenty of potential in YouView.
The box was a "carcass" to which additional content such as on-demand movies and internet TV channels would be added in the future, he said.
Analysts, who had said YouView could be threat to BSkyB and Virgin Media by offering on-demand content without the need for a subscription at a time when household spending is coming under pressure, were not so sure.
They said YouView's impact had been blunted by its long gestation, which had given many other services, including catch-up TV on games machines, time to enter the market.
"Clearly the consortium wanted to make some kind of impact ahead of the Olympics but in effect this will not be a mainstream proposition for UK customers until the end of 2012," said Nick Thomas at Informa Telecoms and Media.
"Had it launched in 2010 or 2011, it would have been able to shape the market, but now, it is another smart TV platform competing with offers from Freeview Plus, Sky, Virgin Media and TV manufacturers." ($1 = 0.6378 British pounds)