© Screen Digest. Not for distribution TV economics and the digital switchover A seminar hosted by...

© Screen Digest. Not for distribution

TV economics and the digital switchover

A seminar hosted by Screen Digest at

The Institute of Physics, London22nd February 2008


Digital platforms in the age of analogue switch-off

Guy Bisson, Senior Analyst


Digital platforms in the age of ASO

• Market context

• Primary set and DTT success

• DTT: the channel market

• Pay TV, DTT & competitive impact


Switch-off: years scheduled for transition

0 2 4 6 8 10 12 14

NorwayDenmark

NetherlandsAustriaEstonia

PortugalSlovakia

CzechHungaryFinlandFrance

GermanySloveniaBelgiumPoland

SwedenItaly

SpainUK

years

2012

2010

2012

2007

2014

2010

2012

2008

2011

2007

2012

2012

2012

2012

2010

2010

2006

2009

2009

ASO

Data shows years from first launch. Does not account for re-launches


% homes wholly reliant on terrestrial at ASO

0 10 20 30 40 50 60 70

NorwayDenmark

NetherlandsAustriaEstonia

PortugalSlovakia

CzechHungaryFinlandFrance

GermanySloveniaBelgiumPoland

SwedenItaly

SpainUK

% TV homes

2012

2010

2012

2007

2014

2010

2012

2008

2011

2007

2012

2012

2012

2012

2010

2010

2006

2009

2009

ASO



• Market context





Methodological note: considering ‘primary set’ is central to modelling whole markets

• Simplification of a multi-combination environment based on basic but robust market-specific assumptions

• Primary set is the primary viewing/reception mode in a TV household• The primary set may be the only TV in the house or one of many• There may be several different reception methods in the home.

These may each be on a different set or, increasingly, on a single set which may also be the main set in the home.

• Is not a factor of the number of TV sets in the house• The primary set is not a measure of the total reach of a platform • But it does provide a better measure than total of the competitive

dynamics• All platforms must be considered even if they are hybrid platforms


Coming soon to TV Intelligence….UK market overview: platform penetration rates

1996 1997 1998 1999 2000 2001TV households 000s 23,297 23,475 23,660 23,873 24,078 24,390TV penetration % 98 98 98 98 98 99TOTAL TV PENETRATI ON RATESCableanalogue cable penetration % 8.0 10.1 11.9 13.2 11.2 6.7digital cable penetration % 0.4 3.6 8.1total cable penetration % 8.0 10.1 11.9 13.6 14.8 14.8Satelliteanalogue pay satellite penetration % 14.8 15.3 13.7 8.0 1.6digital pay satellite penetration % 1.0 8.2 18.8 22.5total pay satellite penetration % 14.8 15.3 14.6 16.2 20.4 22.5analogue free satellite penetration % 1.5 1.5 1.5 1.6 1.2 0.8digital free satellite penetration % 0.5 0.7 1.0 1.2 1.5 2.0total free satellite penetration % 2.0 2.3 2.5 2.8 2.7 2.9total analogue satellite penetration (pay and free) % 16.3 16.8 15.2 9.6 2.8 0.8total digital satellite penetration (pay and free) % 0.5 0.7 1.9 9.4 20.2 24.6total satellite penetration (pay and free) % 16.8 17.5 17.1 19.0 23.1 25.4terrestrialtotal analogue terrestrial penetation %digital terrestrial (DTT) penetration (pay) % 0.1 2.3 4.2 5.2digital terrestrial (DTT) penetration (free) %digital terrestrial (DTT) penetration (total) %total pay analogue terrestrial penetration (pay) %I PTV free IPTV penetation %pay IPTV penetration % 0.0 0.1total I PTV penetration % 0.0 0.1third-party premium servicestotal third-party premium pay TV subscribers %PRI MARY TV PENETRATI ON RATESCableanalogue cable penetration % 8.0 10.1 11.9 13.2 11.2 6.7digital cable penetration % 0.4 3.6 8.1total cable penetration % 8.0 10.1 11.9 13.6 14.8 14.8Satelliteanalogue pay satellite penetration % 14.8 15.3 13.7 8.0 1.6digital pay satellite penetration % 1.0 8.2 18.8 22.5total pay satellite penetration % 14.8 15.3 14.6 16.2 20.4 22.5analogue free satellite penetration % 1.4 1.4 1.4 1.4 1.1 0.7digital free satellite penetration % 0.5 0.7 0.9 1.1 1.3 1.8total free satellite penetration % 1.8 2.0 2.2 2.5 2.4 2.6total analogue satellite penetration (pay and free) % 16.1 16.6 15.0 9.4 2.7 0.7total digital satellite penetration (pay and free) % 0.5 0.7 1.8 9.3 20.1 24.4


DTT penetration* of TV HH since launch

0

10

20

30

40

50

60

70

80

1 2 3 4 5 6

UK

*DTT penetration (% TVHH) is for the primary set usage



0

10

20

30

40

50

60

70

80

1 2 3 4 5 6

UK

Germany




0

10

20

30

40

50

60

70

80

1 2 3 4 5 6

UK

Italy

Germany




0

10

20

30

40

50

60

70

80

1 2 3 4 5 6

UK

France

Italy

Spain

Germany



Market summaries: DTT in the big five

UK France Italy Spain Germany

Reliance on terrestrial

high high high high low

Pay/Multichannel penetration

high Moderate moderate low high

DTT launch year 2002 (re-launch) 2005 2004 2005 (re-launch) 2002

Influence of incumbents in DTT

moderate high moderate high high

Broadcaster support for DTT

Unique DTT channels

No Yes Yes Yes No

Hardware Low cost. No regulation. But service-driven innovations

Split: low cost/pay TV-MPEG 4. Mandated minimum spec.

Full interactivity, CA. Mandated minimum spec.

Low cost no regulation

Low cost.

DTT five year ranking

2 3 4 1 5


Strength of multichannel pay TV impacts DTT

0

10

20

30

40

50

60

70

Italy Spain France* UK Germany

% T

V H

H

pay TV pentration at launch

DTT pentration year five

Poly. (DTT pentration year five)

Pay TV penetration at launch vs. yr 5 DTT penetration

Freeview falling behind

•Freeview held up as benchmark for DTT success

• Now being outpaced by platforms in France and Spain

•Future legacy hardware issues exacerbated by early success and promotion of low cost access options

• Regulatory involvement in hardware specification a feature in both France and Italy but market-led in UK

• Freeview has not yet embraced provision of premium pay TV

• Freeview and UK ASO now trending towards Parkinson’s Law?

• At around 40% pay TV penetration, DTT uptake seems to be impacted

More difficult to correlate with:

• analogue dependency

• years scheduled for transition

* France excludes analogue terrestrial pay TV (single channel) and Cable Antenna


But digital terrestrial already dominant

Digital pay sat32%

Digital free sat9%

Digital cable10%

DTT42%

IPTV7%

Digital pay sat25%

Digital free sat8%

Digital cable10%

DTT49%

IPTV8%

Shows market share of primary digital TV homes in UK, France, Italy, Spain (Germany excluded due to cable skew)

2007 2012

60m homes 91m homes


And increasingly important for second set

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ho

me

s (

m)

Secondary device

Primary device

• 90m+ DTT homes in big five markets by 2012: Half (48%) will use DTT as secondary device



• Market context





Keys to success?

• Platform/digital brand?– Freeview vs. the rest

• Offering something new (more and different). For free?– In analogue dependent markets (elsewhere pay TV-only model can

work)

• Retail cross-promotion?– Plus regulated hardware specification…

• Providing optional access to a pay TV tier?– France, Italy vs. Spain

• Killer content?– Soccer helped in Italy but initial burst now levelling


Brand


Incumbent* broadcaster role

807571

49 50

0

10

20

30

40

50

60

70

80

90

UK Italy France Germany Spain

% o

f to

tal

chan

nel

s

% of all DTT channels that are incumbent-owned

Increasing incumbent role

Relatively stable channel mix: at launch 40% of Freeview channels were incumbent owned

*Incumbent means main national analogue terrestrial broadcasters.

UK Italy France Germany Spain

# channels 37 18 28 32 20


56 6

7

1718

9

16 16

24

0

5

10

15

20

25

30

UK France Spain Italy Germany

# ch

ann

els

Incumbents’ channel familiesAnalogue vs. digital channel families

*Incumbent means main national analogue terrestrial broadcasters.


Incumbents’ % increase in channel family size since digital launch

0 50 100 150 200 250 300

Germany

France

Italy

Spain

UK


European top five: advertising market (€m)

0 5,000 10,000 15,000 20,000 25,000

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008f

2009f

2010f

2011f

2012f

€m

National

Multichannel

Chart shows net advertising revenue (€m) for the national channels (national channels previously available in analogue) and new digital channels.


0

10

20

30

40

2001 2002 2003 2004 2005 2006 2007

$bn

Pay TV revenues License fee revenues Advertising revenues

Advertising has dominated Western European TV market for the past decade…


But in the US, pay TV revenue has already overtaken advertisingBut in the US, pay TV revenue has already overtaken advertising

0

20

40

60

80

100

120

2004 2005 2006 2007 2008 2009 2010 2011 2012

$b

n

Pay TV revenues Advertising revenues


And in 2009, the same will happen in Europe

0

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011 2012

$b

n

Pay TV revenues License fee revenues Advertising revenues



• Market context





DTT pay TV strategies

Not possible under current regulation. TV groups lobbying for change (Mediapro) hoping to replicate Italian model. Third-party pay TV platform (Dahlia TV) waiting in wings.

No current plans

Market led by main commercial FTA broadcast groups. Centred on soccer PPV strategy now migrating towards pay TV subscription (with movies and TV). Helped by early national hardware strategy

Premium pay TV provided by main pay TV gatekeeper (Canal Plus) and thematic channels. Open market for distribution and packaging of thematic pay TV channels.

Free market approach has created mixed bag of pay TV options. Lack of premium content as no current involvement of key content gatekeeper (pending?). Pay options increasingly based on technology-led innovations (push VOD, IP hybrids)


DTT: Competitor defensive measures

•Over 40* digital TV channels including Virgin1, FILM4 and more •A massive library of films, TV, music available on demand •Catchup TV - our pick of last 7 days' telly for free

FREE

with Virgin Phone

• Conversely, Freeview has pushed UK pay TV operators towards free digital offers

• Move has yet to be replicated in other markets where existing pay TV operators tend to have more direct involvement in DTT

• Fill in satellite services with ‘public service’ role have opportunity to leverage position with service innovations (HD on Freesat)

• Free DTT can be ‘flipped’ to provide core linear channel offer with on-demand pay TV booster


Free platforms follow pay TV’s HD lead

0

5

10

15

20

25

30

35

chan

nel

s (#

)

free satellite free DTT pay satellite cable pay DTT

2007 (UK)

2007 (France)

2012 (UK)

2012 (France)

Free access to HD led by DTT and Freesat after 2010

•France DTT : at least 4 HD channels (of which 3 free-to-air broadcasters) to start broadcasting in 2008, and possible 4 more within a year

•UK satellite: Freesat to launch in Spring carrying free HD channels but only BBC and ITV have confirmed their support.

•UK DTT: The current OFCOM/BBC plan is to start offering HD on DTT as soon as 2009 in ‘turned-off’ regions. Our forecasts are based on that.

•However the OFCOM plan is dubbed by some technical experts as being unrealistic (DVB-T2, MPEG-4, restructuring of existing multiplexes)

•This will contribute to a stronger take-up in France: 11m HD viewers at end-2012 v. 8m in the UK


Final thoughts…

• Difficult (impossible?) to correlate single market factors with DTT success

• Analogue dependence, pay and multichannel TV penetration and speed of transition all contribute

• Branding as distinct platform does not seem to be factor• But content offer is crucial• Support of incumbent broadcasters and willingness to develop new

channel concepts has been key driver in most successful markets• Can be viewed largely as defensive measure, but also provides back

route into pay TV market• Retail support also crucial, consumer labelling campaigns where

mandatory hardware specifications absent • Natural migration of free DTT service towards provision of pay TV

tiers. Will increasingly follow pay TV lead with PVRs, HDTV, on-demand, push services…triple-play?


Thank you

[email protected]


‘Balancing the TV pie’Television advertising trends

Vincent Létang, Senior Analyst


Television advertising trends

• Advertising trends: new data from Screen Digest

• Advertising revenues forecasts

• Focus on European broadcasters

• Long term strategic outlook


New Screen Digest Intelligence dataExample: ‘second dimension’ tables


Advertising revenues: short-term outlook

• The ongoing slowdown in advertising spending will continue in 2008-2009

• In 2008, television revenues will experience near-flat growth: ‘quadrennial events’ will compensate for adverse economic conditions

• 2009 however could be the year for a full-blown TV ad recession, esp. in the US and in France (for local reasons)


Short-term outlookWill there be an adspend recession in 2008?

YES!

• When economic conditions get rough, advertisers cut marketing spending right away

• TV is highly dependent on some badly-oriented sectors like automotive

• Advertisers may prefer to keep investing online where accountability is better

NO!

• 2008 is ‘quadrennial’ year with major events that always drive ad spending

• Advertisers have already adjusted their ad spending in 2007

• No ‘bubble’ that needs deflating (dotcom-crash-like) and CPMs are reasonable

• Global media agencies claim advertisers will keep to their 2008 plans (cf SuperBowl)


0%

1%

2%

3%

4%

5%

6%

Big Five USA

2007 2008 2009

Short-term: key forecastsTotal ad market - Europe and US


-3%

-2%

-1%

0%

1%

2%

3%

4%

Big Five USA

2007 2008 2009

Short-term: key forecastsTelevision ad market - Europe and US


Long-term outlookA three-tier story

• Advertising spending will resume growth in 2010-2012– However, it will not rebound as strongly as in the early 2000s

• Only online advertising will post real net growth– Without search online advertising, total ‘display’ advertising spending will

grow much below economic growth rate in the Western world

• Television will maintain its overall market share – Internally, market share will adjust to better reflect the growing audience

share of digital channels

• All other media will shrink in market share, if not absolute revenues


EuropeAd spend to grow GDP growth

-6%

-4%

-2%

0%

2%

4%

6%

8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Nominal GDP Total advertising


EuropeOnly (search) online advertising is really growing

-5%

0%

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011 2012

TV Online Other Total


EuropeTelevision forecasts

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-10%

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

USATelevision forecasts: recession in 2009


0

500

1,000

1,500

2,000

2,500

3,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

Ad

vert

isin

g r

even

ues

in

€m

Mediaset

ITV group

TF1 group

RTL Deutschland

ProSiebenSat.1

RAI

Channel 4 group

TeleCinco

France TV

Antena 3

RTVE

M6 group

European broadcastersTop 12 European broadcasters


European broadcastersDigital channels are saving big guys’ growth in 2007

-0.6%

1.3%

-4.4%

0.6%

32.0%

24.0%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Group Flagship channel Multichannel

ITV

TF1

Online advertising: +77%


Television advertising 2007-2012




• Long term strategic outlook – SWOTs for (TV) advertising

– Ad revenues to become second to pay TV revenues

– DVRs and advertising

– Emerging formats


Growth factors and opportunities

Threats

Short-term (2008-2009)

- Quadrennial factors of 2008 (Olympics, Euro Football, US elections) benefit mostly to big FTA channels/networks

- Credit squeeze and low consumer confidence threaten ad spending from big categories (automotive, financial)

Mid-long term (2010-2012)

- DVR-based advertising solution can help better targeting

- DVR-based ad-skipping threatens ad-viewing

- More flexible TV regulation (European Directive, PP, CRR)

- Regulatory threats on unhealthy food and children advertising

- Mobile and online TV potentially expanding the audience pie (long term, measurement issue)

- Mobile and online TV potentially disturbing value chain and business model

-Digital multichannel TV becomes universal, maintaining overall TV viewing

- Digital multichannel reaching critical mass audience and challenging established networks

Long term outlookThreats and opportunities for TV advertising


Threats to the ad-funded linear-broadcast-TV business model

Alternative leisure: gaming

DVRs and ad-skipping

Alternative TV/VOD platforms


DVR and advertising DVR impact on ad-viewing: UK case

13’time-shift

96’ live

Before (without) DVR

After (with) DVR

100’

100’ live

6’ ‘as live’

96’ live

7’ ad-skipped+ 9’

109’Minutes of viewing (index)

102’ of total ad-viewing(live + ‘as live’)

2’ gain

Source: BARB, Sky, NDS


DVR and advertisingSummarising all the DVR effects identified

Time

Advertising impact

Small improvement thanks to DVR targeting

DVR initially boosts total viewing

DVR net impact soon becomes detrimental to ad viewing

Short-term Mid-term Long-term


Television advertising Trends and forecasts

Thank you

[email protected]


TV programme spend in Europe’s big five

Tim Westcott, senior analyst



Contents of this presentation

• The TV market (value)• Relationship with programme spend• Free to air (FTA) broadcasters• Pay TV platforms• The outlook


Future funding of TV appears uncertain

• Advertising: audience fragmented, on demand viewing increasing, eyeballs going online...

• Subscription: pay TV market is maturing, free multichannel is growing faster…

• Licence fee/government funding: case for funding is in question.


The broadcasting landscape in the big five (channels included in SD analysis)

France Germany Italy Spain UK

Free to air

TF1

France TV

M6

Arte

ARD

ZDF

ProSiebenSat1

RTL

RTL2

Rai

Mediaset

Telecom Italia

TVE

A3 TV

Tele5

Cuatro

La Sexta

BBC

ITV plc

Channel 4

Five

Pay TV Canal+

TPS

Premiere

DF1

‘Old’ Premiere

Sky Italia

Stream

Tele+

Sogecable BSkyB


Value of the TV market in 2007 (€bn)

France Germany Italy Spain UK

Public

Advertising

Subscription

9.2 8.3

14.6

5.7

16.8


Free to air broadcasters have not significantly reduced programme spend

Programme spend by free to air broadcasters (€bn)

Spain

Italy

FranceUK

Germany

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004 2005 2006


There is no rule about how much broadcasters invest in programmes

FTA broadcasters: programme budget as % of revenues (2006)

CuatroTelecom Italia Media

La SextaArte

S4CFrance 2

France 3France 5Five

MediasetChannel 4ZDF

ITVProSiebenSat1

TF1BBC

RaiARD

RTLAntena 3 TV

RTL2TeleCinco

TVEM6

0% 20% 40% 60% 80% 100% 120%


The level of programme spend bears little relationship to audience share

ITV1 programme spend vs audience share

0

200

400

600

800

1000

1200

1999 2000 2001 2002 2003 2004 2005 2006

0

5

10

15

20

25

30

35

ITV network programme spend

ITV1 audience share (%)


The same is true for TF1…

TF1 programme spend vs audience share

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1999 2000 2001 2002 2003 2004 2005 2006

29

30

31

32

33

34

35

36

TF1 network programme spend

TF1 audience share


…and Mediaset

Mediaset programme spend vs audience share

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

1999 2000 2001 2002 2003 2004 2005 2006

38

39

40

41

42

43

44

45

Mediaset FTA programme spend

Mediaset FTA audience share


One reason is that few FTA broadcasters are purely FTA broadcasters

Pay TV Theme channels Production & distribution

Other media


TitleFTA broadcasters like TeleCinco continue to invest heavily in primetime


But FTA broadcasters cannot afford to be complacent

• New generations of viewers accustomed to multichannel world – habits of ‘first channel on dial’ dying out

• Potentially, loyalty to national broadcaster (the Beeb, Mamma Rai) also threatened?

• Analogue switch-off means every TV home will have selection of channels by 2012

• PVRs are more widespread (already 15% of UK TV homes), ‘live’ viewing will diminish


Pay TV is now at the end of the beginning

• DTH market in the big five has consolidated• Leading players have more leverage over key

programme suppliers (film and sports) • Subscriber growth is levelling off as pay TV platforms

reach maturity• Pay TV platforms may still face challenges (Setanta,

Mediaset Premium, Orange)


BSkyB has outstripped pay TV platforms on the other major markets

Revenues of major pay TV platforms (€bn)

Sky Italia

Premiere

CanalSat

Digital Plus

0

1

2

3

4

5

6

2003 2004 2005 2006 2007

BSkyB


Pay TV operators have succeeded in controlling programme spend

Programme expenditure by pay TV (€bn)

Spain

UK

Italy

France

Germany

0

0.5

1

1.5

2

2.5

3

1999 2000 2001 2002 2003 2004 2005 2006


…Despite sharp increases in sports costs

BSkyB programme spend (£bn)

0

200

400

600

800

1000

1200

1400

1600

1800

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

sports

fees to 3rd partychannels

movies

entertainment

News


Programme spending over next five years

• Revenue outlook is not as gloomy as all that…


Value of the TV market in the big five (€bn)

45

55

71

0

10

20

30

40

50

60

70

80

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Advertising

Public

Subscription

+22%

+24%


Programme spending over next five years

• Revenue outlook is not as gloomy as all that…• FTA broadcasters are still able to aggregate a mass audience

quickly• Broadcasters have found ways of delivering audiences more

economically • TV is a mainstream medium:

technology (PVRs, VoD) will

take a long time to impact on

the average viewer

World Cup final 2006: 84% audience share on Rai in Italy


Free to air: Germany recovers, but growth across big five is a sluggish 3.5%

Forecast programme spend by free to air broadcasters (€bn)

Spain

Italy

France

UK

Germany

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Pay TV: BSkyB reins in as programme costs increase 5% across big five

Programme expenditure by pay TV (€bn)

Spain

UK

Italy

France

Germany

0

0.5

1

1.5

2

2.5

3

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



Thank you

[email protected]

© Screen Digest. Not for distribution TV economics and the digital switchover A seminar hosted by...

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Transcript of © Screen Digest. Not for distribution TV economics and the digital switchover A seminar hosted by...