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© 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
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Digital platforms in the age of analogue switch-off
Guy Bisson, Senior Analyst
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Digital platforms in the age of ASO
• Market context
• Primary set and DTT success
• DTT: the channel market
• Pay TV, DTT & competitive impact
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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
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% 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
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Digital platforms in the age of ASO
• Market context
• Primary set and DTT success
• DTT: the channel market
• Pay TV, DTT & competitive impact
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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
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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
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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
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DTT penetration* of TV HH since launch
0
10
20
30
40
50
60
70
80
1 2 3 4 5 6
UK
Germany
*DTT penetration (% TVHH) is for the primary set usage
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DTT penetration* of TV HH since launch
0
10
20
30
40
50
60
70
80
1 2 3 4 5 6
UK
Italy
Germany
*DTT penetration (% TVHH) is for the primary set usage
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DTT penetration* of TV HH since launch
0
10
20
30
40
50
60
70
80
1 2 3 4 5 6
UK
France
Italy
Spain
Germany
*DTT penetration (% TVHH) is for the primary set usage
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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
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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
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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
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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
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Digital platforms in the age of ASO
• Market context
• Primary set and DTT success
• DTT: the channel market
• Pay TV, DTT & competitive impact
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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
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Brand
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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
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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.
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Incumbents’ % increase in channel family size since digital launch
0 50 100 150 200 250 300
Germany
France
Italy
Spain
UK
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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.
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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…
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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
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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
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Digital platforms in the age of ASO
• Market context
• Primary set and DTT success
• DTT: the channel market
• Pay TV, DTT & competitive impact
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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)
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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
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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
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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?
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Thank you
guy.bisson@screendigest.com
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‘Balancing the TV pie’Television advertising trends
Vincent Létang, Senior Analyst
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Television advertising trends
• Advertising trends: new data from Screen Digest
• Advertising revenues forecasts
• Focus on European broadcasters
• Long term strategic outlook
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New Screen Digest Intelligence dataExample: ‘second dimension’ tables
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Television advertising trends
• Advertising trends: new data from Screen Digest
• Advertising revenues forecasts
• Focus on European broadcasters
• Long term strategic outlook
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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)
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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)
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0%
1%
2%
3%
4%
5%
6%
Big Five USA
2007 2008 2009
Short-term: key forecastsTotal ad market - Europe and US
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-3%
-2%
-1%
0%
1%
2%
3%
4%
Big Five USA
2007 2008 2009
Short-term: key forecastsTelevision ad market - Europe and US
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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
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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
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EuropeOnly (search) online advertising is really growing
-5%
0%
5%
10%
15%
20%
25%
30%
2008 2009 2010 2011 2012
TV Online Other Total
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EuropeTelevision forecasts
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USATelevision forecasts: recession in 2009
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Television advertising trends
• Advertising trends: new data from Screen Digest
• Advertising revenues forecasts
• Focus on European broadcasters
• Long term strategic outlook
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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
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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%
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Television advertising 2007-2012
• Advertising trends: new data from Screen Digest
• Advertising revenues forecasts
• Focus on European broadcasters
• Long term strategic outlook – SWOTs for (TV) advertising
– Ad revenues to become second to pay TV revenues
– DVRs and advertising
– Emerging formats
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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
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Threats to the ad-funded linear-broadcast-TV business model
Alternative leisure: gaming
DVRs and ad-skipping
Alternative TV/VOD platforms
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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
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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
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Television advertising Trends and forecasts
Thank you
vincent.letang@screendigest.com
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TV programme spend in Europe’s big five
Tim Westcott, senior analyst
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TV programme spend in Europe’s big five
Contents of this presentation
• The TV market (value)• Relationship with programme spend• Free to air (FTA) broadcasters• Pay TV platforms• The outlook
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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.
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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
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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
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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
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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%
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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 (%)
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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
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…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
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One reason is that few FTA broadcasters are purely FTA broadcasters
Pay TV Theme channels Production & distribution
Other media
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TitleFTA broadcasters like TeleCinco continue to invest heavily in primetime
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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
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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)
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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
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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
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…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
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Programme spending over next five years
• Revenue outlook is not as gloomy as all that…
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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%
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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
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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
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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
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TV programme spend in Europe’s big five
Thank you
tim.westcott@screendigest.com
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