This report provides an analysis of Pay TV in the UK. Information provided includes:
- Strategic Overview
- Satellite DTH
- Cable TV
- TV over ADSL
- An International Perspective
- PEST Analysis
- Consumer Dynamics
- Supplier Profiles
- The Future
The UK pay-TV market was worth £4.41bn in 2003. The market has grown by 80.8% since 1999 on the back of strong growth in subscriber numbers and a constant push by the pay-TV platform operators to raise the average revenue per subscriber unit (APRU).
The UK market is dominated by the satellite platform and one key player, BSkyB, which is both the leading platform operator and a leading content provider. Its nearest rival is Telewest, which also acts as both a platform provider and content provider. The only other significant player is NTL, which although larger than Telewest in terms of its platform operations does not supply content.
The market has shown over its 20-year history that scale is a key driver of commercial success. Today, the industry is effectively a duopoly within each cable-TV franchise area and the proposed merger of Telewest and NTL will create an actual duopoly for most customers.
Despite the consolidation of the industry, competition remains intense and the introduction of a digital free-to-air (FTA) competitor to the pay-TV market — i.e. Freeview — has made the competitive pressures in the market stronger.
The key characteristics of the market today are as follows:
- Satellite services dominate cable.
- Revenue from subscribers (covering monthly service fees, pay-per-view payments, payment for hardware and installation charges) continues to represent the vast bulk of industry revenue.
- Revenue from interactive services is relatively low but fast growing and this area represents a still largely untapped target opportunity for the major players.
- Customers are largely reactive, watching the programme schedules as laid down by the major channel operators.
- The platform operators continue to carry high levels of debt.
The market is currently at a crossroads. A number of factors could lead to a radical change in the market over the 2003 to 2008 period, which will affect both the overall size of the market and the competitive landscape.The proposed switch-off of the analogue-TV signal between 2006 and 2010 will create a competitive battle to sign up the remaining 53% of TV households that do not currently access digital TV. Currently, Freeview appears to have an edge in this regard, as it is appealing to households that have been sceptical about subscribing to digital pay TV. However, the pay-TV operators need to seriously penetrate this market if they are to continue to enjoy rising subscriber numbers. This will call for a major rethink in their marketing plans, tariff structures and service packages.
By 2008, the market will take on a different complexion to the one seen today. In particular, interactive services, more broadly based family entertainment programmes and greater customer control over programme scheduling and start times will be commonplace. The market will also effectively split into two halves:
- Full-strength segment: these are customers that access the bulk of the premium services available and pay a relatively high monthly subscription package for the privilege. These will be mid- to high-income earners.
- The Lite segment: these are customers that access a restricted set of services and pay a relatively low monthly subscription package as a result. These will be high- and mid-income earners that do not want a large number of channels and low-income earners that cannot afford the
The competitive landscape of the market may also change in the next 5 years for three reasons:
- If BSkyB's rights for the broadcasting of Premier League football are seriously undermined after 2007, either the cable pay-TV operators could improve their competitive position against the company or FTA terrestrial TV could become a stronger competitor against pay TV generally.
- The cable companies will be financially stronger. Both NTL and Telewest will have completed financial restructuring, both are set to merge (with each other), and should benefit more than BSkyB from the convergence of broadband Internet and pay-TV services.
- Freeview could take up to 40% of UK TV households by 2008.
By 2008, We expect just under 60% of TV households to be signed up to pay-TV services. By this time, the multidigital TV home will be firmly established; homes will subscribe to both Freeview and a digital pay-TV service.