European and U.S. DTH Markets Analyzed (Part II)
Over the last few weeks, all the major satellite pay-TV operators in Europe and U.S. have announced their results. Here, in a special two-part article, we look at how well satellite pay-TV operators are performing against cable and telco alternatives. With telcos aggressively targeting the television market, and able to offer television services as part of an overall bundle, we assess the recent performance of the major satellite pay-TV operators both sides of the pond, as competition intensifies.
European DTH Trends Examined
There were good reasons for European DTH operators to be optimistic after their latest set of results. Strong subscriber growth in different countries, as well as key recent market developments mean DTH operators are well placed in most of Europe’s major markets. BSkyB continues to set the pace adding more than 400,000 subscribers in the last year. Following closely behind, Sky Italia added 370,000 subscribers. The two operators combined for most of the subscriber growth in Europe adding just under 800,000 subscribers between them. Here, we take a detailed look at the main markets in Europe and analyze the performance of all the main operators.
The United Kingdom
BSkyB continues to steamroller the market. Its subscriber numbers are impressive, but when you add the fact that it has almost 300,000 HD subscribers and more than 700,000 broadband subscribers, the company is now an all-encompassing presence on the U.K. communications landscape. However, despite its strong performance there were some other key events in the U.K. digital TV market. U.K. communications regulator, Ofcom reported in June that household digital TV penetration had gone through the 80 percent mark with 20.4 million homes in the United Kingdom now accessing digital TV services. It also said Freeview (Digital Terrestrial Television) had now overtaken BSkyB as the number-one digital TV service in the United Kingdom. In the first quarter of this year, another 870,000 housholds went digital in the United Kingdom for the first time.
In terms of pay-TV competition, Virgin Media has also been in the news in the last three months. The operator said on August 7, that it was extending the process which could lead to the overall sale of the company. Parties such as Liberty Global have expressed an interest in the operator. The operator has 3.1 million digital TV subscribers at the end of June.
Premiere appears to have emerged from the dark days when it lost the key Bundesliga rights in Germany at the end of 2005. While subscriber growth was non-existent when it did not have soccer, it surprisingly did not see the huge losses that many had predicted for the operator. Its agreements with Unity Media mean that soccer is now back on the platform, and likely to stay there. Daniel Kerven, a media equity analyst at UBS believes Premiere’s competitive position is better than ever in this area. He said in a research note, issued August 14, “Arena’s difficulties and Premiere’s strategic partnership with Deutsche Telekom (DT) puts Premiere in a strong position to secure the next package of Bundesliga rights on favorable terms. As the sole premium pay-TV operator in Germany, Premiere is well placed to benefit from accelerated market growth resulting from a clear Bundesliga proposition, and development of the digital and triple play markets.”
However, it was not all good news for Premiere. On August 13, the company announced that CEO Georg Kofler, the man behind the operator’s resurgence was quitting at the end of the month, to be replaced by Michael Börnicke. Kerven believes this could be a blessing. He said, “While Kofler was instrumental in Premiere’s turnaround following Kirch Media’s collapse, his intransigence in the last auction of the Bundesliga rights was a factor in the loss of the rights to Unity. Furthermore, Kofler’s entrepreneurial approach, while an asset during its rehabilitation, could now be seen as a potential source of uncertainty and Michael Börnicke could be seen to be better suited to the company’s current stage of development.”
The IPTV threat in Germany will primarily come from DT. DT said in August that It plans to equip 50 cities with VDSL and connect them to the platform by 2008. This year, DT will also offer IPTV and triple play based on ADSL2+ across the country to around 17 million households.
Canalsat ended the quarter with 5.1 million subscribers. It is difficult to chart Canalsat’s growth in this market given that only two quarters ago, its subscriber numbers were reported before it combined with DTH rival, TPS. So, it won’t be until early next year that we can better examine the performance of the operator and see whether the link-up with TPS means growth. There has also been consolidation in the French cable market in recent times with Numericable combining with Noos.
Canalsat operates in a market where IPTV is perhaps at its strongest in Europe. France Telecom (Orange) reported in its results that it had 837,000 ADSL television subscribers, almost three times the number at 30 June 2006. Iliad Telecom (Free) is also another major player and had 2.6 million ADSL customers in France at the end of June, which are able to also access TV services. The operator also stepped up its plans in the TV market. It launched two major new services, Free Home Video, a subscription video-on-demand (SVoD) service in France dedicated to movies and series, as well TV Perso Freebox, a service allowing its Freebox subscribers to broadcast live or pre-recorded content to the entire Freebox community on their TV sets. Neuf Cegetel, a telco also has around 600,000 TV customers in France. France Telecom, Iliad Telecom and Neuf Cegetel’s presence means that IPTV is a vibrant market in France with strong competition.
Sky Italia remains one of the major growth stories of DTH in Europe and its subscriber numbers continue to grow strongly. Its main rivals in the pay-TV come from Telecom Italia with its IPTV service ‘Alice Home TV’ and FastWeb, which was recently acquired by Swisscom, and has around 1.2 million customers in Italy. Telecom Italia has 6.1 million retail broadband customers in Italy but does not break down its IPTV numbers.
Digital+, the DTH operation of Sogecable in Spain, had an acceptable year adding around 66,000 subscribers in Spain. However, like Premiere in Germany previously, the operator could be set for tougher times ahead, as it has recently lost the blue chip soccer rights in Spain. In July, Mediapro, a Spanish audiovisual rights company, announced that it signed up most of the top Spanish soccer teams in an exclusive broadcast rights deal, which will run for five seasons from 2009. Ian Whittaker, a media equity analyst at UBS added in a research note, “Although the exact impact of the above is difficult to pinpoint at this stage (cost inflation? loss of subscribers? Etc.) we would consider the potential loss of football rights as negative, at least from a sentiment perspective.”
In terms of pay-TV competition, Telefonica continues to perform impressively in the IPTV market. Telefónica España ended June with 450,925 pay TV customers, and continues to see solid growth. ONO, the Spanish cable operator, which is the other main competition to Digital+ ended June with 922,000 TV customers, a decrease of 3,000 customers compared to the previous quarter.
The Nordics is the one area in western Europe where there is still true DTH competition. Both operators had exactly the same subscriber growth in terms of their DTH operations. Both, Viasat and Canal Digital added 13,000 subscribers each. Canal Digital remains the number one operator in the market. In terms of the IPTV threat to both operators, TeliaSonera said in its most recent results that at the end of June, that the total number of IPTV subscriptions increased to more than 200,000 in the region, with the majority of these in Sweden. TeliaSonera said it had had “successful IPTV push in Sweden” which increased the number of IPTV subscriptions by almost 80,000 to approximately 160,000.
(as of June 30th 2006)
(as of Sept. 30th 2006)
(as of Dec. 31st 2006)
(as of March 31st 2006)
(as of June 30th 2007)
(as of June 30th 2007)
|CanalSat (France)||N/A||N/A||3,460,000 *||5,000,000||5,100,000||N/A|
|Sky Italia (Italy)||3,830,000||3,830,000||4,030,000||4,170,000||4,200,000||+370,000|
|ViaSat** (Nordic region)||791,000||802,000||820,000||814,000||804,000||+13,000|
|Canal Digital (Nordic region)||921,000||929,000||943,000||944,000||934,000||+13,000|
*This was the last figure given before Canalsat merged with its DTH rival, TPS hence the huge subscriber increase from December to March
** Viasat’s numbers include premium and basic DTH customers
Source: Satellite News, Company reports