By Mark Holmes
Industry executives increasing their portfolios with Euros and British Pounds witnessed dramatic changes in the European broadcasting arena, a phenomenon that may result in major ramifications for satellite businesses. Consolidation, interactive applications and financial upheaval surfaced, and all eyes are now following the changing programming landscape as it continues to evolve in Europe.
In Spain and Italy, for example, recent consolidation occurred within the satellite pay-TV platforms (Telepiu and Stream in Italy and Canal Satelite Digital (CSD) and Via Digital in Spain). In the cable industry, heavyweight players NTL in the United Kingdom and UPC struggled with financial issues. In terms of Digital Terrestrial Television (DTT), Freeview in the United Kingdom continues to lead the way, but other countries are now looking to implement DTT alternatives for European consumers.
HDTV
For satellite operators, the changing landscape is offering new possibilities, which in an era of tough market conditions will be vital. In particular, FSS executives will look toward High Definition TV (HDTV) for new revenue opportunities in the European broadcasting arena. Giuliano Berretta, Eutelsat's CEO, and Ferdinand Kayser, SES Astra's president and CEO, outlined some of the new growth opportunities for European satellite broadcasting operators. Both see HDTV as having strong potential. "There are a number of sports events coming up, such as the European Football Championships, the 2004 Summer Olympics and the 2006 Winter Olympics, which will attract a substantial audience. They could be the showcase for this type of application," says Berretta.
Kayser adds, "Free TV and pay-TV operators recognize HDTV as a possibility to gain a competitive advantage. They are tempted to produce more in HDTV. We also see interest from the hardware industry. We see HDTV as a possible separator of satellite from cable and DTT. HDTV might be possible on cable. It is extremely possible on satellite."
Tim Sheppard, director of strategic development at Tandberg Television, sees HDTV as a new revenue stream for satellite players. "One area that might be of interest is the high-definition area, where if you asked me a year ago, there was not the slightest bit of interest in Europe at all. Recently, we have talked to quite a few broadcasters, not just satellite ones but terrestrial operators as well, and they are now seriously considering their plans for HDTV. There has been an evolution to larger screen TVs, more Plasmas, etc. People are beginning to think about HDTV," he says. "There are a serious number of projects worldwide in the digital cinema arena, which are trying to compete with either the home cinema or with the digital cinema. I suspect there will be some high-definition channels next year."
Core Markets
While further expansion into new applications are integral for Eutelsat and SES, generating revenues from the Western Europe juggernaut region will still be a key. The consolidation in Spain and Italy can be interpreted that in most markets there is room for only one satellite pay-TV platform. In Spain, it could also spell bad news for either Hispasat or SES Astra. Via Digital's operations had been based on Hispasat and CSD on SES Astra. While Sogecable (the owner of the merged platform, to be called Digital+) has delayed a decision on which satellite platform to base Digital+'s operations, it seems unlikely that it will continue with both SES Astra and Hispasat in the long-term.
Yet, despite the fact there are likely to be fewer satellite pay-TV platforms, both Berretta and Kayser believe this is good news. "The business model of [the] digital pay-TV operator is such that it is very difficult if not impossible for the number two player to survive. That means there are considerable pressures to merge competing platforms. This means in the end lower prices for the rights holders of premium content. In continental Europe, the prices for sports and entertainment rights have gone down in the last 12-18 months. This then enables the operator to have more money left for the marketing side to drive subscriber numbers. I do not believe this has an impact on the satellite operator," Kayser says.
Berretta adds, "I believe consolidation can benefit the overall business in Italy. We have seen BSkyB be extremely successful in the United Kingdom: their results are good and they reach into a large part of the population with a strong program line-up. In the particular case of Italy, Sky Italia may even generate more demand for capacity than two competing operators."
Others are not so optimistic. Mark Smith, CEO of BT Broadcast Services, says, "There is going to be a big challenge with the number of consolidations, which will effectively cause transponders to be made empty. I believe that will cause price pressure on those transponders that are not being filled."
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