SPAIN, A LAND RICH IN DIGITAL PLATFORMS

By | June 20, 2001 | Feature

Spain is at the forefront of the digital TV revolution, with three platforms competing in a market that already reaches more than two million subscribers. David Del Valle reports

Spain currently has one of the most dynamic digital TV markets in Europe, with services provided by the DTH platforms Canal Satelite Digital and Via Digital, along with the digital terrestrial television (DTT) company Quiero. All three nevertheless operate in a country still not used to paying for TV and – on the analogue side – already served by four national commercial networks (La Primera, La 2, Tele 5 and Antena 3 TV), the terrestrial pay-TV channel Canal+, 11 regional stations and around 750 local services. Cable is also starting to grow, with two of the country’s three operators (ONO and Auna) already claiming a combined total of over three million homes passed and at least 460,000 connections.

Matters are set to become even more complicated later this year with the launch of two new national free-to-air DTT channels, followed shortly afterwards by several more regional DTT services (those already in operation include one based in Madrid). Moreover, in April 2002 Spain’s existing analogue broadcasters will start digital transmissions on either one channel (Tele 5, Antena 3 and Canal+) or two (RTVE).

Yet despite the increasingly competitive nature of the marketplace, Spain’s two digital DTH platforms – with a combined subscriber figure of 1,875,000 – seem to be more than holding their own. While Sogecable-owned Canal Satelite Digital remains the digital market leader (its 1,175,000 subscribers equivalent to around 56 per cent of the total), Telefonica-backed Via Digital (currently with 700,000 subscribers, or 33 per cent of the total) expects its connection figure to rise to 800-850,000 by the end of the year. The latest known subscriber figure for the DTT platform Quiero is meanwhile 210,000 (around 11 per cent of the digital total), although it is expected to reach 400,000 in six months time.

The digital market in Spain as a whole claims 2,082,000 subscribers, equivalent to just under 18 per cent of the country’s 11.7 million TV homes. However, when Canal+ subscribers are also taken into account, pay-TV services are received in some three million homes.

There is clearly a bright future for digital satellite TV in Spain. While the local consultancy firm Corporacion Multimedia expects digital DTH will account for 30 per cent of the total pay-TV market by 2010 (which will, in turn, serve 80 per cent of all Spanish TV households), Datamonitor predicts 2.75 million homes will subscribe to digital DTH services by 2004. The take-up of cable and DTT services, on the other hand, will stand at one million and 650,000 respectively.

Astra projections point in the same direction, while also highlighting that the satellite market in Spain grew by 23 per cent last year – almost four times the average 6.8 per cent growth in other European market.

Platforms in the red

Despite their impressive subscriber figures, both Spanish digital DTH platforms still find themselves burdened with debts. In 2000, for instance, Canal Satelite Digital incurred losses of Pta2,659 billion (E15.9 million) – admittedly an improvement on the previous year’s figure of Pta6,870 billion – while Via Digital lost Pta42 billion, or 12.1 per cent more than in 1999. Their total revenues in 2000 meanwhile stood at Pta93 billion (Canal Satelite Digital) and Pta37 billion (Via Digital).

Although things seem little better this year (Via Digital alone lost Pta11.2 billion in the first quarter), both platforms appear to be optimistic about the future. Indeed, Canal Satelite Digital expects to break even as soon as this year, while Via Digital believes it may do so – with around one million subscribers – in 2003. Their feelings are shared by Quiero, which having moved its business plan forward by six months now projects to break-even in either 2003 or 2004.

The chief source of the platforms’ current financial woes appears to be sports and movie rights. Having initially engaged in a fierce fight to sign exclusive contracts, they saw their strategy backfire and now find themselves facing such consequences as having to pay Pta40 billion for Spanish Football League pay-TV rights. They have nevertheless managed to secure output deals with a number of US majors including Columbia Tristar, Disney and Time Warner (in the case of Canal Satelite Digital), and Universal, MGM and Polygram (Via Digital).

Merging is surviving

Given their financial problems and the fact that Spain is a relatively small market, some think the only solution for the digital platforms to adopt is the one favoured in Italy, namely a merger. Indeed, Gustavo Cisneros, the president of Group Cisneros (one of the shareholders in Via Digital), recently demanded it as a way to make the digital business profitable. Jesus de Polanco, the president of Sogecable, has meanwhile stated that his company would be willing to negotiate with Via Digital, as well as called for an end to “aggressive” marketing campaigns in the digital sector that only contribute to an increase in the price of TV rights.

Speaking at an annual shareholders’ meeting, de Polanco continued: “we are willing to enter into all kinds of negotiations for the benefit of consumers and our own companies”.

He added: “we think that in the short term good sense will impose its rule in this sector, which up until now has been too subject to political pressures”.

Via Digital has nevertheless ruled out a merger at the present time, with its CEO Juan Ruiz de Gauna arguing that the company’s business plan is financed for the next ten years. Although the two platforms have held talks about a possible merger on a number of previous occasions, these have as yet come to nothing. A deal, however, would strengthen their position in the fight against DTT and advanced and integrated (TV, telephony and Internet) cable networks. A possible agreement between the satellite operators SES Astra (Canal Satelite Digital) and Hispasat (Via Digital) whereby the SES-owned company would become a shareholder in Hispasat might also help a merger. Be that as it may, the two satellite platforms continue to compete in a far more mature market than existed for years ago when they were launched.

Interactivity, the new El Dorado

Although offering as many channels as possible was the initial key to success, subscribers soon started to demand higher quality. As a result, the two satellite platforms – and more especially Quiero – now find themselves at the stage of having to focus on providing added value and interactive services. Indeed, in the case of Quiero up to 50 per cent of its subscribers have decided to pay for the service as it allows them to surf through their TV sets. The platform is clearly setting the pace in advanced TV services and expects e-commerce revenues to be one of its principal revenue streams in the future.

All three digital platforms have also announced that they will shortly launch a new set-top box, despite the fact that many think MHP boxes are not likely to arrive on the market in any quantity before the end of this year. In the case of Via Digital, the company plans to introduce an OpenTV-based decoder that will allow subscribers to access the Internet and both play and record digital programmes. With a 30Gbyte hard drive, it will be able to store between 16 and 20 hours of television programming.

Canal Satelite Digital, on the other hand, intends to launch a box employing the MediaHighway API software developed by Canal+ Technologies. It has also reached an agreement with TVC Multimedia that will see interactive services produced by the TV3-owned company distributed via TV (through Canal Satelite Digital), the Internet (by Plus.es) and mobile platforms. Quiero has meanwhile announced plans to introduce a box able to record up to 20 hours in the fourth quarter of this year.

The Spanish Telecommunications Market Commission (CMT) has asked all digital TV operators to use a common set-top box compatible with existing and future digital TV offers. For the CMT, a set-top box agreement is absolutely necessary in order to develop the digital market, guarantee free competition and benefit consumers. According to the regulator, there are at present around three million set-top boxes – all subsidised by digital operators – in the country.

Aside from a set-top box battle, the digital platforms are also involved in a price war to capture new customers. Via Digital, for instance, recently came up with the idea of a flat fee, offering its services for a fixed price of Pta4,995 per month for 12 months for clients who subscribed in April and May. Quiero meanwhile offers its 14 channels for a fixed monthly fee of Pta5,000.

Although the latter figure is considerably lower than the (approximately) 200 services offered by Canal Satelite Digital and Via Digital, the market is highly competitive and looks set to remain so for the foreseeable future. According to Corporacion Multimedia, in 10 years time Spain is likely to have six to seven national free-to-air multiplexes each capable of carrying four to five channels. It will also have four free-to-air multiplexes with regional coverage and also able to carry four to five channels each, along with pay- TV platforms (two via satellite, one DTT and three large cable companies) and new distribution media like the Internet and UMTS telephony. Are digital satellite platforms ready for this? Sooner or later, they may come to the conclusion the best policy is “united we stand”.

Digital TV Platforms in Spain
Name
Launch date:
Subscribers:
Satellite:
Simulcrypt/Multicrypt:
API:
Conditional Access:
STB Manufacturer:
Shareholding:
Canal Satelite Digital January 1997 1,175,000 Astra Simulcrypt MediaHighway MediaGuard Pioneer, Philips and Sony Sogecable (83.25%), Warner Bros (10%), Proarsa (4.5%), Antena 3 (2.5%)
Via Digital September 1997 700,000 Hispasat 1C Multicrypt OpenTV Nagra Echostar, Thomson and Nokia Telefonica Media (48.6%), Strategic Management Company (18.8%), DTH Europa (10%), Galaxy Entertainment Latinamerica (6.9%), Recoletos (5%), Media Park (5%), smaller partners (5.7%)
Quiero (DTT) May 2000 210,000 Terrestrial Multicrypt OpenTV Nagra Thomson Auna (49%), Media Park (15%), Sofisclave (15%), Carlton Communications (7.5%), smaller partners (13.5%)
Source: Interspace


Spanish packages at a glance

Via Digital
Canal Satelite Digital
Quiero
Installation
90.10
90.10
59.80
Decoder Rental
7.80
7.50
7.20
Channel Packages
Basic
18.00
30.00
22.50
Premium (inc Basic)
23.90
30.00
Extended Premium
29.90
39.00
Complete package
36.00
45.60
Pay-Per-View per event
PPV football
5.90
5.90
PPV movies
3.60
3.60
A la carte channels also available
Source: Interspace

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