Viasat Confident Sub Numbers Will Increase
Viasat expects its number of pay-TV subscribers to really accelerate this year. The satellite pay-TV operator, which offers services in the Nordic region, already has close to 640,000 digital pay-TV subscribers but it also has been badly affected by piracy issues in recent times.
Hans-Holger Albrecht, CEO of Modern Times Group (MTG), Viasat’s parent company, told Satellite News, “Less than a year after switching to the digital platform, we noticed the first signs of piracy. Since we first announced the switch to NDS in 2002 with the ambition to finalize the implementation by mid-2004, we have said that until the NDS technology is implemented, we don’t expect the numbers to really accelerate. However, in the last quarter of 2003, we added around 30,000 new subscribers despite the fact we had piracy issues. And in the seasonally weak first quarter, we managed to keep the numbers unchanged. The company has performed pretty strongly.”
Viasat has moved from the Viaccess CA system to the NDS system (see related story in this issue), and it hopes the change will eliminate most of its piracy issues. There could be as many as 300,000 people accessing Viasat’s pay-TV services through illegal smart cards. Considering it has fewer than 650,000 digital pay-TV subscribers, the number of pirates is comparatively high. The other issue will be how many of the illegal subs will start paying legally for services.
There are more than 4.1 million households in Sweden, and the competition between the two satellite pay-TV operators, Digital Terrestrial Television (DTT) and cable means it is a diverse and rich market. Boxer, the DTT offering, ended 2003 with more than 200,000 Swedish subscribers, 70,000 of them new. The offering is growing well after a slow start. On the cable side, com hem is the leading player here and it has a network that covers 1.4 million homes. A number of its customers are still receiving analog packages, although the operator expects to reach 250,000 digital TV subscribers with 12 to 18 months.
Albrecht believes the company compares well in terms of it offering to its satellite pay-TV rival, Canal Digital. Albrecht comments: “Scandinavia is one of few regions where you still have competing satellite platforms. If we look at Canal Digital as our competition, we have a strong offering, with three sports channels, movie channels, the Disney brand. Despite having an attractive offering, we have the lowest price in the market.”
He continued, “Despite this, our pay-TV business delivers operating margins of 20 percent, and we have a high margin on premium subscribers. Our business model with a lot of our own produced channels and centralized functions like play out and program acquisition is appreciated by consumers, and it enables us to have high profit margins as well.”
Right now the pay-TV operators are involved in a land grab, trying to pick up as many new subs as possible. Analog switch-off is due to take place in Sweden in 2008, and operators are being aggressive in their pursuit of new digital customers. Viasat has invested heavily in sports rights, and it hopes its combination of sports and movies will prove to be a compelling one for new subscribers, both in Sweden and other Nordic countries. It now has three dedicated branded sports channels (Viasat 1, Viasat 2, Viasat 3). Two of these channels were introduced in February, indicating strongly where Viasat hopes to have a competitive advantage.
Albrecht commented, “I think the key strategy is to convert as many of the analog terrestrial customers to satellite, to convert our analog basic subscribers to digital subscribers and to convert the pirate viewers into paying subscribers. This will enable us to cash in on the investments we have made with the new sports channels. We have launched two more sports channels, and we now have the most extensive portfolio of sport rights in the region. We have done the biggest campaign in marketing terms for new sports channels and sports content.”
Triple Play Threatens Satellite
com hem also is looking to increase the pressure on its satellite rivals by offering the triple play in Sweden for the first time. It recently decided to enter the telephony market, and it hopes to appeal to consumers who want a rich bundle of services. Certainly, for satellite pay-TV operators Viasat and Canal Digital, this will increase the pressure.
Gunnar Asp, CEO of com hem, told Satellite News’ sister publication Inside Digital TV that the operator has two very key advantages over its satellite counterparts. He said, “We have at least two very big advantages. Firstly, we have a very broad number of TV channels and services. We are the only one having 90 channels and PPV. At the same time, we are the only operator in Sweden that has the triple play.”
MTG could also play a more prominent role in broadband markets across the Nordic region. Albrecht commented, “I am a believer over time in the broadband business. We could play two roles. We could sell our products to cable or DSL operators or we could go to an operator role. It depends on the economics as to which one we choose.”
Contact: Henry Persson, MTG, e-mail: email@example.com