If the Chinese government is going to achieve its goal of analog signal switch-off by 2015, then satellite will play a key role, an industry analyst said. However, the satellite market will not see strong development until officials acknowledge that the spread of digital cable services has been slower than expected.

“If the Chinese government is really going to push hard to switch off the analog signal by 2015, the fastest way is to open up the satellite market,” Ann Yi-Yen Bird, an analyst at IMS Research and author of “The Chinese Market for Digital Set-Top Boxes,” told Satellite News. “They want to control the content, so before they can control the content, they will not open up the market. We know they planning to launch their own direct-to-home (DTH) satellite in the next couple years, … but they will only look at this option after it is realized that digital cable will not succeed.”

The IMS report looks in detail at the Chinese digital television market, which will arguably be the fastest growing throughout the next few years. The numbers involved are quite staggering. At the end of 2004, there were 340 million TV households in China, and the government hopes to convert 23 percent of those to digital by the end of 2010.

According to IMS Research, the push to digital cable by China’s State Administration of Radio, Film and Television has had mixed results. The government’s goal was to reach 30 million digital cable households by the end of 2005. At the end of 2004, there were only 640,000 digital cable households in China. Aggressive terrestrial deployment plans by the government could produce rapid digital growth over the next several years, “however, we are quite conservative in what they can achieve,” IMS said.

Satellite Numbers

At the moment, the Chinese government allows only non-Chinese nationals and hotels to have access to satellite pay-TV service. “I don’t think the government will open this one up to the mass market in the near future,” Bird said. “As discussed before, they want to control content.”

A number of people are accessing services illegally in the grey market, so the actual number of satellite users within the country may be higher, Bird said. “According to our research, there are 6 million set-top-boxes a year shifted in the satellite arena,” she said. “These are basic boxes, with most of the people living in the rural areas. Demand is huge. Currently, China has more than 25 million digital satellite households. This number is a similar size to the U.S. digital satellite TV household numbers. It is huge. I don’t think the Chinese government will recognize that because a lot of this belongs to the grey market.”

Should the Chinese government launch its planned DTH satellites on time and the gray market continues to be tolerated, the satellite TV market could see huge numbers in the latter half of the decade. Bird says, “According to our forecast, the number of digital satellite households can grow really fast, to 60 million by the end of 2010.”

The opportunities for international players could be limited by the government, Bird said. “If the government restricts satellite TV reception and restricts it to the rural areas, then the opportunity for foreign companies will be very slim, because price is the most important thing in the market. A lot of Chinese set-top-box manufacturers just produce very cheap set-top-boxes. We think there are some chances for the western companies but they are still facing some issues. There are issues of over-capacity and excess supply by the Chinese set-top-box manufacturers, long established sales networks by the Chinese set-top-box makers with their local connections, and, of course, the price.”

–Mark Holmes

(Anna Hunt, IMS Research, Anna.Hunt@imsresearchresearch-usa.com)