Satellite TV platforms maintain growth amid consumer tightening

MUMBAI: Euroconsult, an international research and analyst firm specialised in the satellite and broadcasting sectors, has announced that growth in the satellite pay-TV market remained strong in 2009 despite the global economic downturn.

According to the fourth edition of “Satellite TV Platforms, World Survey and Prospects to 2019, Growth through the Crisis”, the number of TV Platforms in service increased to 113 in 2009 (38 per cent in three years). Pay TV platforms combined currently reach 131 million subscribers and have earned a revenue of $70 billion in 2009. 
Emerging digital markets have experienced tremendous growth in the past few years. According to Euroconsult, the
number of platforms in emerging digital markets reached 88 in 2009, up from only 30 in 2000. Subscribers in these
markets grew from 11.9 million to nearly 60 million from 2003 to 2009. In India alone, there were 19 million
subscribers spread over six platforms in 2009, despite a slow start in 2003/2004.

The adjustment of subscription fees to compete more effectively with analog cable TV is partially responsible for stimulating subscriptions. Similarly, subscriptions in Central and Eastern Europe, at only 2 million in 2005 rose to 15.9 million in 2009, according to the Euroconsult report.

Euroconsult CEO Pacôme Revillon says, “Subscriber growth in the satellite pay-TV market has been robust, increasing 15 per cent worldwide. Growth in emerging digital markets has been particularly strong with subscribers reaching the 60 million mark in 2009, a nearly five-fold increase over the previous few years. Looking forward, the market is expected to remain bright with Euroconsult forecasting roughly 235 million subscribers worldwide by 2019."

Nearly all markets, with the exception of Europe, saw revenue growth in local currency last year. However, more
aggressive pricing strategies, both due to the crisis and to more intense competition, weighed down the average
revenue per subscriber (ARPU), resulting in revenues growing more modestly than subscribers. While the
aggressive pricing strategy currently practiced by many platforms drives subscriptions more than revenues in the
short term, fee increases -- which are very likely over time -- should help securing long term revenue growth.

This commonly-used strategy enabled platforms like Russia’s Tricolor TV to sign close to three million subscribers in only
three years of operation with a basic package at around one dollar per month. Meanwhile, its rival NTV+ is still
striving to reach the one million subscriber mark after more than a decade. 
Some markets saw their first dedicated satellite pay-TV platforms in 2008 and 2009 – including the Maghreb region
(North Africa), Venezuela and Bolivia. Other markets saw the introduction of several platforms simultaneously, such
as in the Ukraine with three new platforms in only two years.

Satellite TV Platforms in the most developed TV markets performed well overall, despite the economic crisis and
growing competition from other delivery networks including IPTV and DTT. In the US, the availability of new services including HDTV enabled DirecTV and Dish Network to capture more than one million new subscribers combined, despite overall belt-tightening among consumers.

The economic downturn had a stronger impact in Western Europe with subscription growth at slightly over four per cent, but stagnation in revenues in local currency – the only market in which this occurred. Restructuring of certain platforms and stronger competition from terrestrial platforms also affected the market. In Germany (Sky Deutschland) and Spain (Digital+), satellite TV platforms actually saw revenues decline.

By contrast, Sky Digital in the UK remains a strong leader in the region, with subscribers increasing by three per cent last year to 9.5 million, and revenue growth of eight per cent for the fiscal year ending June 30 2009. Still, growth may resume in Western Europe, boosted by the introduction of new platforms in several markets such as France and Portugal and by the introduction of lower priced packages to drive overall market penetration.

Platforms maintain investments in new services: In recent years Satellite pay-TV platforms have accelerated the roll out of value-added services such as HDTV and Digital Video Recorders (DVRs) with the more mature digital TV markets leading the way and emerging digital TV markets recently jumping on the bandwagon. These services require significant initial investment but have become mandatory for platforms to differentiate themselves from competitors. Moreover, value-added services offer other advantages including lower churn rates and higher ARPU.

DVRs and HDTV are currently the most dynamic services. At year-end 2009, 46 satellite pay-TV platforms had
already rolled out HD services, up from 21 at the end of 2007. The two US platforms, DirecTV and Dish Network,
have the largest HD offers, with each broadcasting more than 150 HD channels in the first half of 2009. That same
year, DVR services were also offered by more than 50 platforms across the world, up from 29 in 2007. MyTV Ukraine and Telesat in Belgium are two of the most recently launched DVR services.

One of the next value-added services to be offered by platforms is 3DTV. Sky Digital (UK) is expected to become the first platform to offer a 3DTV channel in 2010. Others should follow the path in coming years. For pioneers such as
Sky Digital, value-added services build their brand image.

Consolidation and vertical integration still likely:
Euroconsult expects the outlook for satellite pay-TV to remain positive and continuous growth is expected into the
next decade, with an estimated 240 million subscribers worldwide by 2019. This growth will mainly come from
emerging digital markets, in particular India, Russia, and Brazil, as satellite pay-TV platforms multiply in those markets
and affordable offerings increase uptake.

Emerging digital markets should represent close to 70 per cent of total subscriptions worldwide by 2019 compared to 45 per cent in 2009. However, the growing number of national markets served by multiple platforms (ex. seven platforms in Russia) and difficulties anticipated to reach profitability due to the slowing pace of subscriptions, will likely lead to consolidation in the next three to four years in certain markets. Vertical integration could also continue in both emerging and developed markets, driven by telecom operators’ investments in the content distribution business.

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