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European Pay-TV Forecasts |
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Introduction
Overview Free Samples Table of Contents Who Should Buy? The Author Reviews 
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Bob Marich
Deal Memo Ashley Faull Managing Director, bid-up.tv Joyce Taylor former Managing Director, Discovery Europe Dr Gillian Doyle Head of Film & Media, University of Stirling |
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Review 1 |
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Bob Marich - Deal Memo |
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European TV channels pour out despite dim survival prospects July 28, 2003 WESTERN EUROPEAN TV channels are simultaneously folding, being launched and expected to change hands, as upheaval grips the region's €20 billion ($22.4 billion)-revenue multichannel sector. New channels continue to sprout up - even though economics remain unfavourable - because digital cable and digital satellite DTH have high channel capacities, resulting in available carriage slots. In Germany, the Premiere DTH platform prepares to launch the Universal Studios-owned Sci Fi Channel Sept. 1, and in the UK, private-equity firm agreed a week ago to fund a startup TV-channel consolidator, Constellation Media Group. The private-equity outfit is West Private Equity, which operates an established €400 million fund and is new to the media/entertainment sector. The field narrowed because of DTH mergers earlier this year in Spain - where Canal Satellite Digital and Via Digital combined to create Digital Plus - and Italy - where Telepiu and Stream merged into Sky Italia - creating pay TV platform monopolies in those territories. Further, the trend is for channel platforms to reduce or eliminate carriage-fee payments to channels.  All eyes are on the UK, which is Europe's most robust multichannel territory, with about 250 full-service, unduplicated TV channels and a hefty 44% penetrate rate for highcapacity digital DTH and cable. "The UK is the most developed, and Continental Europe [is] coming up behind, following the UK example" says Leonard Fertig, the veteran eastern Europe broadcasting executive who is behind Constellation, which is aiming to acquire UK channels. Last year, some 15 satellite/cable channels launched in the UK (see fig. 1) and 32 rolled out in Spain(see fig. 2), though channel launches slowed to just a handful in major territories elsewhere in western Europe.  Euroconsult estimates that the world's 21 leading DTH platforms grew from 4,152 channels at end- 2000 to 6,079 by end-2002. Fertig notes that UK regulators essentially force BSkyB to add any licensed channel that is satellite transmitted - costing the channel operator less than £1 million ($1.6 million) per year, on top of the £75,000 yearly fee to be added to the BSkyB electronic program guide. |
| Because of falling costs for transmission and operations, a typical UK satellite/cable channel can be operated for £7.2 million a year, assuming a £4 million expenditure on programming, which is the biggest variable. For niche channels, program costs can range from £3.25 million to £10 million a year see fig. 3), estimates Pay-TV Business Planning : An Analysis of Pay- TV Business Planning, Channel Operation and Economics, a report by London-based International Marketing Reports. |
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Though technical and regulatory barriers are surmountable, economics can be the killer. The IMR report counts the closure of 30 significant TV channels in the UK since 1997, resulting in £300-450 million in losses, including Carlton Cinema and pay-per-view platform u>directfilms. On the growth side, Turner Broadcasting is known to be considering a new film channel. Across Europe, Pay-TV Business Planning estimated that satellite/cable channels that have closed since the mid-1990s have run up €2.25- 3.5 billion in losses. In Continental Europe, Canal+-backed Multithematics was a loser, as its Cineclassics apparently failed to get carriage on merged platforms in Spain and Italy. Size does help: Hollywood-studio-backed basic film channels did get picked up by Spain's Digital Plus, while other locally owned channels did not. For advertising-supported channels in the UK, Fertig said a TVchannel platform needs to aggregate viewing of 5% in multichannel homes to be taken seriously by advertisers. Consolidation is being driven by the necessity to achieve economies of mass scale for selling ad revenue (multiple channels offered in a single ad buy), spreading overhead costs and clout to gain carriage. An increasingly bloody battleground for TV channels is the negotiation of carriage fees paid by cable and satellite platforms. It's believed that the most that BSkyB is paying to carry third-party, ad-supported basic channels is £0.08 per subscriber per month, compared to a £0.15 peak previously. Pay-TV Business Planning figures a good deal these days is a £0.05 carriage fee. That rate adds up to £6 million per year in total DTH and cable carriage fees in the UK. By comparison in the U.S., top basic sports channel ESPN - which is owned by Walt Disney - reportedly averages about $1.75 per sub, or 11 times more than the top UK carriage fee. The only silver lining in the UK is a growing subscriber base. "Even when widespread distribution is achieved, carriage fees are now much lower than in the past, and competition from the hundreds of digital channels makes it harder and harder to achieve high enough ratings for decent advertising revenue," notes the Pay-TV Business Planning report. A successful ad-supported UK channel - garnering 0.5% of audience - takes in £5-10 million in advertising, though only the top 25 channels fall into that category. A channel would be "doing well" to generate £1 million in ad revenue, according to the report. "In the present very tough climate, adsales agencies are not generally very interested in a new independent channel," the report states. For premium channels, BskyB reportedly receives about £1.50 per sub per month for conditional access and subscriber management. FilmFour, the premium movie service launched in 1998 by a UK public broadcaster, has 450,000 subs but needs about 800,000 subs to reach operating breakeven, Pay-TV Business Planning estimates. Film- Four, which recently folded two of the four channels in its multiplex, is priced to consumers at £6 per month. With 143 movie channels already transmitted in Europe, the opening for additional pure film channels is considered narrow. DTH platforms such as BSkyB have well-developed premium film channels they directly own (VDM, 16 Jun, 2003), and new launches tend to be niche channels from independent channel operators. V Bob Marich - Deal Memo July 28, 2003 |
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Review 2 |
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Ashley Faull |
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"Presents an invaluable analysis for anyone who needs to know about pay television across Europe. Containing a wealth of useful industry data, this report provides a highly informative assessment of market conditions in the Pay-TV sectors of all key European markets" Dr Gillian Doyle, Head of Dept of Film & Media Studies, University of Stirling |
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