Films and Pay-Television

After the United States the most important markets for revenue from all sources for movies are Germany, Italy, Spain, Japan, France and the United Kingdom. For Box Office alone, taking weeks in March 2000 as an illustration, the leading market outside the US was France, followed by Germany, then the UK, Spain, Italy, and Japan.

FIGURE 1: PROPORTION OF REVENUES FROM LEADING MARKETS IN 1999

Source: AFMA, ems

International revenues account for just under 50% of the total. Most AFMA members release their films in the United States through the majors and there are therefore no figures available for US revenues

TABLE 1: AFMA 1999 MEMBERSHIP SALES SURVEY

Source: SRi

The key markets for pay-TV are not necessarily the same as those for the box office, although there are parallels as both the box office and pay-TV will tend to do best in the wealthier markets. For pay-TV there are additional determinants. From the studio or distributor perspective the most important factors are the development of subscription TV in a market, including digital penetration, and the competition between pay-TV operators and different movie channels for content.

Pay-TV provides a valuable showcase for the film industry across the world and at the same time top movies help pay-TV operators to drive subscription.

For the studio or distributor, relatively wealthy and large countries where there are competing platforms will yield the best deals. Countries like France and Spain, where there are two competing satellite platforms each bidding for movie rights, are thus considered to be good markets. In the early days of satellite pay-TV in Britain there were two platforms and they bid up prices astronomically before the two merged to form BSkyB which then renegotiated the contracts.

From the perspective of the studios it is clearly better to have a market where there are several services bidding up the price of their product. For movie channels and services, there are benefits from buying for more than one channel and over several territories.

A pan-regional services such as Star TV in Hong Kong, has considerable buying power as it broadcasts across the Asia and will be in a stronger negotiating position than a local channel, even though rights will still be sold on a territory by territory basis. Canal+ is active in pay-TV in several different European markets and has strong e buying power, while M-Net also benefits from buying rights that will cover several African countries. The new VOD services can also set up in different territories and buy product for different markets, again improving their negotiating position.

How pay-television has developed will be a function of several factors, including government regulation and competition rules, the competitive environment for free TV and the development of multichannel television. In Germany, for example, pay-TV has been relatively slow to develop because of obstacles from national and European competition regulators as well as a very competitive multichannel free TV market delivered via a utility cable network.

It has been very difficult to persuade Germans to pay for premium services, making it hard for more than one pay-TV player to survive. At the same time the competition authorities did their best to prevent a single such player from emerging. This meant that until recently Germany was a very good film market for free TV, but a disappointing one for pay-TV.

TABLE 2: DIGITAL DTH SUBSCRIBERS WORLDWIDE END Q1 2000 '000S

Source: ems

Aside from their respective competitive environments, the best markets for pay-TV are the most developed economies and they do tend to be similar to those that are good for theatrical release. There is no breakdown available for key markets for pay-TV alone, but the most important pay-TV operators aside from the US are in the UK, France, Germany, Spain, Italy and Japan.

Talking to the studios, the most important pay-TV operators were identified as Japan Satellite Broadcasting Inc (Wowow) in Japan, BSkyB in Britain, Premiere in Germany, Canal+/ Canal Satellite in France, and Canal+ / Canal Satelite Digital in Spain. The success of BSkyB in Britain and the rapid development of competing digital pay-TV platforms in France and Spain have paid dividends for film studios.

Other significant territories include Italy, and to a lesser extent Scandinavia and the Benelux countries in Europe. Latin America, Asia and Central Europe, Poland in particular, are good emerging markets and in the case of some regions it is possible to do a pan-regional deal with channel such as HBO Latin America or Asia, or Cinecanal, part of the Latin American Pay-TV service. This Section provides a brief overview of each of the key markets, with more information on the movie channels themselves in the following Section.

UNITED STATES

JAPAN

EUROPE

FRANCE

GERMANY

ITALY

SPAIN

UK

CENTRAL EUROPE

There are some large markets in Central Europe, not least Poland which has over 12 million TV households and an economy, which is developing quickly. There is a Canal+ premium service in Poland and are two satellite pay-TV services, Cyfra+, which is partly owned by Canal+, and Wizja TV, owned by pan-European cable operator UPC which also owns PTK, the main Polish cable operator.

The Canal+ premium channel has nearly 400,000 subscribers, while Cyfra+ and Wizja TV have 285,000 and 245,000 subscribers respectively. PTK has nearly 1 million subs.

HBO has services in Poland, the Czech Republic, Slovakia, Hungary and Romania and these are all growing markets. Prices paid for movies are, of course, much lower than for Western Europe as local prices paid by subscribers are far lower as are theatrical and video prices.

For film distributors it is therefore a question of investing in the future by helping the pay-TV services to develop the market.

ASIA

LATIN AMERICA