Nº 1 2014 > Television
Direct-to-home television platforms
Revenues going up, entry costs coming down
More than 150 platforms with television revenues primarily derived from direct-to-home (DTH) satellite broadcasting are now offering services. The 202 million subscribers in more than 100 countries (early in 2013) are expected to generate an annual revenue exceeding USD 100 billion, according to Euroconsult’s Executive Report DTH Platforms: Key Economics & Prospects, released in November 2013.
The report highlights wide differences between countries. It identifies three distinct market profiles on the basis of different growth patterns and service availability. First, advanced markets such as the United States, the United Kingdom, France and Japan have high maturity in terms of pay-TV, and are seeing fierce competition resulting from telecommunication and media convergence and online entertainment. Second, in transitional markets, pay-TV penetration is increasing beyond 50 per cent, and consolidation is taking place among pay-TV providers in order to reach critical mass and achieve solid operating margins. Finally, emerging and fast-growing direct-to-home markets had 126 million subscribers and 20 per cent growth in 2012. Strong competition exists among platforms, with up to six or seven services in countries such as India and Indonesia.
The report benchmarks the commercial strategies and economic performance of direct-to-home platforms, and provides a number of findings to support future development priorities. “In a highly competitive environment, content stays at the heart of the development model”, says Pacôme Revillon, CEO of Euroconsult. “Excluding new platforms, the standard offering now stands at 100–150 channels, with around 25 per cent of platforms offering more than 150 channels.” Emphasis is being given to proprietary content and channels, and to securing premium television rights. This results in higher programming costs, usually representing more than 40 per cent of operating costs and 30–40 per cent of revenues.
High definition (HD) is becoming a must-have for direct-to-home platforms worldwide. Two-thirds of platforms now offer HD content. And the number of platforms with more than 20 HD channels more than doubled in the past two years. SKY Perfect JSAT in Japan is set to become the first HD-only platform by 2015. Although HD penetration already reaches 40 to 60 per cent of subscribers for certain players, it still remains a niche service in many fast-growing economies.
While platforms in advanced markets aim for an average revenue per user of more than USD 40 to 50, subscriptions and strategies are now targeting low-cost services, particularly in emerging digital markets. Entry prices of no more than a few dollars per month result — for many platforms — in an average revenue per month of around USD 10 or less. However, low-cost strategies allowed Tricolor TV in the Russian Federation and Multichoice in South Africa to sign up a total of 12 million subscribers in five years.
Besides high definition and low costs, the third major trend for direct-to-home platforms comprises vertical integration and converging service ecosystems. This is based on three pillars. The first is the roll-out of new generation digital video recorders with up to 1 terabyte storage capability and more flexibility in home networking. The second is the roll-out of non-linear services — with video-on-demand (online and push) already being provided by more than two-thirds of direct-to-home platforms, television everywhere and on the move, and over-the-top (OTT) services. The need to offer triple-play services leads to different strategies, ranging from the ownership of direct-to-home services by telecommunication operators (more than 60 per cent of platforms in Latin America), to direct investments in telecommunication operations (Sky Digital in the United Kingdom or Bulsatcom in Bulgaria) and partnership-oriented strategies (DirecTV in the United States and Canal+ in France).
Service strategies have allowed platforms to maintain churn rates between 10 and 20 per cent, with best performing platforms — such as Astro in Malaysia, Cyfrowy Polsat in Poland and Sky Deutschland in Germany — reducing their churn rates in recent years.
Direct-to-home subscriptions should reach close to 350 million people worldwide by 2022, including around 270 million in fast-growing economies. Asia (led by India and Indonesia) and Latin America (led by Brazil and Mexico) are expected to be the fastest-growing markets. In these markets, subscriptions should continue to be supported by low-cost offerings and the roll-out of new services.