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August 24, 2010
Adversely affected by the global economic crisis, the UK telecom market declined by 2.3% in 2009, with the mobile segment declining at roughly 2% and fixed at 7%. On the contrary, pay-TV services were embraced as a cheaper alternative to other forms of entertainment, so UK pay-TV market revenue grew strongly, by 8%.
In our new UK Country Intelligence Report, I discuss the current state of the UK pay-TV arena and analyze the competitive potential of the market. With a projected ₤34.4bn in cumulative service revenue in the 2010-2015 period, pay-TV seems to be a battle worth fighting.
But will Ofcom, the regulator, manage to provide a level playfield for all pay-TV providers? The dominant video transmission technology in 2009 was DTH satellite, accounting for 70% of the market, and BSkyB was by far the largest service provider. The cable segment followed with 25%, and IPTV, provided by the incumbent BT, stood at modest 4%. By forcing Sky to cut the wholesale price it charges Virgin Media, BT and Top Up TV to broadcast Sky Sports 1 and 2 in March 2010, the regulator showed its will to intervene in the market and provide for more competition. Furthermore, Sky also could be made to reduce its prices and allow other operators to broadcast its Sky Movies channels after the most recent push from Ofcom this month.
PAY-TV SUBSCRIPTIONS BY TECHNOLOGY, 2008-2015
Despite the regulator’s efforts not much will change in the balance of power among the UK pay-TV providers by 2015. While IPTV will grow faster, satellite will remain the dominant video transmission technology, and Sky will remain the dominant market player. Sky’s position in the market and its access to premium content and funds allows this giant to provide affordable bundles of pay-TV, telephony and broadband Internet access within relatively short contracts (12 months, compared to BT’s 24 months), as well as a large HD channel offering and a number of other perks for potential clients.
Furthermore, Sky can commit to significant investments to R&D, which is allowing the provider to be the trendsetter in the UK pay-TV segment. No wonder Sky will be the first UK provider to launch 3D-TV offering for residential customers in October this year. It just seems that whatever the remedy the UK regulator is trying to implement in order to limit Sky’s power, Sky will remain the limit to a competitive battle in the UK pay-TV market.
— Stela Bokun, Senior Analyst
Related resources:
UK: BT Faces More Market Share Losses as Mobile Services Take Hold
Country Intelligence Report published August 2010
Adversely affected by the global economic crisis, the UK telecom market declined by 2.3% in 2009, generating ₤36.8bn ($57.6bn) in service revenue. The mobile market declined at roughly 2% and fixed at 7%. Pay-TV services were embraced as a cheaper alternative to other forms of entertainment, so UK pay-TV revenue grew strongly during the crisis (by 8%).
Pay-TV Video on Demand in Emerging Markets
Research Report published October 2009
At year-end 2008, pay-TV households in emerging markets totaled 426m, up 16% from 2007. By 2014, we expect emerging markets to account for 69% of all pay-TV households. This report looks at the pay-TV VoD business model for emerging-market operators, analyzing its value proposition, different approaches to offering VoD and the overall market opportunity.
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Pyramid Points
