2008 Australia - Broadcasting and Pay TV

BuddeComm’s 2008 Australia Broadcasting and Pay TV Annual Publication profiles key market sectors in Australia’s free-to-air TV, digital TV, pay TV and radio markets. It provides revenue and subscriber statistics as well comprehensive market overviews in areas such as personal video recorders, digital radio, Interactive TV, set-top boxes, podcasting and datacasting.

The report reveals that although the dominance of FTA television as a mass communication medium has been unsurpassed for many decades, the industry is now facing challenges from a number of fronts as incumbent broadcasters cling to their lucrative oligopolies. Digital FTA TV has been held up in a vicious cycle since it was launched in 2001. Available digital content, beyond simply offering better picture qualities, has been nowhere near sufficient to help drive digital TV.

The recent changes to media ownership and broadcasting regulations in Australia are likely to lead to further consolidation of radio operators and increased cross-media ownership. The proposed shake up of the market by Lachlan Murdoch could start off a range of new developments. Competition from within and outside the industry, which is already strong, is predicted to increase.

After decades of delays, digital radio will finally be introduced in Australia from January 2009. It however seems that the radio innovations for the foreseeable future will come from the Internet and other new media developments rather than from the radio broadcasting industry.

Key highlights:

Free-to-air TV

·         Marketing and media buyers are increasingly turning to alternative media, such as through Internet and mobile channels in order to reach consumers. The Internet will become increasingly entertainment-based as broadband penetration is predicted to continue to rise steadily over next few years.

·         Consumers will be demanding a richer and extensive online experience through services such as video-based entertainment.

·         The FTA networks are expected to see intense competition for viewers and advertising in 2008 and beyond, which will impact on their cost margins as they will be forced to put more money into programming and marketing. For more information, see chapter 2.1, page 9.

·         TV stations will be forced to market themselves more aggressively due to threats from the new media sector. Broadcasting’s ad revenues are already gradually being squeezed due to falling audiences and rising costs.

Digital TV

·         By 2008, the move towards flat panel TVs had further accelerated with CRT TVs only constituting a very small proportion of TV sales as the price of the smaller screen LCD TVs and standard definition plasmas had dropped further. This trend will continue to accelerate through to 2009 as CRT televisions should by that time be totally phased out by retailers. For more information, see chapter 3.1, page 31.

·         Household penetration of digital TVs (including set-top boxes, PVRs and integrated digital TV sets), is predicted to rise from 28% in 2007 to 37% in 2008 and 51% by 2008.

·         Pay TV DVRs currently dominate the DVR market, with proprietary FTA based recorders (mainly TiVo recorders) taking only a small slice of the market. Of the pay TV market, the Foxtel iQ recorder holds the vast majority.

·         BuddeComm predicts that the launch of Seven’s TiVo recorder will lift the numbers of current FTA PVRs, but not to level significant enough to break out of its niche product status, or to be of any sort of threat to the pay TV PVR model. For more information, see chapter 3.8.9.2, page 50.

Pay TV

·         Early indicators show that digitalisation of the service alone has not made a huge difference to pay TV. People continue to look for good content, and in principle, the more channels the better, plus reasonable prices.

·         By 2007 pay TV penetration had only reached 24%, and growth is expected to continue to increase modestly to around 29% by 2009. However this still falls well short of most other developed nations.

·         While it is still not impossible for pay TV penetration to reach the 40% penetration mark, this can only reached if pay TV companies offer more attractive price packages, or include competitively priced broadband.

·         An overall pay TV revenue growth of 14% was recorded in 2007 and we expect growth to remain reasonably strong in 2008, with a slight drop to around 12%. For more information, see chapter 4.6.2, page 92.

·         From 2007 the cost structure of the industry began to become more sustainable and the industry reaches profitable territory. This trend is continuing into 2008.

Pay TV subscribers by operator – 2004 - 2007; 2009

(Source: BuddeComm, Telecommunications Strategies Report)

Notes:

¹year ends June.

²since 2003 Optus figures are included in Foxtel.

³Others includes Neighbourhood Cable.

Radio

·         Although its advertising base is growing, the radio market is losing share to other media sectors such as TV. The declining power of FM radio is expected to be a key trend during 2008 and beyond.

·         The launch of digital radio, which will start in capital cities from January 2009, is expected to cost the radio sector about $400 million. For more information, see chapter 5.2.2.2, page 115.

·         Rather than looking at it as essential infrastructure technology, which would allow radio broadcasters to run their networks more efficiently and effectively, the industry has concentrated on finding exclusive services that they could offer over this network.