2007 Australia - Broadcasting and Pay TV

Publication Overview

For those needing high level strategic information and objective analysis of Australia’s FTA TV, Digital TV, Pay TV and radio markets in Australia, this report provides essential reading and gives in-depth information on:

  • revenue and subscriber statistics;
  • analyses of market and industry trends and developments;
  • regulatory and government policy developments including the Digital Media sector;
  • Overviews of key market segments including: Personal Video Recorders (PVRs), digital radio, Interactive TV, Set-top Boxes (STBs) and datacasting;
  • Overviews of major players in the market including: Foxtel, Austar, Australian Broadcasting Corporation (ABC), Nine Network, Seven Network, and Channel Ten.

Executive Summary

BuddeComm’s 2007 Broadcasting and Pay TV Annual Publication, profiles key market sectors in Australia’s Free-to-Air (FTA) 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 (PVRs), digital radio, Interactive TV, Set-top Boxes and datacasting.

The report reveals that FTA television industry is now facing challenges from a number of fronts as incumbent broadcasters cling to their lucrative oligopolies. Marketing and media buyers are increasingly turning to alternative media, such as through Internet and mobile channels in order to reach consumers. Digital FTA TV has been held up in a vicious cycle since its launch. Available digital content, beyond simply offering better picture qualities, has been nowhere near sufficient to help drive digital TV. The main driver of growth has been ‘user experience’ delivered by DVDs and plasma screens.

By early 2007 with the vast majority of subscribers on digital services, pay TV penetration had only reached just over 25% and we expect penetration to reach only 26% in 2007. An overall pay TV revenue growth of 15% was recorded in 2006 and we expect growth to remain reasonably strong in 2007, while not increasing. A launch date for digital radio of 2009 is scheduled for Australia.

Free-to-Air TV

  • 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.
  • During the six years from 2001 to 2006, viewing of FTA television fell by over 11%, while overall TV viewing increased, mainly driven by the rise of pay TV. The FTA networks are expected to see intense competition for viewers and advertising in 2007 and beyond, which will impact on their cost margins as they will be forced to put more money into programming and marketing.
  • TV stations must market themselves more aggressively due to threats from the new media sector. Broadcasting ad revenues are already gradually being squeezed due to falling audiences and rising costs.
  • Australian audiences have increasing choice and control over when, where and how they consume media. These choices have been facilitated by the rise of technologies such as digital media players (iPods and MP3 players), digital personal video recorders, and video and audio downloads.
  • From 2002 to 2006, subscription television increased its average audience by approximately 30%. This increase has been at the expense of FTA networks.

Digital TV

  • By the beginning of 2007, penetration of digital TVs (digital receivers or digital integrated TVs) stood at only 25% of Australian households, which still classifies digital TV as a niche medium.
  • The main driver of growth has been ‘user experience’ delivered by DVDs and plasma screens. This has been a bigger driver for digital TV devices than digital TV itself.
  • Rate of adoption increased significantly in 2006 as the price of widescreen TVs (plasma and LCD) dropped to below $2000 at the lower end of the market.
  • By early 2007, the move towards flat panel TVs had further accelerated with CRT TVs only constituting a 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 2008 as CRT televisions are totally phased out by retailers.
  • The estimated number of free to view digital television receivers sold to retailers and installers in the Australian market during the period 1 October to 31 December 2006 reached 302,000 units, raising the cumulative total sales figure since digital television transmissions began to over 2.3 million.

Pay TV

  • With the introduction of digital pay TV, the industry only saw modest growth through 2004 and 2005. Growth in 2006 in fact even slowed a bit further.
  • By early 2007 with the vast majority of subscribers on digital services, penetration had only reached just over 25% and we expect penetration to reach only 26% in 2007.
  • While it is still not impossible for pay TV reach the 35-40% penetration mark, this level can only be reached these targets if more attractive price packages are offered, or a broadband offering within an affordable priced package is offered. So far both Foxtel and Telstra have not been able to come up with such attractive packages.
  • For the year to December 2006, pay TV subscribers in Australia increased by just over 9%, only a modest increase on the previous year. A similar growth pattern is expected to continue further into 2007 and 2008.
  • An overall pay TV revenue growth of 15% was recorded in 2006 and we expect growth to remain reasonably strong in 2007, while not increasing.

Pay TV subscribers by operator - 2004 - 2007

Year Austar* Foxtel**
retail
Foxtel
wholesale
(Optus & TransACT)
Foxtel**
total
Others Total
2004 490,000 930,000 186,000 1,116,000 12,500 1,618,500
2005 534,000 1,025,000 157,000 1,182,000 15,000 1,731,000
2006 601,100 1,129,000 140,000 1,269,000 19,000 1,889,100
2007 (e) 661,200 1,219,000 130,000 1,349,000 20,000 2,030,200
(Source: BuddeComm www.budde.com.au)
Note:*year ends December; **year ends June.

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 2007 and beyond. FM stations will be in danger of becoming less relevant to the youth market, as teenagers will increasingly turn to alternate new media channels such as the Internet for their music.
  • Digital radio will allow multi-channelling by existing and possibly new radio companies as advertisers will find it increasingly expensive to achieve broad audience reach.
  • In early 2007 the Federal Government was in the process of drafting digital radio legislation, setting the date of 1 January 2009 for the launch of digital radio services in Sydney, Melbourne, Brisbane, Adelaide, Perth and Hobart.
  • By early 2007, CRA was continuing with its digital radio trial in Sydney, while Macquarie Bank’s Broadcast Australia was running a similar trial in Melbourne.

Table of Contents

1.OVERVIEW AND ANALYSIS – 2007
1.1Free-to-Air TV
1.1.1Market overview and trends
1.1.2TV as multimedia launching platform
1.1.3Market statistics
1.2Digital TV
1.2.1Market trends
1.2.2Market statistics
1.2.3Market analysis – patchy digital TV reception – yet another stumbling block
1.3Pay TV
1.3.1Subscriber statistics
1.3.2Revenue statistics
1.3.3Market analysis
1.3.4Regulatory
1.4Media reforms
1.4.1Government Plans and Policies
1.4.2Analysis of the media reforms
1.5Radio
1.5.1Market trends
1.5.2Digital radio
2.DIGITAL TV
2.1Market overview and statistics
2.1.1Market trends
2.1.2Market statistics
2.1.3Market surveys
2.1.4Market analysis
2.1.5Regional overview of broadcasters
2.1.6Proposed new media reforms
2.1.7Consumer survey of digital media in Australian homes
2.1.8Technological environment
2.2Digital video recorders
2.2.1Introduction
2.2.2Free-to-Air DVRs
2.2.3Market analysis
2.2.4Pay TV DVRs
2.2.5TiVo
2.2.6Digital TV and DVDs
2.2.7Television advertising
2.2.8Forecasts
2.3Interactive TV overview and analysis
2.3.1Market overview
2.3.2Definitions
2.3.3The future of Video on Demand – analysis
2.3.4iTV analysis
2.3.5Interactive advertising
2.3.6Market analysis – interactive advertising
2.3.7Case studies
2.4Set-top box overview and analysis
2.4.1Personal Video Recorders (PVRs)
2.4.2Market update
2.4.3Regulatory developments
2.4.4Market overview by sector
2.4.5Set-top box statistics
2.4.6Historical analysis
2.5Datacasting overview and analysis
2.5.1Regulatory framework
2.6Summary of datacasting developments and trials
2.6.1Year 2005
2.6.2Year 2006
2.7Datacasting review – 2006
2.8Launch of the first datacasting channel
2.8.1NSW Government’s participation
2.8.2Macquarie Digital
3.FREE-TO-AIR TV
3.1Broadcasters
3.1.1Market overview
3.1.2National broadcasters
3.1.3Regional broadcasting
3.1.4Community television broadcasting services
3.1.5Indigenous broadcasters
3.2Market overview and statistics
3.2.1Introduction
3.2.2Market trends and analysis – 2006 and 2007
3.2.3Market statistics and revenue – 2006
3.2.4Financial overviews
4.PAY TV
4.1Industry revenues and analysis
4.1.1Revenue statistics
4.1.2ARPU statistics
4.1.3Churn statistics
4.1.4Piracy statistics
4.1.5Pay TV advertising
4.2Subscribers overview and analysis
4.2.1Market overview
4.2.2Subscriber statistics
4.2.3Consumer penetration statistics
4.2.4Penetration analysis
4.2.5Pay TV penetration forecasts to 2010
4.2.6Industry trend towards broadband infrastructure
4.2.7The trend towards Digital Media
4.3Infrastructure - statistics and analysis
4.3.1The next phase from HFC to fibre
4.3.2Infrastructure statistics
4.3.3Major players – overview and major developments
4.3.4Infrastructure analysis
5.DIGITAL MEDIA REFORMS
5.1Analyses of media reforms
5.1.1Media reform the aftermath
5.1.2Disappointing media reforms
5.1.3Media reforms – who could get what?
5.1.4Analysis of the government media policies – 1996 - 2006
5.1.5Technology might solve cross-media laws
5.1.6More dynamic media market needed
5.1.7Customer demand driving changes
5.1.8Structural changes are needed
5.2Government plans and policies
5.2.1New Policy Directions
5.2.2Prelude to new digital media policies
5.2.3Proposed media reforms
5.2.4Finalisation of new media reforms
5.2.5IPTV regulations?
5.2.6Policies and Regulations – 1996 - 2006 - Historic
6.RADIO
6.1Overview and statistics
6.1.1Market overview
6.1.2PwC’s four-year predictions to 2010 on the media and entertainment sectors – August 2006
6.1.3Demand statistics
6.1.4Financial statistics
6.1.5Major players
6.1.6Digital media developments
6.1.7Visual radio
6.1.8Community radio
6.2Digital radio
6.2.1Market overview
6.2.2Market surveys
6.2.3Development path of digital radio
6.2.4Features and benefits of digital radio
6.2.5New and alternate delivery channels
6.2.6Technologies
7.GLOSSARY OF ABBREVIATIONS
Exhibit 1 – Digital TV broadcasters by region – 2006
Exhibit 2 – Digital media reform – current rules and key proposed changes
Exhibit 3 – ACMA register of datacasting licensees – 2006
Exhibit 4 – Commercial television licences – 2006
Exhibit 5 – Nine Network coverage
Exhibit 6 – Regional licence area plan update
Exhibit 7 – Community television licences – 2005
Exhibit 8 – Public television stations funding – 2003 - 2004
Exhibit 9 – New media activities from pay TV operators - 2006
Exhibit 10 – Pay TV roll-outs by state
Exhibit 11 – The key issues still remain the same
Exhibit 12 – Media diversity
Exhibit 13 – Dutch digital media policies
Exhibit 14 – Digital media reform – current rules and key proposed changes
Exhibit 15 – Estimated number of radios in the home
Exhibit 16 – Austereo national networks – 2006
Exhibit 17 – SBC key radio stations
Exhibit 18 – Timeline of music on the Internet


Table 1 – Pay TV subscribers by operator – 2004 - 2007
Table 2 – Commercial TV networks share of advertising revenue – 2001 - 2006
Table 3 – Commercial TV networks audience share of revenue – 2005 - 2006*
Table 4 – Major broadcaster’s primetime audience share – 2006
Table 5 – Digital TVs and integrated digital TV sets sold – 2003 - 2006*
Table 6 – Average monthly sales volume of digital TV receivers – 2005 - 2006*
Table 7 – Pay TV subscribers by operator – 2002 - 2007
Table 8 – Pay TV subscribers annual change by operator – 2002 - 2007
Table 9 – Pay TV household penetration – 1997 - 2007
Table 10 – Pay TV revenue per operator – 1997 - 2008
Table 11 – Percentage change of pay TV revenue per operator – 2002 - 2008
Table 12 – Digital TVs and integrated digital TV sets sold – 2003 - 2006*
Table 13 – Average monthly sales volume of digital TV receivers – 2005 - 2006*
Table 14 – Average monthly sales volume of integrated digital TVs – 2006*
Table 15 – Digital TV adoption by number of devices – 2005 - 2006
Table 16 – Number of CRT TVs sold – first and third quarter 2006
Table 17 – Household penetration of digital TVs* – 2005 - 2006
Table 18 – Number of digital TV* households – 2001 - 2007
Table 19 – Digital TV statistics – household penetration – August 2006
Table 20 – Digital pay TV statistics – July 2006
Table 21 – Widescreen TV sales – 2004 - 2006
Table 22 – Growth rate of widescreen TVs – 2005
Table 23 – TV sets in Australian households by type of set – September 2005
Table 24 – Percentage of households with FTA or pay TV – 2005
Table 25 – Household penetration of digital media – 2005
Table 26 – Percentage of household use by application or platform – 2006
Table 27 – Frequency of device used for downloaded content – 2006
Table 28 – Main drivers for DTTB* adoption – 2006
Table 29 – Is digital FTA TV available to households in your area?
Table 30 – Awareness of analogue switch-off – 2005 - 2006
Table 31 – Type of television set in use – 2005
Table 32 – Top nine most satisfying features of digital FTA TV – 2005
Table 33 – Segmentation of households according to interest in adopting digital FTA TV – 2005
Table 34 – Penetration of pay TV services by access device – 2005
Table 35 – Foxtel iQ DVR subscribers – 2006 - 2007
Table 36 – Percentage of digital pay TV subscribers – 2004 - 2006
Table 37 – Subscriber churn rate by customer category – 2006
Table 38 – Digital TV adoption by number of devices – 2005 - 2006
Table 39 – Digital TVs and integrated digital TV sets sold – 2003 - 2006*
Table 40 – Penetration of pay TV services by access device – 2005
Table 41 – Penetration of DVD players by type of device – 2005
Table 42 – EPG developments based on current DVRs
Table 43 – EGP developments based on DVR pricing
Table 44 - FTA set-top box users – 2001 - 2010
Table 45 – Foxtel iQ DVR subscribers – 2006 - 2007
Table 46 – Number of television and radio licences on issue – 2004 - 2005
Table 47 – Number of television licences on issue (historical) – 1999; 2001 - 2004
Table 48 – ABC operating revenue and cost of services and annual change – 2005 - 2006
Table 49 – ABC revenue and annual change (historical) – 1998 - 2004
Table 50 – Nine Network revenue and annual change – 2003 - 2006
Table 51 – Seven Network revenue and annual change – 1999 - 2006
Table 52 – Network TEN revenue and annual change – 1995 - 2006
Table 53 – Television set penetration by number of sets – 2006
Table 54 – Advertising revenue for commercial television networks – July to December 2006
Table 55 – Commercial TV networks share of advertising revenue – 2001 - 2006
Table 56 – Commercial TV networks audience share of revenue – 2005 - 2006*
Table 57 – Major broadcaster’s primetime audience share – 2006
Table 58 – Primetime audience shares - Summer-to-date – weeks 49-50, 2006 v weeks 49-50, 2005
Table 59 – Primetime audience percentage shares - Summer-to-date – weeks 49-50, 2006 v weeks 49-50, 2005
Table 60 – Ad revenue forecasts by media sector – 2006
Table 61 – Average number of FTA viewers in capital cities – 2001; 2005
Table 62 – Share of advertising revenue – 1990; 1995; 2000; 2005
Table 63 – Australian commercial TV revenue and expenditure – 1992 - 2005
Table 64 – TV broadcasting revenue and expenditure growth – 1996 - 2005
Table 65 – Commercial TV revenues by broadcaster – 1998 - 2005
Table 66 – Commercial TV broadcasters’ revenues as share of total – 1998 - 2005
Table 67 – Broadcasting and commercial licence fees collected by ACMA – 1997 - 2005
Table 68 – Commercial television programming spending – 2003 - 2005
Table 69 – Pay TV revenue per operator – 1997 - 2008
Table 70 – Percentage change of pay TV revenue per operator – 1998 - 2008
Table 71 – Telstra pay TV bundling revenue and annual change – six months to December 2006
Table 72 – Net losses pay TV industry – 1996 - 2007
Table 73 – ARPU levels per operator Austar, Foxtel and Optus - 1999/2002; 2003 - 2007
Table 74 – Pay TV industry annual churn rates – 1996 - 2007
Table 75 – Foxtel subscriber annual churn rate – 2002 - 2006
Table 76 – Foxtel subscriber annual churn rate by customer category – 2006
Table 77 – Austar monthly and annual subscriber churn – 2002; 2005 - 2006
Table 78 – pay TV advertising spending estimates and annual change – 2005 - 2007
Table 79 – Pay TV subscribers by operator – 1995 - 2007
Table 80 – Pay TV subscribers annual change by operator – 1997 - 2007
Table 81 – Telstra pay TV bundling subscribers and annual change – six months to December 2006
Table 82 – Digital pay TV subscribers percentage per Foxtel/Austar – 2004 - 2006
Table 83 – Pay TV household penetration – 1997 - 2007
Table 84 – Pay TV viewing versus FTA channel viewing – six months to June 2006
Table 85 – Pay TV HH penetration and number of subscription TV HHs – 2000 - 2005
Table 86 – Pay TV audience growth by age group – 2004 - 2005
Table 87 – Pay TV HH penetration in Australia versus overseas countries – 2005
Table 88 – Pay TV viewing as a percent of total TV viewing – 1998 - 2006
Table 89 – Penetration of pay TV services by access device – 2005
Table 90 – Market share by provider and annual change – metropolitan homes in Australia – 2004 - 2005
Table 91 – Market share by provider in pay TV homes – 2004 - 2005
Table 92 – Forecast pay TV household penetration, low market growth scenario – 2005 - 2010
Table 93 – Forecast pay TV household penetration, high market growth scenario – 2005 -2010
Table 94 – Pay TV roll-out statistics (homes passed) – 1996 - 1998; 2002 - 2006
Table 95 – Share of all radio listening (historical figures) - 2003
Table 96 – Number of commercial and government radio stations – 2006
Table 97 – Radio subscription and advertising revenue, forecasts and annual change – 2000 - 2009
Table 98 – Advertising spending by media sector – 2005
Table 99 – Commercial radio penetration and time spent listening – Sept - Nov 2006
Table 100 – Time spent listening by capital city (excluding Canberra, Hobart, Darwin) - 2006
Table 101 – Audience penetration by time of day – 2006
Table 102 – Radio listening by radio location – 2001 - 2006
Table 103 – Commercial radio – top ten industry sectors and annual change – 2004 - 2005
Table 104 – Metropolitan radio advertising revenue – 2005
Table 105 – Australian commercial radio financial results and annual profit change – 1992 - 2005
Table 106 – Number of commercial radio services by city – 2006
Table 107 – ABC radio regional reach and share – 2005/06

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Last updated 4 Apr 2007
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Analyst: Stephen McNamara

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