2009 Australia - Broadcasting and Pay TV

BuddeComm’s annual publication ‘Australia - Broadcasting and Pay TV’ 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 targeted advertising, 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. Digital content, beyond simply offering better picture qualities, has not driven uptake of digital TV. 

Crucial changes are likely to occur with respect to the advertising model employed by FTA and pay TV firms as consumers shift to digital viewing standards. In future, digital services will enable FTA and pay TV to utilise targeted advertising in a similar manner to web based content delivered to PC’s and increasingly, mobile phones. Firms within the industry entertain hopeful prospects of increased revenue per viewer from advertisers. However technical, legal and regulatory impediments remain, delaying the delivery of targeted advertising via FTA and pay TV channels, while telecommunications providers and other new media players continue to prepare their targeted advertising based services. 

FTA and pay TV organisations have close relationships with professional content producers which many web based video providers, such as YouTube, often lack. FTA and pay TV providers have mostly been unwilling to make their content available via the web as the quality of service was deemed unacceptable. However now that broadband with sufficient bandwidth is available to a substantial portion of their viewing audience, FTA and pay TV providers can deliver a quality video experience. This could see these organisations gain significant market share in the IPTV arena in 2009/10.  

Changes to media ownership and broadcasting regulations in Australia have lead to further consolidation of radio operators and increased cross-media ownership. Competition from within and outside the industry, which is already strong, is predicted to increase while trading conditions are likely to be difficult.  

After decades of delays, digital radio has been introduced in Australia. It seems however 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 more extensive online experience through services such as video-based entertainment.

·         The FTA networks are expected to see intense competition for viewers and advertising in 2009 under difficult trading conditions and beyond, which will impact on margins should organisations be forced to put more money into programming and marketing.

·         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 2009, 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 2010 as CRT televisions should by that time be totally phased out by retailers.

·         Household penetration of digital TVs (including STBs, PVRs and integrated digital TV sets), is predicted to rise from 37% in 2008 and 51% by 2009

·         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.

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 2008 pay TV penetration had only reached 28%, and growth is expected to continue to increase modestly to around 30% by 2010 and 34% by 2012. 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.

·         Pay TV revenue growth of 17% was recorded in 2008 and we expect growth to remain reasonably strong in 2009, with a slight drop to around 14%.

From 2007 the cost structure of the industry became more sustainable and the industry became broadly profitable. This trend continued in 2008, and is set to continue in 2009, though should Australia experience recessionary conditions, this may temper growth. Despite this, competition from web based media is set to intensify.  

Pay TV subscribers by operator – 2004 - 2009

(Source: BuddeComm, Telecommunications Strategies Report)

Notes:

¹Year ends June.

²Others includes Neighbourhood Cable.

Radio

·         Although its advertising base is growing, the radio market is losing share to other media sectors such as TV. FM radio is expected to experience competition among the youth market segment as consumers continue to migrate to web based media and personal music devices. The launch of digital radio in January 2009, is expected to cost the radio sector about $400 million.

·         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.

Data in this report is the latest available at the time of preparation and may not be for the current year.

The following notes provide some background to our scenario forecasting methodology:

·         This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band.

·         The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15-20% around this data.

·         All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.