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The in View

Executive Summary May 2010

The Philippines in View 2010

1 Executive Summary

1.1 | A DTH Shake‐up? The number of TV households stands at 13.5 million. By far the highest penetration of pay‐TV households Despite the global economic crisis and the many is in Metro (population 14 million) where structural problems faced by the Philippines 27% of homes passed by a cable service view economy, the pay‐TV market should see an overall subscription TV services. market expansion of around 5% this year ahead of a 2.5‐3.5% growth for the economy as whole. Nationally, 51% of the population is under the age of 25 and more than half live in urban areas. Mobile Indeed, the Philippine pay‐TV industry should expect teledensity stands at 73 million subscribers, with some modest increase in revenue over the next few fixed line subscribers at 4 million households. Almost years but piracy, lack of legislative reforms and all TV households have colour . economics will restrict the pace of growth. Major penetration stands at 4%. urban centers where there is critical mass are the main focus for investors. Thus the legitimate pay‐TV market has been slow to grow with an estimated 1.5 million and 100,000 With a population of 92 million (18.26 million cable TV and DTH subscribers respectively. households), GDP per person stands at US$1,866, just below Mongolia and Sri Lanka, and just above A key factor holding back national growth remains Pakistan and Vietnam. poverty – the World Bank estimates 40% of the population lives on less than US$2 a day or US$60 per month.

The Philippines: Subscribers by Monthly Household Income

35

30

25

20

15

10

5

0 Below P8,000 ‐ P10,000 ‐ P15,000 ‐ P25,000 ‐ P60,000+ P7,500 9,999 14,999 24,999 59, 999 % Philippines population Access Any Subscription TV at Home

Source: Synovate Media Atlas Q108‐Q408

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The Philippines: Subscribers by Operator 35 30 25 20 15 10 5 0 Any Subscription TV SkyCable Destiny Others % Access at Home (People 15+)

Source: Synovate Media Atlas Q108 – Q408

But other factors restraining the growth of from basic tier analogue delivery to broadband subscription TV have been the overbuilding of cable internet and even Pay Per View services. systems (multiple operators competing solely on price within franchise areas) and a lack of The majority of cable TV subscription rates remain enforcement of an already weak intellectual low thanks to the high level of poverty even where property rights regime (signal theft). there is critical mass in areas such as , , Davao City and Baguio. This leaves much room The weak regulatory environment has led to either for further growth. Monthly cable subscriber rates outright piracy by commercial entities or endemic vary from P250‐300 (US$5.65‐$6.40) in the provinces under‐reporting of subscriber numbers by licensed to P1000 (US$22.60) in the upscale areas of Manila. operators. Both issues are major problems for legitimate domestic operators and the suppliers of The dominant cable player is SkyCable, accounting international programming (the bulk of cable for an estimated one third of national cable content) alike. penetration if we include partial investments in subsidiaries such as Home Cable and Sun Cable in However, the gradual deployment of digital systems Cebu, Davao City and Baguio. should create greater transparency of subscriber numbers, permit an increase in ARPU as more SkyCable, which launched in the late 1980s, is owned premium tiers are rolled out and make individual and operated by the Lopez Group, which also owns line‐tapping more difficult. and operates ABS‐CBN, one of three dominant to air broadcasting networks. Meanwhile, the deployment of new DTH platforms may energise the nationwide market, buoyed by the The Lopez Group and its related Benpres Holdings fact that MediaQuest, the media partner of telco until recently held a firm grip on the Manila Electric behemoth Philippines Long Distance Telephone Company (), the biggest power company in Company (PLDT), has recently joined the DTH fray the country with management of a significant through TV. percentage of the electricity poles in Metro Manila (used for electricity and cable TV distribution) and 1.2 | Cable TV Services nearby suburbs and provinces. Through its First Philippine Holdings and Benpres units, the Lopez Group controls a 13.4% stake, while the First Pacific Currently, there are some 700 CATV systems under group, through national telco PLDT and Metro Pacific management (out of 1,500 entities holding cable Investments, owns 34.7%. licenses from the National Commission) that provide a broad range of services,

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The Philippines in View 2010

The SkyCable system has now digitized around 90% Systems, which later changed its name to of its network in Metro Manila enabling it to better Mediascape. The related MediaQuest also has a control individual households illegally tapping into minority stake in . its network, among other advantages. Another relatively new entrant to the DTH market is Other MSO style operators include Global Destiny G‐SAT, which is owned by Global Broadcasting and Cable, Cable Link, Central CATV and Pacific CATV. Multimedia (GBMI), a joint venture between cable operator Global and the Tieng family’s 1.3 | DTH Services Solar Group. The Solar Group holds rights to sports, film and TV distribution, production and broadcast divisions. It controls several free‐to‐air and CATV A major shake‐up of the Philippines pay‐TV market channels, including ETC, 2nd Avenue, Basketball TV, could be in the offing, as new investment comes on‐ and CS9. line from MediaQuest, which in July 2009 launched its Cignal TV DTH platform. The Cignal TV platform is The third DTH provider is Dream Satellite TV, which distributed via Ku‐band transponders on the NSS‐11 claims around 45,000 subscribers. Owned by the satellite. Cojuangco family and operating from the Agila‐2 satellite, the Dream platform comprises some 30 Cignal TV offers 22 Standard Definition channels, of channels, many of which have been available which 11 are free‐to‐air, plus a bouquet HDTV and regionally via unauthorised IRDs. VOD channels.

The MediaQuest DTH offering may be strengthened 1.4 | Pay‐TV Content Wholesalers by the recent purchase of a stake in ABC Development which operates the country's third‐ Two competing organisations dominate the largest free to air network TV5 (formerly ABC‐5) and wholesale distribution of pay‐TV content in the holds a 100% stake in Primedia, which in turn is a Philippines, Cable Boss and ACCION. Cable Boss, its programme producer and air‐time wholesaler. TV5 affiliate Omnicontent Management, and ACCION currently ranks third in the Philippines after the represent almost all of the major international Lopez Group’s ABS‐CBN and GMA Network. channel brands such as HBO Asia, CNN, Discovery, ESPN and Fox International Channels for sales of MediaQuest’s other investments include a 30% stake international cable TV programming. (Contracts with in business newspaper BusinessWorld and a 51% SkyCable are negotiated directly by programmers.) interest in Nation Broadcasting. In July 2007 it also acquired licensed DTH firm GV Broadcasting

The Philippines: Share of Viewing in Subscription TV Homes

120

100

80 63 64 62 58 60 67 60

40 42 20 37 36 38 40 34

0 All Youth Upmarket Kids Men Women

% Subscription TV % Terrestrial TV

Source: Nielsen Audience Measurement Q109 – Q209

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1.5 | Fixed broadband, Mobile and 1.7 | Regulatory Environment Internet Politics plays a significant part in the pay‐TV Fixed broadband penetration in the Philippines regulatory environment within the Philippines and stands at 4% of households with PLDT controlling there is not expected to be significant movement on 63% of the DSL market. PLDT also leads the mobile this front until well after early May’s presidential broadband market through election. which has 700,000 subscribers. The late president signed an order PLDT had 1.2 million broadband subscribers at the in June 1987 regulating the operation of cable end of June 2009 while nearest rival television (CATV) systems in the Philippines. had 379,308 with smaller players BayanTel (Benpres) and a distant third and fourth. In the meantime, a bill to regulate the pay‐TV industry (the Convergence Bill) has been stalled in The NTC announced in June last year it would issue the House of Representatives for 10 years. Under new rules to liberalize the broadband industry to the current constitution, cable TV is defined as spur universal access by 2010. "Media" and is thus barred from any foreign investment. Passage of the draft Convergence Bill Under the government’s Medium Term Philippine would open pay‐TV infrastructure up for a level of Development Plan, all municipalities should have Foreign Direct Investment (FDI), at least. 100% access to broadband by 2010. However, the plan is seriously delayed and a long‐time off At present, industry infrastructure regulation is becoming a reality. covered by the NTC whose composition is influenced largely by major operators and political leaders. The Meanwhile, PLDT’s Smart Communications had 35.3 NTC, much of whose agenda is driven by traditional million mobile subscribers at the end of 2008. Globe telecoms issues, has had four commissioners in two Telecom (45% owned by SingTel and 34% by the years, apparently largely due to lobbying related to local Ayala group) had 25 million mobile customers. the Digital TV standard as well as telco issues.

Intellectual property rights enforcement for the pay‐ 1.6 | Digital Transition TV sector remains weak despite a 2006 Memorandum of Agreement signed between the The transition from analogue to digital terrestrial NTC and the Intellectual Property Office (IPO) to television (DTT) has moved slowly with the migration cooperate fully on issues pertaining to pay‐TV piracy. deadline now extended to 2015. The NTC is said to In theory, the IPO is mandated to process piracy be in favor of the European Digital Video Broadcast complaints and pass them to the NTC for action Terrestrial (DVB‐T) as the preferred platform for against infringing operators. In practice this has yet DTT. to deliver a decisive decision in favour of the rights holders. The US‐based Advanced Television Systems (ATS) and Japan’s Integrated Services Digital Broadcast The criminal justice system for copyright issues (ISDB) technical standards are also being considered within the Philippines remains frozen and, despite but most of the industry favors the European complaints filed by industry groups on behalf of platform. content owners, has yet to deliver a decisive result.

ASEAN has already adopted the European standard. The Movie and Television Review and Classification A number of players have already started testing the Board (MTRCB) is mandated to have oversight of European platform including the country’s two content issues but is largely passive within the pay‐ biggest television networks ‐ ABS‐CBN and GMA7 ‐ TV sector. and Smart has tested DVB‐H for mobile TV.

Meanwhile, the technical standard for digital pay‐TV services seems to have been settled as DVB.

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ABOUT CASBAA

The Cable & Satellite Broadcasting Association of Asia (CASBAA) is dedicated to the promotion of multi‐channel television via cable, satellite, broadband and video networks across the Asia‐Pacific. CASBAA represents some 130 Asia‐based corporations, which in turn serve more than 3 billion people.

Among the highest priorities for CASBAA are the promotion of free and fair markets and the protection of intellectual property rights, as well as the development of thriving and competitive domestic communications industries.

The Association is also dedicated to the development of regulatory best practices which assist the interests of both domestic and international participants within the multi‐channel and communication communities.

CASBAA undertakes a number of initiatives including the pursuit of copyright enforcement, promotion of cable and satellite as a key advertising medium, lobbying activities, the promotion of regional technical standards, regulatory roundtables, and educational seminars.

CASBAA Executive Office 802 Wilson House, 19‐27 Wyndham Street, Central, Hong Kong Tel: +852 2854 9913 Fax: +852 2854 9530 Email: [email protected] www.casbaa.com

© 2010 The Cable & Satellite Broadcasting Association of Asia holds all copyrights to this report unless otherwise stated, and no part thereof may be reproduced or replicated without prior explicit and written permission.