Philippines in View A CASBAA Market Research Report An exclusive report for CASBAA Members Table of Contents 1 Executive Summary 4 1.1 Pay-TV Operators 4 1.2 Pay-TV Subscriber Industry Estimates 5 1.3 Pay-TV Average Revenue Per User (ARPU) 5 1.4 Media Ownership of FTAs 6 1.5 Innovations and New Developments 6 1.6 Advertising Spend 6 1.7 Current Regulations 6 2 Philippine TV Market Overview 8 2.1 TV Penetration 8 2.2 Key TV Industry Players 9 2.3 Internet TV and Mobile TV 11 3 Philippine Pay-TV Structure 12 3.1 Pay-TV Penetration Compared to Other Countries 12 3.2 Pay-TV Subscriber Industry Estimates 12 3.3 Pay-TV Subscribers in the Philippines 13 3.4 Pay-TV Subscribers by Platform 14 3.5 Pay-TV Operators’ Market Share and Subscriber Growth 14 3.6 Revenue of Major Pay-TV Operators 16 3.7 Pay-TV Average Revenue Per User (ARPU) 17 3.8 Pay-TV Postpaid and Prepaid Business Model 17 3.9 Pay-TV Distributors 17 3.10 Pay-TV Content and Programming 18 3.11 Piracy in The Philippine Pay-TV Market 20 4 Overview of Philippine Free-To-Air (FTA) Broadcasting 21 4.1 Main FTA Broadcasters 21 4.2 FTA Content and Programming 26 5 Future Developments in the Philippine TV Industry 27 5.1 FTA Migration to Digital 27 5.2 New Developments and Existing Players 28 5.3 Emerging Players and Services 29 Table of Contents 6 Technology in the Philippine TV Industry 30 6.1 6.1 SKYCABLE 30 6.2 Cignal 30 6.3 G Sat 30 6.4 Dream 30 7 Advertising in the Philippine TV Industry 31 7.1 Consumer Affluence and Ability to Spend 31 7.2 General TV Viewing Behaviour 32 7.3 Pay-TV and FTA in Relation to Philippine Social Strata 33 7.4 Advertising Spend 34 7.5 Key Advertisers and Future Trends 35 8 Regulation of the Philippine TV Industry 37 8.1 Key Stakeholders in Philippine TV Regulation 37 8.2 Current Regulations 38 Appendices Appendix 1: Number of Families by Number of TV Set Owned By Region in ‘000s (2010) 41 Appendix 2: Flagship FTAs and Sister Channels 42 Appendix 3: Smaller Broadcasters in the Philippines 43 Appendix 4: Content Split for Flagship FTA Channels 44 Appendix 5: Content Split for Sister FTA Channels 45 Appendix 6: Top FTA Programmes 46 Appendix 7: Programming Proposition of FTA Channels 47 Appendix 8: Pricing Bundles and Channel List of Pay-TV Operators 48 Appendix 9: CPI Content Operation and Distribution 56 Appendix 10: NTC Organisational Structure 58 Appendix 11: NTC Departmental Structure 59 Appendix 12: MTRCB Organisational Structure 60 Appendix 13: IPO Organisational Structure 60 Appendix 14: OMB Organisational Structure 61 Appendix 15: MTRCB Television Classification Ratings 61 Appendix 16: Contact and Contacts’ Details 62 Appendix 17: Abbreviations 68 1 Executive Summary The Philippine pay-TV industry has entered into Attractiveness of the terrestrial offering will be a period of development and diversification, as enhanced as rollout begins in 2014 of digital companies explore new types of content offerings terrestrial television (DTT). Policy on DTT has been particularly in the relatively affluent urban areas. slow to develop in the Philippines, with a final Internet (OTT) as well as mobile methods of delivering decision in favor of the Japanese ISDB-T standard content are in various stages of commercialization coming late in 2013. Implementing Rules and and development, and digital service expansion Regulations for the digital rollout are expected soon; continues in order to provide bigger bouquets a key question will be who – in addition to current including more sophisticated programming (e.g. HD national broadcasters – will be licensed to broadcast channels) to consumers. digital channels, and how many competitors there will be. The cable sector continues to be dominated by ABS-CBN subsidiary SKYcable, which claims about 1.1 Pay-TV Operators 800,000 subscribers nationwide, or 45% of the overall The Philippine pay-TV market has been dominated by pay-TV market. Its major competitor is PLDT affiliate SKYcable since its establishment 23 years ago. As a Cignal DTH service, which in a few short years of company, SKYcable has focused on offering varied rapid growth has reached 600,000 subscribers, giving and specialized content on pay television to enhance it a roughly 25% market share. Growth of the market the viewing experience of an increasingly discerning and development of new content offerings is being Filipino audience. Currently, SKYcable offers over 200 driven by the competition between these two major channels. media conglomerates (ABS-CBN and PLDT). The remainder of the market is made up of 600 smaller Although SKYcable historically has led the pay-TV operators (including two smaller DTH platforms as sector of the TV industry, Cignal Digital TV, under the well as provincial cable operators.) MediaQuest Holdings of the Philippine Long Distance Telephone Company (PLDT) Group, has changed the Reception of pay-TV signals nationwide is still competitive landscape since its launch in 2009. Cignal relatively low at about 19.7% of TV households; this is a subscription-based direct-to-home (DTH) satellite reflects the low spending power of many households TV provider. It offers around 90 channels at present. and the widespread availability (and popularity) of free-to-air terrestrial channels. (With a population Smaller DTH operators Dream and G-SAT offer of 96.7 million, the Philippines had 16.9 million TV more limited content bouquets. There are also other households by the end of 2012, representing a TV operators, such as Cablelink, which offer services household penetration rate of 79%.) in limited areas in the country. Cablelink has a 4 PHILIPPINES IN VIEW subscription-based cable antenna television system This inconsistency in subscriber number estimates is operation in 16 cities in the Philippines and also reflected in the varying figures reported by different offers high-speed cable Internet service. interviewed industry players or groups, as seen below. Because of the Philippine’s archipelagic geography, Research in the Philippines suggests that the there are many rural and small operators throughout uncertainty in pay-TV subscriber estimates will remain the country. Presently, there are around 800 licensed for some time. However, with increased digitization of pay-TV operators in the Philippines. However, pay-TV networks, the uncertainty element is expected Philippine regulators indicate that there are only about to reduce somewhat over the next few years. 600 active pay-TV operations. A detailed description of the pay-TV industry is set out in Section 3. Factors that are driving pay-TV take-up include: • Higher household incomes 1.2 Pay-TV Subscriber Industry • Lower cost of television sets Estimates • Increased choice and cheaper subscription Concrete and verifiable industry-wide data on pay-TV packages, including prepaid options. subscription numbers are impossible to obtain; there is no enforceable government reporting requirement 1.3 Pay-TV Average Revenue Per User nor any authoritative source with access, in (ARPU) particular, to provincial subscription numbers. Based At present, SKYcable has reported an ARPU of US$14 on discussions with key media industry stakeholders per month for pay-TV and US$25.5 per month for its in the Philippines, estimates of subscriber numbers broadband service. Cignal has reported ARPU of spanned from 1.5 million to 3.8 million for 2012, as similar US$13.4 per month for its postpaid service reflected in the following exhibits. Different Philippine and US$5.8 for its prepaid service. However, MPA has media groups concurred that the industry suffered estimated a national pay-TV ARPU of US$11.1 in 2012. from prevalent underreporting and misrepresentation of subscriber numbers from provincial operators, as well as rampant illegal connections via signal theft, making subscriber estimates notoriously shaky. Exhibit 1: Philippine Pay-TV Subscribers According to Different Industry Groups in ‘000s (2012) 4,000 3,500 3,600 600 3,000 1,700 2,600 800 2,000 3,000 2,850 2,700 1,000 1,800 1,800 0 A B C D E Uncertainty Range of Reported Subscriber Numbers Base Number of Reported Subscribers Source: Venture Consulting discussions with media companies in the Philippines PHILIPPINES IN VIEW 5 1.4 Media Ownership of FTAs Disney Company, CBS Studios, Sony Pictures, Private media groups dominate the TV industry in Warner Brothers, and 20th Century Fox. the Philippines, as major FTA channels and pay-TV • Broadband penetration remains low. As a result, operators share similar parent companies. There are Apple TV, Google TV, Netflix, Hulu, Amazon, and six major FTA channels, which collectively account other legitimate international over-the-top (OTT) for 92% of the national audience share in 2013. The services are not expected to be launched in the remaining share is split among several smaller private Philippines anytime soon. However, downloads of or government-owned channels. Correspondingly, the content from illegal pirate OTT sites are common. two major pay-TV operators jointly represent 70% of subscriber share in 2012, with the remaining share 1.6 Advertising Spend distributed among – 800 smaller operators. Advertising spend in the Philippines in theory amounted to US$4 billion in the first half of 2013 Two private media/telecom groups, ABS-CBN based on rate card revenue. This amount is Corporation and PLDT, have interests in both FTA and comprised of digital, as well as the tri-media of pay-TV businesses. television, radio, and print. However, according to Mindshare, the estimated spend in 2013 is expected 1.5 Innovation and New Developments to be – US$3 billion for the full year.