Development of Digital Satellite Pay TV in Spain (2004-2008)1
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Observatorio (OBS*) Journal, 10 (2009), 209-223 1646-5954/ RC123483/2009 209 Development of Digital Satellite Pay TV in Spain (2004-2008)1 Sagrario Beceiro, 2h0 Information Sciences. 5niversidad Complutense de 6adrid, Spain A stract This article discusses the evolution during the period of 2004-2008 of 0igital 8, the only operator of satellite pay T9 on the Spanish mar:et at the moment. It describes the configuration of the offer and economic performance of the platform and its strengths and wea:nesses as an operator. .s an introduction, the article draws a broad outline of the evolution of pay T9 in the 5.S., Latin .merica and the 5, presents the main trends observed and describes the mar:et situation in Spain. INTERNATIONAL CONTE)T The market for T9 services in the world in 2006 was estimated at 250.000.000 million euros. The 5.S., urope and Japan accounted for 80% of revenues. While advertising remained the main income, revenues for pay T9 had experienced the highest growth in the whole industry. In the same year 2006, 18% of the 1,100 million households in the world with television received digital broadcasts and 44% of those households had paid a subscription fee to pay-T9, analog or digital. Cable T9 was the most common multi-platform on the planet. But satellite T9 had a good rate of growth especially in developing countries2, both in subscriptions and digital television distribution, while the 32 T93 technology was still a marginal emerging mar:et.The 5nited States accounted for 40% of the total television market in 2006 and about 88% of households was subscribed to basic or advanced pay T9. In 2007, 61% of households were connected through cable4. Satellite had grown significantly in recent years, reaching 26% of households5, due largely to the joint distribution agreements between telecommunications companies that brought various combinations of broadband services and telephony6. The turnover of pay television in the 5nited States reached 60.004 million euros in 2006 compared to 5.919 million euros in 5nited Aingdom, the reference for the european market.7 .ccording to corporate data, all major pay-satellite platforms in the 1 This work has been done with the help of the research project BCulture, Society and Television in SpainB. 6inistry of Science and Innovation. 2royecto Nacional de I 8 0 8 I (2007-2009). Ref. 2006/03962/001. 2 6uch of the growth of digital television in developing markets is supported by the satellite. See1 0igiworld 2007. spaCa. Los retos del mundo digital. d. I0.T - nter. 6adrid, 2007. 2age 72. 3 Internet 2rotocol Television. 4 The major cable operators in the 5.S. market are Comcast and Time Warner Cable. 5 Of the 112.8 million 5.S. T9 households in 2007, 69.3 mill. of households were connected to basic cable or premium and 29.6 mill. of households were connected via satellite.Douseholds with access to 9O0 services were 31 million. See1 http1//www.mpaa.org/5S ntertainmentIndustry6ar:etStats.pdf 6 0igiworld 2007. spaCa. Los retos del mundo digital. d. I0.T - nter. 6adrid, 2007. 2age 46. 7 l Libro verde de los canales temEticos. 5na perspectiva multidisciplinar de la publicidad en los canales temEticos. .rce6edia F .I6C. 6adrid, 2006. 2age 48. Copyright ( 2009 (Sagrario Beceiro). Licensed under the Creative Commons .ttribution Noncommercial No 0erivatives (by-nc-nd). .vailable at http://obs.obercom.pt 210 Sagrario Beceiro Observatorio (OBS*) Journal, 10 (2009) 5.S. market8, 0irecT9 5.S. and 0ish Network (formerly choStar Communications Corporation), had 16.89 and 13.7810 million subscribers in 0ecember 2007, respectively. Both satellite companies have always been aware of the need for concentration in a highly competitive market li:e the 5.S. and began a failed merger process in 2001. The Federal Communications Commission, the regulator body of the telecommunications sector in the 5.S., finally rejected the operation in October 2002, believing that the alliance between the two major satellite T9 services would substantially reduce competition in the distribution of multichannel programming, hurting consumers and creating a de facto monopoly on the distribution of television in certain rural areas.11 0espite the ruling, rumours remain about the possibility of such a merger in the near future.12 .s for the mar:et for satellite pay T9 in Latin .mericaH after years of fierce competition, 0irecT9 and S:yNews, the two major digital satellite platforms in Latin .merica, reached a merger agreement in February 2004. The merger was expected since News Corp, owner of S:y Group, bought a year before Dughes lectronics, a Ieneral 6otors subsidiary, which was the technology provider for 0irecT9.0irecT9, a Cisneros Group company established in 1995, had 9eneJuela, .rgentina and 2uerto Rico as its main markets, while S:yNews, owned by Televisa and News Corp., was dominant in BraJil and 6exico. Overall, both platforms have gained 3.2 million subscribers throughout Latin .merica, a result that seems poor in such a large potential market. In fact, the merger was not such, but a complex web of alliances and purchases. In BraJil, Costa Rica and 2anama, existing platforms were merged under the name of S:yH in Chile, Colombia and 9eneJuela, S:y bought 0irecT9. In .rgentina and 6exico the two operators continued the competition for the same audience with a very different end1 in .rgentina 0irecT9 absorbed S:y, in 6exico 0irecT9 went bust and sold the subscriber base to S:y. The entire cluster is managed by 0irecT9 Latin .merica, which includes three divisions1 0irecT9 2anamericana, S:y 6exico and S:y BraJil.13 The alliance of 0irecT9 and S:y created a de facto monopoly in the satellite T9 business throughout Latin .merica, as the various divisions of the new company came to control about 95% of the market for satellite pay T9 in the region. In addition, the merger helped to reduce costs in management expenses, technological equipment, marketing and advertising costs.14 0irecT9 Latin .merica had reached approximately 4.8 million subscribers in 0ecember 2007.15 .s for urope ( 527), in 0ecember 2006 8 2arsons, 2.R./ Frieden, R.6. The Cable and Satellite Television Industries. d. .llyn and Bacon. Boston, 1998. 9 .nnual Report 2007 0irecT9 Iroup. See1 http1//investor.directv.com/annuals.cfm 10 Fourth Luarter 2007 results of 0ish Networ:. See1 http1//dish.client.shareholder.com 11 Source1 Federal Communications Commission. http1//www.fcc.gov/mb/echoditv. Inquiry1 30/04/2007. 12 M6alone10irecT9 is (almost) done dealN BusinessWee:, February 2008. See1 http1//www.businesswee:.com/technology/content/feb2008/tc20080225_978295.htm 13 See1 http1//www.directvla.com. Inquiry1 15/05/2008. 14 MCisneros y 6urdoch llegan a un acuerdo para fusionar 0irecT9 y S:yNews en LatinoamPricaN. Journal l 6undo (25/02/2003) 15 .nnual Report 2007 0irecT9 Iroup. See1 http1//investor.directv.com/annuals.cfm Observatorio (OBS*) Journal, 10 (2009) Sagrario Beceiro 211 households received television signals via terrestrial analogue (45%), cable (35%), satellite (21%), digital terrestrial television (0TT) (7%) and x0SL/32 T9 (2%). Only 36% of households paid for television services.16 .s a general rule, and although there were large differences, major countries with access to television via terrestrial and satellite had less subscribers to pay-T9 offers, than countries with a high level of access to cable T917. There is also an increasing trend1 households subscribed to pay T9 tend to pay for extra services, such as fixed or mobile telephony or x0SL access. These joint offers are often called Mdouble playN and Mtriple playN, according to the number of combined services. Furthermore, 30% of uropean households were digital by the end of 2006, implying that its penetration quadrupled since 2000. The main players in this high growth were cable, digital satellite and 0TT played a major role in these figures, with one third of households in the 5nited Aingdom and a major presence in Italy, France and Spain.18 .s for digital platforms, ten years after launching the first satellite platform in 199619, results came up different in each country20. In all cases there have been significant problems of implementation. Two digital terrestrial platforms, Quiero T9 in Spain and IT9 0igital in the 5nited Aingdom, went ban:ruptH in Italy, Spain and, recently, France satellite platforms were merged due to the inability to sustain heavy losses or the need for more competitiveness with new players in the digital sector. Only BS:yB group and Canal 8 (9ivendi) maintain a significant presence in the market for pay T9 as such, while players such as Airch Group in Germany collapsed. Telecom operators such as Telefonica Spain, Telecom Italia and France Telecom have been moving away from direct management of digital satellite television services to focus on x0SL combined with telephony and broadband access. It can safely be said that the most visible result of a decade of history of digital television in urope, is the formation of monopolies in digital satellite services, after years of competition that wea:ened the whole T9 business.21 It is clear that the uropean market for pay television is now a fragile and highly competitive sector. Its :ey features are permanent change, accelerated by technological change and, above all, market pressures in clear contrast to the relative stability of the analog system.22 Furthermore, in an open multichannel landscape, pay television companies in urope have followed a clear trend towards concentration and transnationaliJation business, although their revenues continue to come primarily from national markets. 16 -communications household survey Q Wave IIN. urobarometer nR 274, .pril, 2007. 2ages 102-105. 17 Lange, .. The financial situation of television companies in the uropean 5nion (1999-2004).