International Communications Market Report 2014 3 3 Television and audio-visual 115 Contents Section Page 3.1 Key market developments in the TV and audio-visual markets 117 3.1.1 Industry metrics and summary 117 3.1.2 Global TV revenues up 3.1% in 2013, driven by continued growth in subscription revenues 118 3.1.3 Digital take-up slows as more countries reach switchover 119 3.1.4 Consumers continue to embrace value-added services 122 3.1.5 Types of content viewed through internet-enabled devices 133 3.1.6 TV owners in the UK are the most aware of the watershed 136 3.2 The TV and audio-visual industries 138 3.2.1 Summary 138 3.2.2 Television revenues among comparator countries 138 3.2.3 TV revenue per head among comparator countries 142 3.2.4 TV licence fee in UK third-highest among ICMR countries 144 3.2.5 Mixed picture for advertising revenue among free-to-view broadcasters 145 3.2.6 Subscription revenues continue to rise for most pay-TV operators 145 3.2.7 The continued growth of UK TV exports 148 3.3 TV and audio-visual consumers 150 3.3.1 Summary 150 3.3.2 Digital television take-up on main sets 150 3.3.3 Take-up of HDTV services 155 3.3.4 Pay-TV take-up 157 3.3.5 Use of online subscription TV and film streaming services 160 3.3.6 Broadcast television viewing 161 116 3.1 Key market developments in the TV and audio-visual markets 3.1.1 Industry metrics and summary The TV and audio-visual chapter focuses on three topics – key market developments in the sector; industry revenue; and trends among TV and audio-visual consumers. It includes a global overview and country-level analyses of the 17 comparator countries. • Key market developments details some of the major TV and audio-visual industry trends during the past year, with analysis of global revenue, take-up of digital TV and trends in online TV viewing. • The TV and audio-visual industries section focuses on key revenue trends among comparator countries, including the financial results of major pay-TV and free-to-air broadcasters. • The TV and audio-visual consumer section examines patterns of digital television take-up, including adoption of high-definition television services and digital video recorders. This section also examines how viewers in different countries consume broadcast television channels and TV online. Figure 3.1 TV industry metrics: 2013 UK FRA GER ITA USA JPN AUS ESP NED SWE POL SGP KOR BRA RUS IND CHN NGA TV revenue (£bn) 13.4 8.8 18.9 6.7 110.2 20.6 4.6 3.0 2.6 1.9 2.2 0.6 5.2 12.1 4.3 5.0 20.6 0.5 Revs change (% YOY) 3.4% 0.4% 2.5% -4.5% 2.0% 2.3% 3.4% -6.2% 1.5% 2.0% -1.3% 3.5% 5.8% 15.8% 13.6% 15.0% 16.6% 19.5% Revenue per cap (£) 210 134 230 109 348 162 199 63 158 202 57 110 106 61 30 4 15 3 from subscription 92 57 66 41 193 56 60 28 82 97 38 44 67 33 8 2 7 2 from public funds 59 35 105 25 0 32 33 5 29 43 1 0 7 0 0 0 0 0 from advertising 58 41 59 44 155 74 106 30 47 62 18 67 32 28 22 1 8 1 TV licence fee¹ 145.50 113.00 183.32 96.43 0.00 91.67 0.00 0.00 0.00 203.87 46.88 0.00 17.53 0.00 0.00 0.00 0.00 0.00 Platform Dsat IPTV Dsat DTT Dcab Dcab DTT DTT Dcab Acab Dsat DTT Acab Asat Dsat Acab Dcab Dsat Largest TV % of platform homes 42% 40% 43% 73% 40% 51% 70% 76% 48% 27% 58% 37% 29% 34% 34% 43% 39% 71% DTV take-up (%) 100% 95% 68% 100% 95% 100% 100% 99% 86% 73% 85% 100% 71% 36% 61% 56% 75% 84% Pay TV take-up (%) 52.8% 76.3% 57.1% 33.0% 84.1% 69.8% 29.1% 22.0% 98.5% 83.8% 84.2% 62.9% 93.9% 30.6% 68.4% 98.8% 61.0% 17.8% DSO date 2012 2011 2008 2012 2009 2012 2013 2010 2006 2007 2013 2020 2012 2018 2018 2017 2015 2016 TV viewing (min/day) 232 226 221 261 293 265 201 244 195 159 247 n/a 217 217 239 n/a 159 n/a Source: IHS/ industry data/ Ofcom The key market developments seen during the past year include: • Global TV revenues (including broadcast advertising, subscriptions and public licence fees only) increased by 3.1% in 2013 to reach £254bn. Subscription revenues continue to be the key driver of this growth, rising by 4.4% to reach £127bn, exactly half of the total. Advertising and licence fee revenues grew by1.9% and 1.6% respectively in 2013. • The UK is one of only five countries to have 100% of all main TV sets receiving digital TV (DTV) in 2013, along with Italy, Japan, Australia and Singapore. 117 • Consumers continue to embrace HDTV, although take-up of 3DTV services is slow. The UK equals the US in HDTV take-up, with 70% of respondents claiming to own a high-definition set, while 45% and 53% of consumers in the UK and US respectively claim to have an HDTV service. However, only 5% (UK) and 4% (US) of consumers claim to have a 3DTV service. • Almost a quarter of UK consumers claim to have a smart TV, with the vast majority (84%) having connected their TV and used the internet functionality. • A third of the online population in the UK use the internet to watch TV programmes or films at least once a week. UK viewers are more likely to watch TV programmes than films online. • Viewing of TV programmes and films in the UK is primarily driven by free-to- access broadcaster services, which have the highest levels of use across all countries researched. Subscription VoD services through a non-broadcaster are used more regularly in the UK than in other European comparator countries. 3.1.2 Global TV revenues up 3.1% in 2013, driven by continued growth in subscription revenues Global TV revenues increased by 3.1% in 2013 Ofcom estimates that global TV revenues increased in 2013 by 3.1% year on year, to £254bn. Global TV revenues have increased by 5.1% over the four-year period since 2009. Our analysis of global television revenues incorporates the three main components: net broadcast advertising revenue, TV licence fees and subscriptions. It excludes revenues generated from pay-per-view (PPV), video on demand (VoD) and over the top/streaming (OTT) services. Figure 3.2 Global TV revenues Revenue (£bn) 300 YOY CAGR £246bn £254bn (4yr) 250 £236bn £225bn £208bn 3.1% 5.1% 200 150 100 50 - 2009 2010 2011 2012 2013 Source: Data derived from PwC Global Entertainment and Media Outlook: 2014-2018 @ www.pwc.com/outlook. Notes: Ofcom is responsible for all growth calculations displayed. Ofcom uses an exchange rate of $1.563 to the GBP in line with the IMF average for 2013. 118 Growth was driven primarily by continued growth in subscription revenues The 3.1% increase in global television revenues; to £254bn in 2013, was driven primarily by continued growth in subscription revenues, which made up exactly half of the total included revenue. Advertising and licence fee revenues grew at a more modest 1.9% and 1.6% respectively in 2013. Global subscription revenues increased for the fourth year in a row, from £122bn in 2012 to £127bn in 2013; a year-on-year increase of 4.4%. Global net advertising revenues (NAR) growth has been steady since 2011 following a rise in 2010 as economic conditions stabilised. The steady recovery in NAR has been sustained in 2013, with revenues increasing 1.9% (or £2bn) to £103bn. As in the three previous years, public funding from TV licence fees saw little change in 2013 and remained around £24bn. Revenue from this source has changed little over the four-year period, increasing by just 1.5% per year on an average compound basis. Figure 3.3 Global TV industry revenues, by source % of revenues £208bn £225bn £236bn £246bn £254bn 100% YOY CAGR (4yr) 80% £84bn £93bn £97bn £101bn £103bn 1.9% 5.3% Advertising 1.6% 1.5% Public TV license fees 60% £23bn £24bn £23bn £24bn £24bn 4.4% 5.7% Subscriptions 40% 3.1% 5.1% All £102bn £109bn £116bn £122bn £127bn 20% 0% 2009 2010 2011 2012 2013 Source: Data derived from PwC Global Entertainment and Media Outlook: 2014-2018 @ www.pwc.com/outlook. Notes: Ofcom is responsible for all growth calculations displayed. Ofcom uses an exchange rate of $1.563 to the GBP in line with the IMF average for 2013 3.1.3 Digital take-up slows as more countries reach switchover The UK was one of only five countries where 100% of all main TV sets received digital TV (DTV) in 2013. In 2013, take-up of digital television (DTV)67 continued to slow overall. In only five comparator countries - France, Poland, Singapore, India and China - did the proportion of primary TV sets receiving DTV increase more quickly in 2013 than in 2012.