Pay-TV Outstrips Ads as Main European TV Revenue Source

16 February 2006

According to a new report from ZenithOptimedia London, the ability of television to increase its share of advertising revenue at a greater rate than rival media is "over for good".

The report, Television in Western Europe to 2014, reveals that western Europe's commercial broadcasters now derive more income from subscriptions than from advertising revenues - in 2005 the former exceeded the latter for the first time.

Among the survey's other findings ...

  • Expenditure grew only 0.3% in real terms in 2005. The [soccer] World Cup will stimulate some extra expenditure, but we forecast real growth will only rise to a below-trend 2.2% in 2006.

  • In real terms, the ad market is not expected to return to its 2000 level until 2008.

  • In the long run, we expect television advertising to grow 3% a year in real terms, or 6% in current prices - the same rate as the market as a whole.

  • Pay-TV subscription revenues continue to grow strongly - penetration is still rising and subscribers are paying more for better services.
Continues the report: "For many years television steadily increased its share of western European ad expenditure, as public broadcasters and commercial monopolies gave way to fierce competition among commercial channels, unlocking plenty of extra value for advertisers."

"Now, however, television's share of ad expenditure is levelling off as the internet takes over as the up-and-coming advertising medium."

At the end of 2004 61% of households in Western Europe had cable, satellite or digital terrestrial television, up from 22% in 1991. Penetration has grown steadily since the 1980s (with the exception of a slight decline in 2003), and as services have improved and expanded over the years, subscribers have generally been persuaded to pay more for them.

ZO estimates the average subscriber paid $29 (€24.38; £16.72) a month for pay-TV in 2004, up from $25 in 2000 and $12 in 1991. It also predicts that pay-TV subscriptions overtook advertising as the main source of commercial television revenues in 2005, and will account for 57% of commercial revenues in 2014.

Satellite television has increased in penetration by over 13 percentage points from 9.1% in 1996 to 22.4% in 2004, but cable is still more popular - at 33% penetration in 2004 - and is expected to remain so.

Most satellite television in Western Europe is now digital, but only 13% of cable households receive digital services. The process of upgrading cable systems to digital is expensive, and there is often little demand for digital cable in markets where viewers are used to receiving cheap and generous analogue packages.

By the end of 2004, however, almost 33 million households in Western Europe subscribed to a digital pay-TV service, including pay-DTT.

Digital pay-TV penetration has grown from 0.4% in 1996 to 21.2% in 2004, and ZO forecasts it will increase to 43.0% of all households by 2014.

Data sourced from ZenithOptimedia; additional content by WARC staff