Pay-TV under pressure in Europe

13 January 2012

LONDON: Pay-TV operators in Europe are due to come under increasing pressure from rivals based in other markets and sectors, while also facing a difficult financial and regulatory climate.

The European pay-TV industry is valued at $36bn per year, and in many cases operators have built a strong position thanks to securing rights to show sports such as football, and high-profile movies.

BSkyB, the British satellite service, has delivered a robust performance despite the downturn, and is the region's largest pay-TV platform. Canal+, in France, also saw revenues rise last year.

In Italy, however, the rivalry between Sky Italia and Mediaset slowed growth for both firms, while Sky Deustchland, in Germany, has found the going hard as cable fees are often included in the rent or service charges paid by apartment block residents.

Al Jazeera, headquartered in Qatar, also spent over €280m to bag the rights for France's top football league and Champions League, and is thought to be competing with RTL's M6 and Bouygue's TF1 to show the UEFA Euro 2012 international tournament.

Claudio Aspesi, an analyst at Bernstein Research, suggested Apple's set-top box might benefit from the trends of consumer loyalty and greater scrutiny on the part of lawmakers.

"Its popularity and potential attractiveness as a distribution channel could drive the owners of rights towards it," he told the Financial Times.

"Moreover, European regulators are increasingly hostile to exclusive contracts and pay-TV companies may find it impossible to keep their most valuable content out of Apple's hands."

Informa, the insights provider, reported that pay-TV's penetration rates stand at 55% in Europe, measured against 90% in the US.

This total reached just 31% in Spain, where Discovery Networks is set to launch a free-to-air station, Discovery Max. It has already successfully followed such an approach with Real Time Italy.

"Where we see opportunities in markets where pay-TV may not be growing, and we can operate without undermining the traditional business, we will look to take advantage of it," Mark Hollinger, Discovery Networks International's president, said.

"There are plenty of forecasts for the year which show ad sales slowing down. A lot will depend on what the resolution is within the Eurozone. We understand the nature of an ad sales model is going to be more cyclical than the dual revenue stream. We're long-term investors in all of this."

Data sourced from Financial Times; additional content by Warc staff