(section): Inside TV (page 2)
Growth in the pay TV market will outpace most other forms of entertainment in Australia but it may be stymied by a new phase of competition from the free-to-air sector when it begins multi-channelling next year, reports Pip Bulbeck.

The pay TV sector is set to outpace all other parts of the Australian media and entertainment industry with the exception of the internet in the next five years, growing by 12.1 percent to be worth $3.776bn in 2012. In their latest Australian Media and Entertainment Outlook, analysts Price Waterhouse Coopers also predict growth in the free-to-air television sector will be slower at 3.8 percent per annum, although free-to-air TV will still rake in more than $4.18bn in revenues in 2012.

Growth in pay TV will come from both consumer spending on subscriptions, and advertising. By 2012, 38 percent of Australian households are tipped to spend $3.13bn on pay TV services, while ad revenues on pay TV will reach $643m.

Yet while the outlook for the pay TV sector continues to be strong, some analysts are tipping further slowing of growth in subscriber numbers in the near term.

Sydney-based consultancy Connections Research’s new Digital Atlas survey last month suggested pay TV subscriptions would plateau at 33 percent while growth in free-to-air digital households continues to rise strongly. Just over 28 percent of Australian households currently subscribe to pay TV – 1.55 million customers are signed up to Foxtel and 700,000 to Austar. But Connections boss Graeme Philipson says subscriptions will grow by just two percent this year, to reach 30 percent penetration nationally.

“Pay TV looks like plateauing at about one third of all households,” says Philipson. “Its growth rate is declining, and it is getting more difficult for the pay TV providers to attract new customers. At the same time, the number of households capable of receiving free-to-air digital TV is growing strongly. Pay TV’s difficulties will only increase as more free-to-air digital channels come on stream, and as more and more people use the Internet TV and web-based video and demand services,” he added. One in two households now receive digital free-to-air TV and that will grow to 66 percent by the end of the year, according to the Connections survey.

PwC partner for technology, entertainment and media David Wiadrowski notes in his outlook that Federal Government concessions to encourage free-to-air operators to begin multi-channelling and promote the take up of digital TV through to 2013 will hold back the growth of pay TV.

The free-to-air networks are expected to launch at least five new channels some time early in 2009. But Nine Network CEO David Gyngell sees the rollout of new free-to-air multi-channels as both a threat and an opportunity.

The commercial impact of the new channels (with programming yet to be announced) is uncertain and the business models will take some time to evolve, Gyngell says. “The need to provide compelling content for consumers will have to be balanced with the need to build a strong commercial case. If we get the balance right, multi-channels will provide an opportunity to grow the platform by providing even more great content.”

This article appeared in IF #114 October 2008

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