UK TV advertising revenue is predicted to be increasingly fuelled by multi-channel broadcasters as traditional commercial channels become constrained by the success of their digital counterparts, according to a report by PricewaterhouseCoopers, commissioned by Government regulator Ofcom.
The report identified two different scenarios for the adoption of digital TV technology by households in the run up to the digital switchover(see
Ofcom Puts Steps In Place For Early Digital Swith-Over), expected in 2012.
Scenario A predicts digital television penetration to be relativity slow until the analogue switchover forces households to install the new technology, whereas scenario B forecasts the digital switch over to occur rapidly over the next few years.
In the first case, PricewaterhouseCoopers expects 75% of UK households to have adopted the technology two quarters before the switchover, and for the second the analysts predict 90% to have installed digital TV equipment.
Both of the scenarios forecast that television net advertising revenue (NAR) for traditional channels are not likely to grow significantly over the next decade, with gradual declines in real revenues over time.
In contrast, NAR for multi-channel programming is predicted by PwC to rise rapidly during the following ten years in both scenarios, with scenario B seeing stronger growth. However, growth in multi-channel TV audiences would have a more positive impact on multi channel NAR as it is relatively more price elastic.
The second quarter of 2004 saw the total number of UK households with access to multi-channel digital television increase to 55%, up from 53% in the previous quarter(see Multi-Channel Television Statistics Q2 2004), according to figures published by Ofcom in September last year. Overall digital penetration in the period increased by 2.4% year on year, reaching 55.4% of UK households, driving multi channel reach to 59.1%.
In addition increased competition from the new BBC channels will have an impact on advertising revenues, as will the Corporation’s commercial activities and increasing viewer share, according to the report. The BBC’s successes are expected to affect traditional and multi-channel viewing in equal measure, although the “higher estimated price elasticity of demand for multi-channel” is predicted to have a greater impact on the revenues of multi channel operators.
PwC’s forecasts for total TV NAR are broadly in line with expected wider GDP growth for the UK, which suggests that total NAR will retain a similar share of the UK economy over time.
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