European Pay-TV Sector Faces Further Failures And Consolidation

With the exception of BSkyB in the UK, early entrants to the European pay-TV sector have generally seen their market share erode over the last few years, as new competitors have arrived. In the UK, however, Sky Digital has recently benefitted from the collapse of digital terrestrial outfit, ITV Digital (see BSkyB Results Beat Expectations With 6.1m Customers Now Signed).

However, analysts expect that the market leaders will recover their share of the market as rival operators exit the sector altogether (like ITV Digital and Spain’s Quiero) and further consolidation between operators also takes place. Both trends are forecast to continue, given the high costs involved in pay-TV.

In 2001, BSkyB was Europe’s second largest pay-TV operator with a 12.3% share of the total market and revenues of $4.0 million. Top of the pile is Canal+, which commands a 13.4% share of the market and revenues of $4.3 million, as shown.

Pay-TV And Cable Operators’ European Market Share 2001
	Revenue ($m)	% of market
Canal+	4,314	13.4
BSkyB	3,967	12.3
NTL	3,167	9.9
UPC	1,369	4.3
Telewest	1,251	3.9
Total	14,067	43.8
Source: Merrill Lynch/Zenith Media, September 2002

The UK market Pay-TV penetration stood at 42.4% at the end of 2001 and is expected to drop back to 41.1% for FY2002, due to the collapse of ITV Digital (see BSkyB’s Lead In UK Pay-TV Market Extends – Merrill Lynch Long-Term Forecasts).

BSkyB is expected to maintain its dominance of the UK market in the near future, peaking with a 64% market share this year. However, once cable groups NTL and Telewest Communications have completed their refinancing and forge the seemingly inevitable merger (see NTL Is Cleared For Reorganisation), cable should claw back some ground on Sky.

UK Pay-TV Market Share By Platform
	2001	2002F	2003F	2004F	2005F
BSkyB (Satellite)	53	64	63	61	58
Cable	35	36	36	36	36
Digital terrestrial (DTT)	12	0	0	0	0
DSL	0	0	1	3	6
Source: Merrill Lynch, September 2002