Satellite is now making significant inroads in the United States and new figures indicate that cable’s domination of the multichannel market could be soon be a thing of the past.
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Television Bureau of Advertising (TVB) reports that national ADS penetration reached 17.0% in May 2003, up from 15.1% at the same time last year. This increase can be largely attributed to direct broadcast satellite (DBS) which has seen its share of the market grew from 13.8% to 15.8% over the past year.
These figures are based on Nielsen Media Research data which also shows that in the space of twelve months, wired cable penetration fell from 70.6% to 68.1%, the lowest level recorded for seven years.
“Advertisers who buy cable locally need to know that local wired cable systems’ ability to deliver commercials continues to erode. In fact, 52 markets now have ADS penetration of 25% or more,” said Susan Cuccinello, Senior Vice President of Research at TVB. “For while a local broadcast commercial is seen by a viewer whether he or she is watching that station over wired cable or satellite, local cable commercials are not seen in ADS homes.”
Satellite is also perceived to offer a better consumer experience than cable. This was a point emphasised by Chase Carey, CEO and President of Hughes Electronics, at this week’s Merrill Lynch Media Conference in London.
The US pay TV market is bracing itself for a thorough shake-up if and when Rupert Murdoch’s takeover of satellite operator DirecTV is approved by the regulators (see Murdoch Puts The Case For Sky America). The plan is to replicate the BSkyB model with a raft of new services and Carey stated that 1 million annual net additions is a realistic target in the near future.
A key objective is to reduce churn, namely the proportion of customers leaving the service from its current level of between 18% and 20%. However, structural market differences mean that it is unlikely that DirecTV will approach BSkyB’s churn rate of just over 9% (see BSkyB Adds 150k New Subs In Q3, Strong Financials).
Carey echoed the thoughts of Sky’s chief executive Tony Ball in voicing his opinion that personal video recorders will become a mass market product (see Forecasts). According to Merrill Lynch, PVR users are an attractive audience because they generate higher ARPU and approximately 50% lower churn than other users.
Cable operators plan to hit back with the imminent rollout of HDTV and video-on-demand. However, broadband remains the greatest threat to DirecTV and satellite TV is looking to offer a competitive data service in urban markets. This may require enhanced relationships will local telephone operators or connectivity via utilities’ power grid.
