This Key Note report reviews the market for free-to-home (FTH) or free-to-air (FTA) television services, in other words television channels where the consumer does not have to pay a fee for viewing the service.
In 2003, the UK FTA television market was worth an estimated £3.03bn in terms of net advertising revenue. The market has largely stagnated in revenue terms since 2001, reflecting a reluctance on the part of some large companies to invest in mass-media television advertising and growing competition for television audiences from the BBC (British Broadcasting Corporation) and non-terrestrial television.
At the end of 2003, FTA television accounted for an estimated 58.6% of all UK households that had a television and for 26.9% of UK multichannel and 29.1% of UK digital households. There were 14.43 million FTA households in the UK at the end of 2003, a decrease of 4.2% from the end of 2002.
The FTA market divides into digital services, including Freeview and satellite services, and analogue terrestrial services. Analogue terrestrial services are declining in the market, while digital services are growing strongly. However, the UK market remains dominated by the terrestrial platform, which in turn is monopolised by one key player, ITV PLC, which is both the leading platform operator and a leading content provider. The market has shown over its 20-year history that scale is a key driver of commercial success, which has led to consolidation. Today the industry is effectively an oligopoly, with only five key players: ITV PLC, Channel 4, Channel Five (terrestrial television), and Freeview and BSkyB (digital).
A number of the leading companies in the industry, like ITV PLC, Channel 4 and Freeview, either are not commercial companies in the traditional sense, or have not been operating long enough for a run of audited accounts to be available. Consequently, unlike other Key Note reports, this report does not include company financials in Chapter 10 - Company Profiles. The major players are, however, profiled in the Chapter 4 - Competitor Analysis and latest turnover and profit figures are shown, where available.
Considering the main companies in the market, it is important to differentiate between ITV PLC and the ITV network. ITV PLC was formally Carlton and Granada and is the main holder of ITV franchises in the UK, the owner of LWT and also owns 50.5% of GMTV. The ITV network consists of ITV PLC as well as owners of ITV franchises in Scotland (SMG PLC), Northern Ireland (Ulster TV) and the Channel Island (Channel Television). ITV PLC is the dominant ITV franchise hold but is not the whole ITV network.
Despite consolidation of the industry, which has seen ITV in England and Wales become a single operation, competition remains intense and the introduction of a digital FTA competitor to the analogue market has made competitive pressures even stronger. The level of competition will intensify in the future as new competitors, such as Top-Up TV and low-cost pay-TV packages from BSkyB, enter the market.
Today the market is in crisis. Digital television is taking a growing share of the market, while the analogue FTA terrestrial sector is increasingly losing out to the pay-TV platform. By 2008, the FTA market will essentially be a digital, not an analogue, market - a fact ensured by the proposed 'switch off' of the analogue television signal progressively between 2006 and 2010.
The proposed 'switch off' of the analogue television signal will create a competitive battle to sign up the remaining television households that currently do not access digital television. At present, Freeview appears to have an edge in this regard, as it is appealing to people who have been sceptical about subscribing to digital pay-TV. However, the pay-TV operators are set to alter their marketing and service packages to compete. The analogue television providers will progressively change to a digital platform.
Key Note predict that between 2004 and 2008, advertising revenue for the FTA platform providers will grow by 20% in current price terms.
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