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THE UK TELEVISION MARKET:AN OVERVIEW
September 2003
2
Contents
• Industry revenues and expenditure
• Multichannel platforms and digital TV
• Broadcasters and channels
• Programming and audiences
3
Sources of revenue to UK broadcasters
Source: ITC
Components of television revenue in 2002(12 months to end September)
Trend in share of main components,1997-2002
Net Advertising Revenue
44%£3.1 billion
Sponsorship1%£82 million
Sale of goods3%£248 million
Other4%£319 million
BBC licence fee spent on TV
26%£1.8 billion
SubscriptionRevenue*
21%£1.5 billion
NAR
Sponsorship
Subscription
Sale of goodsOther
BBC licence fee spent on TV
0%
10%
20%
30%
40%
50%
60%
1997 1998 1999 2000 2001 2002
* defined as subscription revenue to pay-TV channels, not platform revenue
4
UK TV Net Advertising Revenue by channel over time
Source: ITC, figures for 12 months to September of relevant year
Channel 3incl GMTV
Channel 4 incl S4C
Five
Cable and Satellite and other
0%
10%
20%
30%
40%
50%
60%
70%
80%
1997 1998 1999 2000 2001 2002
Channel NAR 2002
Five £221m
ITV1 £1,727m
Channel 4 £623m
Cabsat and Other
£575m
5
PQR
Cash Bids
Tender payments by Channel 3, Five and Additional Services licensees,1997-2002
Note: The drop in total tender payment in 1999 reflects the renewal of some Channel 3 licences. The increase in PQR in this year reflects the policy decision that more emphasis be given to the PQR component of tender payments.
The Broadcasting Acts 1990 and 1996 require that certain kinds of licence are awarded by the ITC after a process of competitive tender. Licences awarded in this way are required to make additional payments to the Treasury (via the ITC). Additional payments are in two parts. The first is a percentage, set by the ITC, of qualifying revenue (PQR). The second part is the cash bid, which on renewal is set by the ITC. This is index-linked and payable annually.
Source: ITC, calendar year figures
£ m
illio
n, n
omin
al p
rices
0
50
100
150
200
250
300
350
400
450
500
1997 1998 1999 2000 2001 2002
6
Programme budgets for the terrestrial channels, 2001-2003
0
200
400
600
800
1,000
1,200
BBC1 (Network)
BBC2 ITV1(Network)
C4 Five
2001
2002
2003
Source: Company reports, press reports and ITC estimates (for the BBC in 2003)
7
The UK programme supply market
Source: ITC
At the Secretary of State’s request, the ITC conducted a comprehensive review of the programme supply market in
autumn 2002.
The ITC made a series of recommendations which were accepted and incorporated into the Communications Bill. Among the actions proposed by the ITC were measures to strengthen
the growth potential of the independent production sector, including the requirement that public service broadcasters develop Codes of Practice to provide a clear framework for their
dealings with independent producers.
Size composition of UK production market by share of turnover 2001
BBC Granada
Carlton
SMG
FremantleMedia
EndemolTVCorporation
Otherindependents
8
International trade by UK TV companies
Source: ONS (2002 figures available in late 2003)
International transactions of TV companies,1999-2001
Others
North America
Other Europe
European Union
0
200
400
600
800
1,000
1,200
1999 2000 2001 1999 2000 2001
Exports Imports
£m
9
Contents
• Industry revenues and expenditure
• Multichannel platforms and digital TV
• Broadcasters and channels
• Programming and audiences
10
Range of available digital basic pay-TV packages (Satellite & Cable)
NTL
Sky
£12.50
Please note: prices for NTL and Telewest packages include phone line rental;installation charges are applicable for all three platforms
102 channels incl. some 90
free to air
Cost:
Cost:
Channels included:
Channels included:
£18.00
£15.50
More than 30 channels,incl. some 25 ‘free to air’
4 ‘themed’ packs (Popular, Knowledge, Kids/music, Lifestyle), each offering
some 113 channels (incl. FTA)
£18.50
187 channels (incl. FTA)
Source: Company literature, 30 September 2003
£28.00
Some 100 channels(incl. ‘free to air’)
Telewest
Cost:
Channels included:
£13.50
More than 30 channels,incl. some 20 ‘free to air’
£25.50
More than 100 channels(incl. ‘free to air’)
11
Source: ITC Multichannel Quarterly. (Please note that these figures do not currently take into consideration platform overlap, therefore all households are considered to be discrete multichannel units. However, the ITC is currently working on a methodology to report more accurately on multi-platform households.)
Multichannel TV take-up by platform
FTA satellite
Digital terrestrial
Analogue satellite
Analogue cable
Pay digital satellite
Digital cable
UK multichannel TV growth, 2000 - 2003
2000 2001 2002 2003
Mill
ions
of
subs
crib
ers
0
2
4
6
8
10
12
14
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
UK Digital TV Penetration, Quarter 2, 2003
PlatformHouseholds
(‘000s)% of UK TV households
Digital Cable
2,188 8.8%
Pay DigitalSatellite
6,559 26.4%
ADSL 11 0.0%
FTA DigitalSatellite*
739 3.0%
Digital Terrestrial*
1,790 7.2%
Total 11,287 45.5%
* ITC estimates
12
How people are watching free-to-air digital television, Q2 2003
FTA DTT Adaptors
797,000 (32%)
Following the launch of Freeview the number of set-top boxes in use (from manufacturers
such as Pace) is increasing rapidly
Ex-ITV Digital
600,000 (24%)
We estimate that 600,000 of ITV Digital’s ex-subscribers now use the set-top box to receive Freeview services
Sky FTA
738,900 (29%)
Sky’s FTA set-top box offer has been re-introduced at £120, although it is not actively marketed. This figure also includes estimates
of ex-Sky subscribers who continue to use their set-top box for FTA services
iDTV
393,000 (16%)
The number of iDTV sets is beginning to
show significant growth
Source: ITC estimates
13
Share of multichannel television homes by platform, Q2 2003
Share of multichannel homes in the UK
Source: ITC
Satellite59%
Cable26%
Digital Terrestrial TV14%
ADSL0%
14
The cable industry has seen significant consolidation in the last decade
Major Cable Operators
Atlantic Telecom
BT
Cable & Telecoms
Cable & Wireless
CableTel
Comcast Europe
ComTel
Convergence Group
Diamond Cable
Eurobell
General Cable
Telecential
Telewest
1997
13 companies controlling 155 regional franchises
Today
2 major operators
1992
29 companies (19 from the US or Canada)
Bruncor;Coastal/Leonard;
Diamond Cable;IVS;
N-Com;Scotcable;
United Artists/US West;
Yorcan;BT;
Comcast;English Cable;
Jones Intercable;Nynex;
Starstream;
US Cable Corp;Cable
Corporation;CUC;
General Cable;Leicester/Fundy;
PacTel;Southwestern
Bell;Vento/Wash Post;
Cable London;Devanha Group;
Insight;Maclean Hunter;Alan Robinson;
Telecable;Videotron;
There are also twosmaller operators:
(Isle of Wight)
(NW England and SW Scotland)
Source: Cable Yearbook and ITC
15
BT Openworld and BT
Broadband accounted for
51% of all ADSL connections in Q2
2003
Source: Company data
Growth in broadband internet subscribers 2001-2003
Note: most broadband internet connections do not currently support
TV broadcast services
ADSL
NTL
Telewest
Hou
seho
lds
(mill
ion)
2001 2002 2003
147,000222,000
330,000
479,000
748,000
1,047,000
1,334,000
1,760,000
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2,152,000
16
Take-up of digital television compared with other home technologies
Source: ITC
Digital TV’s strong initial growth is, in part, a result of the move to switch existing subscribers from analogue todigital packages - by 1998 analogue multichannel TV had already achieved penetration of some 25% of households
Colour TV Sets1969-1978
VCR1980-1989
PC1984-1993
Satellite1987-1996
Digital TV1998-Q2 2003
0
10
20
30
40
50
60
70
80
0 1 2 3 4 5 6 7 8 9Year after launch
Pen
etra
tion
(% o
f ho
use
hold
s)
17
Forecast take-up of digital TV
Source: ITC / BBC
Digital television take-up, 1998-2007
Total UK households95% of householdsUpper scenarioAverage of City analystsLower scenario
0
5
10
15
20
25
30
98 99 00 01 02 03 04 05 06 07Year-end
UK
hou
seho
lds
(mill
ions
)
58%
78%
In 2002, the Secretary of State asked the ITC and BBC jointly to examine what the future growth of digital penetration might be in the UK. Given the particular difficulty of generating projections at that time, we considered two possible scenarios for the market’s development. The “upper” scenario is generated by a generally favourable set of market conditions for the three main digital platforms (satellite, cable and DTT). The “lower” scenario arises if conditions prove more negative and / or operators adopt more limited strategies.
In the upper scenario, digital penetration roughly doubles over the next five years, from 10 million households at the end of 2002 to around 20 million by the end of 2007, a 78% penetration rate. Growth is more modest in the lower scenario, with take-up rising to just under 15 million (58% penetration) by the end of 2007.
18
Contents
• Industry revenues and expenditure
• Multichannel platforms and digital TV
• Broadcasters and channels
• Programming and audiences
19
Key milestones in the history of commercial television in the UK
1955: ITV launches - regulated by the
Independent Television Authority (ITA)
1969: ITV goes colour
1972: ITA becomes the Independent
Broadcasting Authority (IBA)
1981: First subscription
service, Starview, begins
1982: Channel 4 and S4C launch
1984: First cable service
is licensed
1989: Sky television launches
a four-channel service on satellite
1990: BSB launches on satellite - Sky and BSB merge to form BSkyB
Source: ITC
1991: Independent Television Commission (ITC) is successor to IBA; the first competitive tender is held for
Channel 3 licences
1997: Channel 5 (now Five) launches
1998: Digital TV launches
2002: ITV Digital goes into administration;
Freeview launches in November; number of
channels available in the UK now exceeds 200
20
Performance of the terrestrial channels and their subsidiaries
Source: ITC and BARB
* Share figures for terrestrial channels are for all homes in August 2003; figures for the subsidiary channels are for multichannel homes in August 2003 and are only available for those channels with 0.1% share and above.
BBC1
BBC2
ITV1
Channel 4
Five
24.5%
11.5%
22.9%
9.7%
6.3%
BBC
BBC
See nextslide
Channel 4
RTL (65%);UBM (35%)
Channel Share*Owner
BBC3 (0.7%); BBC4 (0.2%); CBBC (0.6%); CBeebies (1.2%); BBC News 24 (0.6%);
BBC Parliament (n.a.)
See BBC1
ITV2 (1.8%); ITV News (0.2%)
E4 (0.7%); FilmFour (0.1%)
n.a.
‘Subsidiary’ channels (share*)Logo
21
The ITV licensees - ownership structure
ITV
Scottish Media Group
Carlton GroupGranada Group
Anglia
Border
Granada
LWT
Meridian
Tyne Tees
Yorkshire
Central
Carlton
HTV
Grampian
Westcountry
Scottish
Ulster
Channel
GMTV** Owned jointly by Carlton, Granada, SMG and Disney
22
Terrestrial licensees must meet targets for original programming...
Source: ITC; Channel 4 Annual Report
ITV, Channel 4 and Five all have requirements in their licences to produce a set amount of original programming each year.
Note: Channel 4’s original programming target was only introduced as a licence requirement in 1998;prior to this the figures were reported in Channel 4’s Annual Report.
Original programmes as a percentage of total output, 1997-2002
ITC Licence Requirement for original programmes and actual performance, 2002
Achieved in 2002
ITC LicenceRequirementFive
55%58%
Channel 460%
67%
ITV65%
81%%
ITV
Channel 4
Five
0102030405060708090
100
1997 1998 1999 2000 2001 2002
23Source: ITC
ITV, GMTV, Channel 4 and Five all have requirements in their licences to commission a set amount of programming from
independent producers each year.
ITC Licence Requirement for independently produced programmes and actual
performance, 2002
Qualifying independents as a percentage of total qualifying output,
1997-2002
…for qualifying hours commissioned from independent producers...
Achieved in 2002
ITC LicenceRequirement
%
ITV
Channel 4
Five
25%
86%Five
25%
66%Channel 4
25%
30%ITV
0102030405060708090
100
1997 1998 1999 2000 2001 2002
24
…and for programme production outside London
Source: ITC Annual Report 2002
ITV1, Channel 4 and Five are required to spend a proportion of their programming budget on production outside London. The requirements for 2002
for each channel are listed below.
ITV1 = 50%
Channel 4 = 30%
Five = 10%2001
2002
50.3%
56.0%
ITV1
29.0% 30.0%
Channel 4
12.8% 11.2%
Five
25
UK multichannel television: most popular channels
* Share figures are for multichannel homes in August 2003
† UKTV is a 50:50 joint venture between Flextech‡ and BBC Worldwide
‡ Flextech is owned by Telewest
Channel Owner Share*Logo
Sky Sports 1 BSkyB 2.1%
ITV2 Carlton (44%); Granada (56%) 1.8%
CBeebies BBC 1.2%
UK Style UKTV † 1.2%
UK Gold UKTV † 2.5%
Sky One BSkyB 2.8%
Sky Premier 1 Sky 0.9%
Sky Sports 2 BSkyB 1.0%
Source: ITC
Nickelodeon BSkyB (50%); Viacom (50%) 1.0%
Source: ITC and BARB
Hallmark Crown Entertainment Ltd 0.9%
26
Contents
• Industry revenues and expenditure
• Multichannel platforms and digital TV
• Broadcasters and channels
• Programming and audiences
27
Audience share in all homes by channel, 2000-2003
Source: BARB
(CAGR*)
BBC1 (-1.4%) (13.5%)Other
ITV1 (-7.4%)
BBC2 (-0.8%)
C4 (-2.7%)
Five (2.8%)
%
* CAGR = Compound
Annual Growth Rate
0
5
10
15
20
25
30
35
Q22000
Q3 Q4 Q12001
Q2 Q3 Q4 Q12002
Q2 Q3 Q4 Q12003
Q2
28
%
Audience share in multichannel homes by channel, 2000-2003
Source: BARB
(CAGR)
BBC1 (-0.6%)
(1.4%)BBC2
(-6.0%)ITV1
(0.1%)C4
(3.9%)Five
(2.7%)Other
* CAGR = Compound
Annual Growth Rate
0
5
10
15
20
25
30
35
40
45
50
Q22000
Q3 Q4 Q12001
Q2 Q3 Q4 Q12002
Q2 Q3 Q4 Q12003
Q2
%
29
Audience share in analogue terrestrial homes by channel, 2001-2003
Source: BARB
%
BBC1
BBC2
ITV
CH4
Five
0
5
10
15
20
25
30
35
40
Q22001
Q3 Q4 Q12002
Q2 Q3 Q4 Q12003
Q2
30
Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2000-2003
Source: BARB
%
BBC1
BBC2
ITV
CH4
Five
40
50
60
70
80
90
100
Q2
2000
Q3 Q4 Q1
2001
Q2 Q3 Q4 Q1
2002
Q2 Q3 Q4 Q1
2003
Q2
31
Viewer profiles by type of television received
Profile of viewers by type of service and age, Q2 2003
Profile of viewers by type of service and social class, Q2 2003
Source: BARB
Children
16-34
35-54
55+
ABC1 C2DE
Analogueterrestrial
homes 62%38%
Multi-channelhomes
55%45%
Allhomes 59%
41%
Analogueterrestrial
homes 52%25%
17%6%
Multi-channelhomes 23%
37%27%
13%
Allhomes
35%31%
22%11%
32
Hours viewed per household per day by age, social class and platform, Q2 2003
Source: BARB
All homes
Multichannelhomes
No
of
hou
rs
0
1
2
3
4
5
AllIndividuals
ABC1 C2DE Children 16-34 35-54 55+
33Source: BARB
Audience share by region, ITV1 compared with BBC1, Q2 2003
ITV1
BBC1
%
0
5
10
15
20
25
30
35
Borde
r
Ulster
North
Eas
t
Yorks
hire
Midl
ands
North
Wes
t
Wale
s
Scotla
nd
East o
f Eng
land
Wes
t
South
Eas
t
Lond
on
South
Wes
t
34Source: BARB
Audience share for regional news programmes by region,ITV1 compared with BBC1, Q2 2003
ITV1
BBC1
%
0
5
10
15
20
25
30
35
40
45
Ulster
North
Eas
t
Borde
r
South
Eas
t
Scotla
nd
Midl
ands
Lond
on
Yorks
hire
Wes
t
North
Wes
t
East o
f Eng
land
Wale
s
South
Wes
t
35
Number of TV sets
Total (%)
Three 27
One 19
Five + 6
Two 36
Four 12
Number of television sets in the home
No. of days Total (%)
5 4
7 85
1 or 2 2
6 4
3 or 4 4
Less thanonce a week
< 0.5%
Number of days watchingtelevision in an average week
Note that the figures presented are for individuals, not households e.g 19% of individuals live in a
household with only one TV set
The number of television sets per household and the number of days spent watching television in an average week
Source: The Public’s View 2002