Not all distributors created equal

PwC: Video to drive cablers, telephony to become content kings

Behind the Internet space, TV distribution is one of the fastest-growing parts of the media and entertainment sector, and it will overtake newspaper publishing and TV networks in terms of revenue by 2009, according to PricewaterhouseCoopers.

"We still have a lot of growth left in broadband, subscription TV and mobile," said PwC advisory services partner Michael Kelley, adding that the continued upward trend also should benefit content producers. "This will continue to create demand for content."

However, not all TV distributors are created equal. PwC predicts that in the U.S., satellite TV providers will start losing customers in 2010. On the other hand, cable operators, which have had success with bundled services, and especially telecommunications firms, which are pushing into video services and are expected to increasingly focus on their own offers rather than on bundling alliances with satellite firms, will add subscribers.

It is not surprising then that the global consultancy's recent "Global Entertainment and Media Outlook: 2007-2011" cites continued revenue growth for cable operators and the entrance of telephone companies into the video space as key driving factors for the global TV distribution space. Plus, in Asia Pacific, "mobile television will expand rapidly and become a significant component of the market," the report indicated.

Overall, TV distribution "remains a stalwart of the industry," PwC partner Stefanie Kane summed up during the report's recent launch event.

In 2006, the global TV distribution market expanded 9.4% to $160.6 billion, up from a 6.5% gain in 2005, according to PwC. The consultancy projects a 9.3% compound annual growth rate for the 2007-11 frame to $250.8 billion, with the U.S. experiencing the smallest gain at 5.4% to $123.3 billion and the Asia Pacific region growing strongest at a CAGR of 18.1% to $46.4 billion.

Asia will add more than 120 million subscriber homes during the five-year period, driven by increases in China and India, according to PwC. One key driver in Asia will be mobile TV, where PwC expects to see spending expand from an estimated $26 million in 2006 to $623 million in 2008, about $1.7 billion in 2009 and finally $6.5 billion in 2011.

"Mobile will emerge as a key new TV licensing business" and not only for big events like the soccer World Cup, Kelley said. "We're just on the cusp of the mobile TV delivery breakthrough."

According to PwC's estimates, TV distribution was the fourth-biggest segment of the global media space in terms of revenue in 2006. Internet advertising and access spending will remain the top revenue category during the next five years, the consultancy projects. However, TV distribution will overtake newspapers in 2008 and TV networks in 2009.

Within the TV distribution space, competition has been heated as cable, satellite and phone players are fighting for their share of a growing pie.

While industry spending will increase worldwide, PwC predicts that cable will see slight subscriber gains in the U.S. through 2011, while Western Europe will experience a slight decline.

Satellite TV, meanwhile, will grow its customer base faster in Western Europe than in the U.S. from 2007-11. And telecommunications firms will see rapid increases in users in both regions, according to PwC.

While telecom video subscribers will remain behind cable and satellite TV during the five-year period, the 52.5% U.S. CAGR will catapult phone companies to 14 million users by 2011, or about half the customer reach of satellite, PwC projects.

In Western Europe, telecom video users could hit 20.1 million, according to PwC. That would be more than half the 33.6 million that satellite TV is expected to reach by then.

In the U.S., PwC sees "declining rates of expansion in the (satellite) household universe through 2009 and decreases to occur during 2010-2011 as subscribers switch to cable or telephone company packages."

But the report lauds the success in phone companies' early video rollouts, adding, "We look for subscriber growth to accelerate in 2009 as the next wave of rollouts occurs."
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