With the siloed structure of the media world giving way to a more wide-open marketplace (or battlefield!), the resulting overlap among sectors requires analysis that pulls together pieces that were once separate. Since 1969 Kagan Research has provided financial analysis across the breadth of the media businesses with an eye to how all the segments of the media puzzle fit together. Examining each business by numerous financial metrics enables comparative analysis that is critical for media executives to decide where to expand, sinceas they are continually on the lookout for promising growth opportunities. TelevisionWeek is proud to announce that we have partnered with Kagan Research to bring our readers Kagan’s special in-depth analysis on a periodic basis. -Chuck Ross
When speculation surfaced earlier this month that AT&T was considering a $13 billion acquisition of Dish Network parent EchoStar Communications, the news was something of an echo from the United Kingdom market.
In recent months, United Kingdom multichannel giant British Sky Broadcasting- which with 7.6 million subscribers held a 68 percent share of the U.K. multichannel market-bought high-speed Internet provider Easynet Group for $375.1 million and launched a 19-channel TV package for mobile phones. Those two are but the latest in a string of initiatives at BSkyB, which is 37.6 percent owned and managed by Rupert Murdoch’s News Corp. The initiatives are designed to increase the operator’s return-path capacity and develop a multiplatform delivery strategy. That’s similar to what AT&T would do with an acquisition of EchoStar.
“The U.K. market has the most advanced competitive landscape in the world with both free-to-air and pay digital terrestrial TV, Internet protocol television, digital cable, and both free-to-air and pay direct-to-home,” said Kagan Research senior analyst Ben Reneker. “Within this landscape, dominant incumbents like BSkyB must innovate like mad, using market share leverage to fund diversification into promising allied sectors and to keep rivals at bay.”
BSkyB’s elbow-grease efforts to stay relevant in the fast-moving competitive landscape can be viewed as a playbook for U.S. operators who are able to consider telcos, mobile TV operators and pay digital terrestrial TV players as emerging threats that have yet to gain significant traction. Of course, News Corp. has managed DirecTV in the U.S. since 2003.
But the U.K. market clearly indicates competitive dynamics can change quickly to squeeze incumbent leaders. Kagan Research analysis indicates BSkyB’s commendable efforts to secure a land-base return path via Easynet and make headway into the mobile space will serve only to slow long-term market share erosion. Even with BSkyB maintaining a 3.7 percent compounded annual subscriber growth rate, Kagan Research forecasts BSkyB subscriber share of the U.K. multichannel market will drop from 68 percent in 2005 to 60 percent by 2015 while revenue share slides from 76 percent to 71 percent.
Competitive High Ground
While Kagan expects digital cable and direct-to-home to maintain their dominant share of the market, insurgent IPTV and pay DTT are in a position to capture households migrating from free TV to pay for the first time. Kagan expects pay DTT could be the primary pay TV platform for 1.6 million U.K. households by 2015, accounting for 9 percent of the multichannel household total.
DTT set-top boxes in Italy already use smart cards or SMS text messages to unlock premium content, including sports and pay-per-view movies. The ability to switch between free and pay DTT will be a powerful lure for households that would normally consider swapping their rabbit ears for a direct-to-home dish or cable box.
Despite Kagan Research’s forecasting some erosion in BSkyB’s subscriber and revenue market share, BSkyB’s method is the model for making all the right diversifications to retain the competitive high ground. With the Easynet acquisition, BSkyB’s Sky Over Broadband IP/VOD initiative can be considered a well-positioned answer to BSkyB competitor Video Networks’ Homechoice IPTV offering.
BSkyB is advancing on two fronts in mobile TV. Its Sky to Mobile strategy offering 19 channels covers third-generation and general packet radio services phones in use today. BSkyB is also a major contributor of TV programming for a digital video broadcasting/handheld mobile broadcast field trial in Oxford, England, that uses a new-generation Nokia handset for reception.
“Clearly, there is no silver bullet incumbents can fire to quash rising competition from IP and mobile competitors,” Mr. Reneker said. “Yet dominant direct-to-home and cable platforms can follow the BSkyB model and develop arsenals of services that meet the competition in the field.” -Kagan Research