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KEY NOTE Market Report Cable & Satellite TV : July 2004

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This report covers:key trade associations, Cable Telecommunications Training Industries, The Digital Television Group, EuroPacketCable Forum, Platform and Service Providers, content providers/rights owners, software/applications developers, hardware vendors and distributors,global market, Europe, US, Asia-Pacific, Latin America,

Companies covered include: British Sky Broadcasting Group, NTL Group, Telewest COmmunications, ITV, Flextech Television, Discovery Networks International (DNI),Telewest Communoications, The Walt Disney Company, Channel Four Group, Viacom UK,

EXECUTIVE SUMMARY

The UK cable and satellite TV market was worth £3.3bn in 2003. The market has grown by 59.6% since 2000 on the back of strong growth in subscriber numbers and a constant push by the platform operators to raise the average revenue per subscribing unit (ARPU). In 2004, Key Note expects revenue to reach £3.7bn.

The market segments into four sectors: analogue cable, digital cable, paid-for satellite and free satellite. Only the digital cable and paid-for satellite are assumed to have a long-term future in the UK.

The UK market is dominated by the satellite platform and one key player, BSkyB, which is both the leading platform operator and a leading content provider. BSkyB's only rivals are the cable companies — Telewest, which like BSkyB acts as both a platform provider and content provider, and NTL, which although larger than Telewest in terms of its platform operations does not supply content. Given the segmentation of the cable market into distinct franchised areas, the industry operates effectively as a duopoly, with consumers choosing between one cable operator and BSkyB in each franchise area.

Despite the duopoly nature of the market, competition is fierce and all three main players now face a new competitive challenge from the rapidly growing free-to-air digital terrestrial platform, Freeview.

The cable and satellite industry is set for major changes between 2004 and 2008 as there will be a competitive scramble to sign up households given the proposed switch off of the analogue TV signal between 2006 and 2010.

The cable and satellite TV companies will be competing among themselves and with rivals like Freeview. To compete against the likes of Freeview, the cable and satellite platform operators will need to create a new marketing strategy based on updated tariff structures and service packages. In particular, a new segment of the market will be created as cable and satellite companies offer Lite service options, which provide access to a restricted set of services for a relatively low monthly subscription package. The Lite services will compete head on with the Freeview-style services.

In the mainstream market, interactive services, more broadly based family entertainment programmes and greater customer control over programme scheduling and start times will become the norm.

By 2008, Key Note expects just over 60% of TV households to be signed up to cable and satellite services with the multi-digital TV home firmly established, that is homes that subscribe to both Freeview and a digital cable or satellite TV service.

TABLE OF CONTENTS

Text © 2004 Key Note

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Last updated by Amanda Porteous September 2004