developments in the uk television market december 2002
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DEVELOPMENTS IN THE UK TELEVISION MARKET
December 2002
2
Contents
• Industry Figures
• Digital TV
• Programming and Audiences
• Focus on ITV
3
Sources of UK television revenue...
Source: ITC
Components of television revenue in 2001
Net Advertising Revenue
44%£3.4 billion
Sponsorship1%£84 million
Sale of goods4%£312 million
Other5%£382 million
BBC licence fee spent on TV
21%£1.7 billion
SubscriptionRevenue
25%£2.0 billion
...and trend in share of main components,1995-2001
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
1995 1996 1997 1998 1999 2000 2001
NAR
Sponsorship
Subscription
Sale of goodsOther
BBC licence fee spent on TV
4
0%
10%
20%
30%
40%
50%
60%
70%
80%
1995 1996 1997 1998 1999 2000 2001
Channel 3 incl GMTV
Channel 4 incl S4C
Five
Cable and Satellite and other
UK TV Net Advertising Revenue by channel over time...
Source: ITC
5
PQR
Cash Bids
Tender payments by Channel 3, Five and Additional Services licensees,1993-2001
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
£ m
illio
n, n
omin
al p
rices
0
50
100
150
200
250
300
350
400
450
500
1994 1995 1996 1997 1998 1999 2000 2001
6
Contents
• Industry Figures
• Digital TV
• Programming and Audiences
• Focus on ITV
7
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-Sep 2002
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 hou
seho
lds)
8Source: Company data
Pay TV take-up by platform
UK Multichannel Pay-TV Penetration, Quarter 3, 2002
PlatformHouseholds
(‘000s)% of UK TV households
Digital Cable
2,037 8.4%
DigitalSatellite
6,063 24.9%
Analogue Cable
1.333 5.5%
Total 9,433 38.7%
* Please note: ITV Digital went into Administration on 27 March 2002 and ceased trading on 1 May, therefore we have only included subscriber numbers up to 31 March 2002.
UK Pay-TV Growth, 1999 - 2002
Analoguemultichannel
ITV Digital*
Sky Digital
Digital Cable
Mill
ions
of
subs
crib
ers
1999 2000 2001 2002
0
2
4
6
8
10
12
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
9
How people are watching free-to-air digital television, Q3 2002
Sources: Estimates for iDTVs are provided by Intellect, all other figures are ITC estimates
Sky FTA Churn317,000 (20%)
We estimate that 25% of Sky’s ex-subscribers still use the set top box to obtain FTA
channels
Sky FTA Viewers 230,000 (15%)
More than 200,000 households are estimated to have taken advantage of Sky's £100 FTA box
offer before it was withdrawn in early 2002 - it is being re-introduced in early 2003
Ex-ITV Digital600,000 (37%)
We estimate that 600,000 of ITV Digital’s ex-subscribers now use the
set-top box to receive Freeview services
iDTV308,000 (20%)
The number of iDTV sets is beginning to show
significant growth
FTA DTT Adaptors120,000 (8%)
A small number were using set top boxes provided by manufacturers such as Pace -
following the launch of Freeview this number is expected to increase rapidly
10
Quarterly growth in pay-TV subscribers
Digital
Analogue multichannel
Total multichannel
Source: Company data
-40%
-20%
0%
20%
40%
60%
80%
100%
2000 2001 2002
Q1 Q1 Q1 Q2 Q2 Q2 Q3 Q3 Q4 Q4 Q3 Q4
1999
Q3
11
Range of available digital basic packages (Satellite & Cable)
More than 20 channels, mostly
free to air
NTL
Telewest
£15
Sky
£12.50
Please note: prices for NTL and Telewest packages include phone line rental;installation charges are applicable for all three platforms
More than 14 channels, mostly
free to air
Channels included:
Cost:
Cost:
Cost:
Channels included:
Channels included:
More than 40 channels
£19.50
£18.50
£15.50
More than 20 channels,mostly free to air
4 ‘themed’ packs (Popular mix, Knowledge, Kids/music, Lifestyle
pack), each offering some 25 channels
Some 44 channels
£21.50
More than 70 channels
£25.50
£18.50
More than 70 channels
Source: Company literature, January 2003
£25.50
More than 70 channels
12
ADSL
NTL
Telewest
‘000
s
-
200
400
600
800
1,000
1,200
Q2 Q3 Q4 Q2 Q3Q1
2001
Q1
2002
Source: Company literature
Growth in broadband internet subscribers 2001-2002
93,000
222,000
147,000
330,000
479,000
748,000
1,046,000
13
Contents
• Industry Figures
• Digital TV
• Programming and Audiences
• Focus on ITV
14
Audience share in all homes by channel, 1999-2002
Source: BARB
%
BBC1
BBC2
ITV1
C4
Five
Other
0
5
10
15
20
25
30
35
Q31999
Q4 Q12000
Q2 Q3 Q4 Q12001
Q2 Q3 Q4 Q12002
Q2 Q3
(CAGR)
(-2.8%)
(-8.0%)
(15.5%)
(2.8%)
(-1.6%)
(2.4%)
15
Audience share in multi-channel homes by channel, 1999-2002
Source: BARB
BBC1
BBC2
ITV1
C4
Five
Other%
0
5
10
15
20
25
30
35
40
45
Q31999
Q4 Q12000
Q2 Q3 Q4 Q12001
Q2 Q3 Q4 Q12002
Q2 Q3
(CAGR)
(3.9%)
(-1.6%)
(-6.8%)
(1.8%)
(2.4%) (-1.1%)
16
Audience share in analogue terrestrial homes by channel, 2001-2002
Source: BARB
Five
BBC1
BBC2
ITV1
CH4
2001
0
5
10
15
20
25
30
35
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3
%
2002
17
Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002
0
10
20
30
40
50
60
70
80
90
100
Q31999
Q4 Q12000
Q2 Q3 Q4 Q12001
Q2 Q3 Q4 Q12002
Q2 Q3
%
BBC1
BBC2
ITV1
CH4
CH5
18
Viewer profiles by type of television received
Profile of viewers by type of service and age, Q3 2002
Profile of viewers by type of service and social class, Q3 2002
Source: BARB
Children
16-34
35-54
55+
ABC1 C2DE
Analogueterrestrial
homes 59%41%
Multi-channelhomes 56%
44%
Allhomes 60%
40%
Analogueterrestrial
homes 50%25%
18%7%
Multi-channelhomes 22%
36%28%
14%
Allhomes
35%30%
23%11%
19
Hours viewed per household per day by social class, 2001-2002
Source: BARB
Q3 2001
Q4 2001
Q1 2002
Q2 2002
Q3 2002
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
All Homes
ABC1 C2DE All Individuals
Multichannel Homes
ABC1 C2DE All Individuals
%
20
Hours viewed per household per day by age, 2001-2002
Source: BARB
Q3 2001
Q4 2001
Q1 2002
Q2 2002
Q3 2002
0
1
2
3
4
5
6
All Homes
Children 16-34 35-54 55+
%
Children 16-34 35-54 55+
Multichannel Homes
21
Issue of ITC licences
Source: ITC estimates
Issue of ITC licences and total number of licensed programme services, 1994-2001
-100
0
100
200
300
400
500
600
1994 1995 1996 1997 1998 1999 2000 2001
Net licences issued in year (all services)
Total programme services
Note: The negative figure for net licences issued in 2000 reflects the replacement of many regional cable licences with fewer national licences.
22
Contents
• Industry Figures
• Digital TV
• Programming and Audiences
• Focus on ITV
23
The ITV licensees
Grampian
Scottish
Ulster
Border
Tyne Tees
Yorkshire
Granada
Central
AngliaHTV
Carlton/LWTWestcountry
MeridianChannel
24
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
25Source: BARB
Audience share by region, ITV1 compared with BBC1, Q3 2002
ITV1
BBC1
0
5
10
15
20
25
30
35
40
Borde
rW
est
South
Eas
t
Scotla
nd
Yorks
hire
Lond
on
Ulster
South
Wes
t
Midl
ands
North
Eas
t
North
Wes
t
East o
f Eng
land
Wale
s
26Source: BARB
Audience share for regional news programmes by region,ITV1 compared with BBC1, Q3 2002
ITV1
BBC1
0
5
10
15
20
25
30
35
40
45
50
Ulster
Borde
r
North
Eas
t
South
Eas
t
Midl
ands
Scotla
nd
Lond
onW
est
Yorks
hire
North
Wes
t
East o
f Eng
land
Wale
s
South
Wes
t
27
Original programmes (including repeats) as a percentage of total output (hours) by channel
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.
Achieved in 2001
ITC LicenceRequirement
ITC Licence Requirement for original programmes and actual performance, 2001
%
Original programmes as a percentage of total output, 1995-2001
0102030405060708090
100
1996 1997 1998 1999 2000 2001
%ITV
Channel 4
Five
65%81%ITV
60%69%Channel 4
55%58%Five
28Source: 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, 2001
Qualifying independents as a percentage of total qualifying output,
1995-2001
Qualifying hours commissioned from independent producers as a percentage of total qualifying output by channel
Achieved in 2001
ITC LicenceRequirement
%
0102030405060708090
100
1996 1997 1998 1999 2000 2001
ITV
Channel 4
Five25%
31%ITV
25%61%Channel 4
25%73%Five
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