The report reveals that the FTA (free to air) television industry is now facing challenges from a number of fronts as incumbent broadcasters cling to their lucrative oligopolies. The Internet will become increasingly entertainment-based as broadband penetration is predicted to continue to rise steadily over next few years. Consumers will be demanding a richer and extensive online experience through services such as video based entertainment.
During the six years from 2001 to 2006, viewing of FTA television fell by over 11 percent, while overall TV viewing increased, mainly driven by the rise of pay TV. The FTA networks are expected to see intense competition for viewers and advertising in 2007 and beyond, which will impact on their cost margins as they will be forced to put more money into programming and marketing. Marketing and media buyers are increasingly turning to alternative media, such as Internet and mobile channels in order to reach consumers. Broadcasting ad revenues are already gradually being squeezed due to falling audiences and rising costs.
Australian audiences have increasing choice and control over when, where and how they consume media. These choices have been facilitated by the rise of technologies such as digital media players (iPods and MP3 players), digital personal video recorders, and video and audio downloads. From 2002 to 2006, subscription television increased its average audience by approximately 30 percent. This increase has been at the expense of FTA networks.
Digital TV gains momentum but remains niche medium
Digital FTA TV has been held up in a vicious cycle since its launch. Available digital content, beyond simply offering better picture quality, has been nowhere near sufficient to help drive digital TV. By the beginning of 2007, penetration of digital TVs (digital receivers or digital integrated TVs) stood at only 25 percent of Australian households, which still classifies digital TV as a niche medium. The main driver of growth has been ‘user experience’ delivered by DVDs and plasma screens. This has been a bigger driver for digital TV devices than digital TV itself.
Rate of adoption increased significantly in 2006 as the price of widescreen TVs (plasma and LCD) dropped to below $2000 at the lower end of the market. By early 2007, the move towards flat panel TVs had further accelerated with CRT TVs only constituting a small proportion of TV sales as the price of the smaller screen LCD TVs and standard definition plasmas had dropped further. This trend will continue to accelerate through to 2008 as CRT televisions are totally phased out by retailers.
Pay TV prices must fall sharply to hit 40 percent penetration
With the introduction of digital pay TV, the industry only saw modest growth through 2004 and 2005. Growth in 2006, in fact, even slowed a bit further. By early 2007, with the vast majority of subscribers on digital services, penetration had only reached just over 25 percent and we expect penetration to reach only 26 percent in 2007. While it is still not impossible for pay TV to reach the 35-40 percent penetration mark, this level can only be reached these targets if more attractive price packages are offered, or a broadband offering within an affordable priced package is offered. So far neither Foxtel or Telstra have been able to come up with such attractive packages.
For the year to December 2006, pay TV subscribers in Australia increased by just over 9 percent, only a modest increase on the previous year. A similar growth pattern is expected to continue further into 2007 and 2008. An overall pay TV revenue growth of 15 percent was recorded in 2006 and we expect growth to remain reasonably strong in 2007.
Digital radio to be launched in 2009
Although its advertising base is growing, the radio market is losing share to other media sectors such as TV. The declining power of FM radio is expected to be a key trend during 2007 and beyond. FM stations will be in danger of becoming less relevant to the youth market, as teenagers will increasingly turn to alternate new media channels such as the Internet for their music.
Digital radio in not expected to be launched until January 2009. It will allow multi-channelling by existing and possibly new radio companies as advertisers will find it increasingly expensive to achieve broad audience reach.
