Digital TV boom time ahead for Eastern Europe

Unlike the mature markets to the west, Eastern Europe still has plenty of room for digital TV growth according to Digital TV Research Ltd. Two-thirds of homes (76 million) were still receiving analog signals at end-2010 but rapid conversion to digital TV means that nearly 67 million digital homes will be added by 2016. The Digital TV Eastern Europe report forecasts that the proportion of analog homes will fall from 68% to 11% (12 million) by 2016 in the 15 Eastern European countries covered.

Report author Simon Murray said: “Pay TV consolidation was one positive outcome from the global economic recession that rocked Eastern Europe so badly. Positive because consolidation will lead to greater consumer choice through bundles, particularly as financially-stronger cable operators can take on the might of incumbent telcos. Greater competition will keep prices down and will lead operators to strive to offer more to entice new subs.”

He added: “Further good news for pay TV operators is that most Eastern European countries have been slow to implement analog terrestrial switchover, with several postponing their own deadlines. This is good news for pay TV operators as it gives them more time to convert homes to their packages before FTA DTT becomes established. Only the relatively small territories of Croatia, Estonia, Latvia and Slovenia had achieved national analog terrestrial switch-off by end-2010.”

Eastern European TV households split by platform (%)

                     2010 2011 2012 2013 2014 2015 2016
                     ---- ---- ---- ---- ---- ---- ----
Digital cable subs     5%   7%  10%  13%  17%  21%  23%
Analog cable subs     24%  22%  19%  16%  12%   9%   6%
Pay IPTV subs          2%   3%   5%   7%   9%  11%  12%
Pay DTH               14%  15%  15%  15%  16%  16%  16%
Digital free DTH       7%   7%   7%   7%   6%   6%   6%
Analog terrestrial    44%  38%  32%  26%  18%  10%   5%
Primary FTA DTT        4%   8%  11%  16%  21%  27%  31%
Primary pay DTT        0%   0%   1%   1%   1%   1%   1%

Source: Digital TV Research Ltd

Rapid conversion means that nearly 67 million digital homes will be added between 2010 and 2016, bringing the total to 104 million. Therefore, digital penetration will reach 89% by 2016, up from only 33% in 2010. However, 31 million of the additional digital homes will take FTA DTT signals, leaving 37 million extra digital pay TV homes. Seven countries will be completely digital by 2016.

Pay TV will be taken by 59% of homes in 2016, up from 45% in 2010 – or up 17 million to 68 million. There will still be 7 million analog cable homes by 2016, although this is 20 million down on the 2010 total. Pay TV penetration in 2016 will range from 83% in Latvia to only 28% in Greece.

Eastern European pay TV revenues (US$ million)

                   2006   2011   2016
                  -----  -----  -----
Digital cable TV    207  1,306  3,464
Analog cable TV   2,921  2,416    670
IPTV                 15    371  1,459
DTH               1,123  3,003  3,285
DTT                   0     31     82
                  -----  -----  -----
Total             4,267  7,126  8,960

Source: Digital TV Research Ltd

Pay TV revenues will be 26% higher in 2016 (US$8,960 million) than in 2011 (US$7,126 million). The number of pay TV subs will climb 28% over the same period, indicating a small decrease in ARPU. Murray said: “There is downward pressure on ARPU as pay TV competition increases and as DTT makes an impact.”

Subscription TV revenues will grow US$2 billion between 2010 and 2016 – or by 30% – to US$8.6 billion. Russia will contribute US$3.3 billion of the 2016 total, followed by Poland with US$1.8 billion. On-demand TV revenues will climb much faster, but will only total US$316 million by 2016.

Cable will increase subscriber and penetration levels, with 34 million subs and 29% penetration expected by 2016. The number of analog cable TV homes will fall from 27 million in 2010 to 7 million in 2016. Meanwhile, digital cable subs wil l go the opposite way: from 6 million in 2010 to 27 million in 2016. Cable TV revenues will increase 11% between 2011 and 2016 to US$4.1 billion. Digital cable TV revenues will climb by US$1.1 billion during this period to US$3.5 billion, with analog cable TV falling from US$2.4 billion to US$0.7 billion.

However, the number of homes paying for IPTV will increase by a massive 325% between 2011 and 2016 to 14.0 million – to 12% of TV households. IPTV revenues will quadruple between 2011 and 2016 to reach US$1.5 billion. Murray explained: “This strong growth comes as telcos have stolen a march on the fragmented cable sector.”

The fast expansion years for pay DTH are over. The number of DTH homes increased by 11 million between 2006 and 2011, but only 2.4 million more will be added by 2016. The sector has already seen some consolidation and platform closures (as seen recently in Romania), with more expected. Eastern European pay DTH revenues will be US$3.3 billion in 2016, up only US$0.3 billion on 2011. Poland and Russia will each supply more than US$1 billion to the 2016 total.

Several countries covered in this report are EU members, with most of them obliged to terminate analog terrestrial signals by 2015. Some smaller countries have already achieved national ATT switch-off, but others have delayed their own deadlines due to the economic crisis. At end-2010, 43.6% (49 million) of the region’s homes still took analog terrestrial signals, though this is forecast plummet to 4.5% (5 million) in 2016. FTA DTT will be the main recipient of the converting homes, increasing from 4.6 million homes (4.0%) at end-2010 to 35.7 million (30.7%) by 2016.