Ofcom releases UK Communications Market Report 2014

The UK’s communications regulator, Ofcom, has published its annual Communications Market report for 2014.

The Television and Audiovisual section examines key developments and trends seen in the UK television market during the past year. These include:

• The UK television industry generated £12.9bn in revenue during 2013, an increase of £426m (3.4%). The increase was driven by growth in subscription revenues and net advertising revenues. There was a small decline in publicly-funded television programming in 2013, following an eventful year in 2012, including the London Olympic and Paralympic Games.

• Pay-TV subscription revenue continues to drive growth in total sector revenues. Subscription revenues increased by 6.7% in 2013 to reach almost £5.9bn. Subscriptions now account for 46% of all television industry revenues in the UK.

• Broadcast-based TV advertising income returned to growth in 2013, increasing by 4% (or £146m) to reach almost £3.7bn, its highest level in the past five years. The largest proportional growth was in the commercial PSBs’ portfolio channels, where revenues increased by 14% to reach a combined total of £669m.

• Online TV revenue increased by 41% in 2013 to reach £364m. The subscription model saw the steepest growth; revenue rose by 76% to £112m, possibly indicating that online streaming services are gaining traction in the UK market.

• Spend on content by all UK TV channels rose by 3.7% to reach £5.8bn. In a year of English Premier League broadcast rights renewal, spend on sports programming grew by 19% to reach £1,808m or 59.1% of all programme spend on commercial non-PSB channels. Spend on BBC digital channels and the other PSBs’ portfolio channels also increased, rising by 6% and 4% respectively. Spend on first-run originated programming for the main five PSB channels declined by 5%; from £2,588m in 2012 to £2,451m in 2013, partly due to there being no major sporting events that year.

• Twelve per cent of TV households had a smart TV in Q1 2014, an increase of five percentage points on the previous year. Among smart TV owners, use of the internet functionality is increasing: 82% used the internet connection on their TV in 2014 compared to 77% in 2013 and 65% in 2012.

• Smart TV sales, as a proportion of all TV sales, have increased significantly in the past year. Sales units peaked at over 800,000 in Q4 2013 – the Christmas period, before dropping slightly to 663,000 in Q1 2014. The share of smart TV sales in the personal television market is 45%, representing a 60% increase year on year.

• Decipher has analysed set-top box numbers, and estimates that 9.9 million households in the UK (38% of total UK households) had an active internet-enabled set-top box in March 2014. This represents an increase of 11pp since 2013, when an estimated 7 million households owned an internet enabled set-top box.

• TV viewing has remained resilient, although there was a decline in 2013 across all age groups. According to BARB, average viewing dropped from 241 minutes in 2012 to 232 in 2013 among all individuals, with all age groups experiencing declines. This may be due in part to changing media habits, but it might also have been influenced by the hotter summer in 2013 and a lack of ‘event’ viewing – in previous years viewing was boosted by major sports events such as the 2010 Football World Cup or the Olympic Games in 2012. However, among 16 to 24 year olds viewing has declined for three consecutive years: from 169 minutes in 2010 to 148 in 2013.

• According to our Digital Day research, UK adults spent on average 4 hours and 17 minutes per day viewing audio visual content through a variety of media. Sixty nine per cent of this viewing was to live TV and recorded television accounted for a further 16%. Viewing online content represented 10% (consisting of 5% on on-demand catch-up services such as BBC iPlayer or 4oD, 3% on other downloaded or streamed services such as Amazon Prime Video or Netflix, and 2% on short video clips). A further 5% was spent on physical media such as DVDs or Blu-ray.

UK television industry metrics

                                                     2008  2009  2010  2011  2012  2013
                                                     ----  ----  ----  ----  ----  ----
Total TV industry revenue (£bn)                      11.2    11  11.8  12.3  12.4  12.9
Proportion of revenue generated
 by public funds                                      23%   23%   22%   21%   21%   20%
 by advertising                                       31%   28%   30%   29%   28%   29%
 by subscriptions                                     39%   42%   43%   44%   44%   46%
TV as a proportion of total advertising spend         27%   28%   29%   29%   30%   26%
Spend on originated output by 5 main networks (£bn)   2.6   2.4   2.5   2.5   2.6   2.5
Digital TV take-up (% all households)                 84%   88%   92%   94%   96%   95%
Proportion of DTV homes paying for TV                 53%   54%   52%   51%   51%   53%
Viewing per head, per day (hours) in all homes       3.74  3.75  4.04  4.03  4.01   3.9
Share of the five main channels in all homes          61%   58%   56%   54%   52%   51%
Number of channels broadcasting in the UK             495   490   510   515   529   527