IPTV to Grab Euro Pay TV Share

Europe's increasing appetite for IPTV services, and a greater penetration of subscription-based satellite services, will eat into the cable sector's share of Europe's pay TV market during the coming six years, according to a new report from Pyramid Research .

The report, "Europe’s Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising," finds that Europe's 12.4 million IPTV subscriptions accounted for just more than 8 percent of Europe's pay TV market in 2008, while cable operators commanded more than 56 percent of the market, and direct-to-home satellite service accounted for just more than 30 percent.

By 2014, though, despite the current economic downturn, the region's IPTV subscriber base will grow to more than 30 million, by which time TV-over-broadband subscriptions will likely command around 16 percent of Europe’s total pay-TV market, direct-to-home satellite service providers will account for about 37 percent of the total, and Europe's cable operators' share of the pay TV subscription market will have dipped to around 43 percent, according to Pyramid's forecasts.

That's not to say that Europe's IPTV service providers aren't finding the going tough at the moment, though the impact of the worsening economy varies from market to market, depending on criteria such as the level of existing broadband penetration, the capex plans of the major operators, and the level of competition from alternative digital pay TV services.

The report's author, Stela Bokun, believes that "in the next 12 months, the economic crisis will have a negative impact on IPTV service adoption only in certain European countries, while its impact on IPTV service revenue growth will be uniformly adverse across the entire region in the same year."

For example, in Spain, where broadband penetration is relatively low compared with the European average, IPTV market growth is likely to be hit harder than in France, where the broadband penetration rate is high.

That theory is borne out by the first-quarter 2009 IPTV numbers from Spain's Telefónica SA (NYSE: TEF) and Orange (NYSE: FTE), two of the region's, and indeed the world's, biggest IPTV service providers, both of which have cut their capex budgets.

While the French incumbent continued to experience significant demand for its IPTV service -- it ended March 2009 with 1.85 million IPTV customers in France, an increase of more than 140,000 during the quarter -- the Spanish giant reported an actual decrease in its IPTV subscriber base of 7,675 compared with the end of 2008, leaving it with a total of 604,819 customers for its domestic TV-over-broadband service at the end of the first quarter.

The Spanish incumbent noted in its quarterly report that the Spanish pay TV market overall experienced a decline during the first three months of 2009, and that it had retained its 14 percent share of the national market.

— Ray Le Maistre, International News Editor, Light Reading