ITC Annual Report

2000 Report

Commercial Television in the UK: an overview

A dynamic and competitive market

The ITC seeks to increase competition, quality and choice across commercial television in the UK.

With internet penetration in the UK at 33 per cent, mobile phone users numbering close to 60 per cent of the population and digital television taken by over 30 per cent of households, new media is providing new choices for consumers and new challenges for the providers of television services. Last year also saw the first steps in the roll-out of broadband wire-based services, and by September 2000 BT’s DSL (Digital Subscriber Line) had upgraded 619 exchanges, amounting to approximately seven million households and over one million businesses. Cable telephony is now available to almost 13m UK homes. Access to regional and local services has also been enhanced. Since 1997 a total of 16 local licences have been awarded to allow television broadcasting at a local level, and eight stations are now on air.

Access to digital television grows

BSkyB, the satellite service provider, has achieved the largest take-up of digital pay-television, with 4.6million subscribers in December 2000. With broadband cable infrastructure now covering over 50 per cent of the UK population, 0.9million homes have taken up these services. ONdigital reported digital subscription levels of around 1m by end 2000, with an all-multiplex coverage of 61 per cent of households.

From a standing start in October 2000, the penetration of digital television had reached 6.5million UK homes by December 2000. This is a remarkable achievement on the part of the digital service providers and, as can be seen in Figure 9, represents a faster rate of growth than previous home technologies at such an early stage.

fig 9
Growth of Home Technologies

New services account for much of the growth in output.

Hours of television output by multichannel providers have increased exponentially over time (Figure 10), with the move to 24-hour television and entry of new digital channels accounting for much of this growth. An increasing number of niche service providers are recognising viable opportunities to reach new markets through television, and the rapid growth in the UK’s digital subscriber base has unlocked these opportunities.

Disney UK has, for example, launched the Playhouse and Toon Disney channels designed to appeal to specific segments of the children’s market with content derived from its main channel, Channel 4 launched E4, and a number of channels of particular appeal to ethnic minorities, such as Anjuman, Gurjari and Lashkara, have been made available in the UK during the year. The level of multichannel take-up and a breakdown of digital versus analogue homes by platform is illustrated in Figure 11 showing aggregate subscriber levels of pay TV at 9.6m by the end of 2000, with 70 per cent of those homes taking digital services.

fig 11
Multichannel Subscriber Numbers
(as at end December 2000)

Industry revenues are showing strong growth.

In nominal revenue terms, the total size of the industry has grown by 72 per cent between 1995 and 2000 (Figures 12a & 12b), with a growing proportion of total revenue accounted for by subscription income (Figure 13). Advertising revenue in 2000 maintained a healthy rate of growth for the first three quarters, but showed signs of a slow down in the fourth quarter and, while the share received by multichannel television services has risen, traditional commercial free-to-air broadcasters (Channels 3, 4, S4C & 5) continue to receive the majority of this revenue (Figure 14).

fig 12a
UK Television Revenue, 1995 and 2000

fig 12b
Sources of UK Television Revenue, 2000

fig 13
Sources of UK Television Revenue Over Time

fig 14
Distribution of Advertising Revenue 1995-2000

Viewing behaviour shifts, though UK viewers do not watch more television.

Figure 15 sets out the average amount of time people spend watching television channels. Total viewing hours has remained fairly constant over the years ranging between 3.5 to almost 4 hours per day, despite the dramatic increase in output illustrated in Figure 9. But at the same time, audience share has shifted across channels, with ITV losing audience share, Channel 4 holding steady while significant increases are seen in viewing of Channel 5 and multichannel television.

Programme Production

Buoyant revenues have been translated into increased investment in programming.

Investment in programmes ranged between £6.5 billion and £7.0 billion in 2000, with the BBC, ITV and BSkyB leading investment. On the main terrestrial channels, budgets rose by 7.5 per cent, suggesting that increased competition for revenues has not reduced programming investment.

Fig 16
Sources of Commissioning
Source of Terrestrial Network
First-Run Productions 2000

Note:This figure is incorrect in the printed version of the Annual Report. The data has been corrected for the web version.

In terms of programme commissions, ITC statistics show number of original productions and commissions by the analogue terrestrial broadcasters (excluding BBC and S4C) is shared primarily between independents (42 per cent) and broadcasters (47 per cent) (Figure 16) over 2000. If anything, in-house productions have stabilised as some broadcasters pursue a more vertically integrated strategy to their operations.

New channels have expanded range, but still rely significantly on acquired programming in particular genre

Figure 17 sets out the hours of programming by genre for multichannel television by category for the year 2000 (i.e. excluding the public service broadcasters). From Figure 18 the most marked rise in broadcast hours in the year 2000 is seen to be in films, documentaries and children’s programming, with light entertainment, sport, drama and hobbies also showing rises. Underlying such changes in the children’s sector for example, are new entrants like Disney Playhouse and Boomerang that have featured animation programming and children’s cartoons.

fig 18
Output Hours by Programme strand

New partnerships

Alliances across national boundaries and between old and new technology providers have been a feature of the industry over the course of the year. Pearson and CLT-Ufa announced a merger in April 2000 bringing together the broadcasting interests of three of Europe’s largest media companies (Bertelsmann, Audofina and Pearson). In the world’s largest merger, the tie up between America Online, with its substantial presence on the internet, and Time Warner, the entertainment and media group, created a single company worth approximately $105bn at the time of the merger, while ITV underwent further consolidation with the merger between Granada Media and United News & Media. In February 2000, three media companies moved to increase their stakes in Channel 5. CLT-Ufa, the pan-European broadcaster, United News & Media and Pearson, the media group, together paid £277m (Euro 172m) to increase their shares of Channel 5 as Warburg Pincus, the financial investor, sold out of the channel. In the independent sector there was further activity as Carlton bought independent production companies Action Time and Planet 24; Ginger was sold to SMG, while Pearson bought Talkback and Regent.

Broadcasters and other Retailers

Viewers and Consumers

Future developments and opportunities

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