Satellite TV continues to experience double-digit growth despite the global financial crisis. A healthy demand for satellite direct-to-home (DTH) TV is an essential part of this growth for satellite operators as this has traditionally been a key driver of satellite capacity. In fact, satellite TV accounts for roughly 40% of worldwide satellite capacity demand and has, so far, survived fluctuating demand and technological improvements. However, satellite TV may need to adapt further in response to fundamental changes in TV demand and consumption.
In the late 1990s, demand for satellite TV channels grew steadily due to the launch of pay TV and the advent of digital DTH TV. For satellite operators, demand for associated DTH TV transponders grew through the switch-off of analogue TV. The migration of TV from analogue to digital made satellite capacity more efficient: a satellite transponder could typically broadcast 8 to 12 digital TV channels instead of one analogue TV channel. This generated some concern in the satellite industry that there would be an over-supply of capacity, and that overall demand for satellite TV would shrink. However, these concerns proved unfounded as the increase in digital TV channels as costs fell more than compensated for the efficiency gains of digital broadcasting.
Some industry analysts are now concerned about the potentially negative impact on overall satellite capacity demand from the widespread use of more efficient digital compression technologies. With the introduction of MPEG-4 in place of MPEG-2 the number of standard-definition TV (SDTV) channels broadcast over one transponder will in theory double. However, as with the switch from analogue to digital, using MPEG-4 for DTH TV requires consumers to have a set-top box, but widespread migration to set-top boxes will take many years. Broadcasters are likely to decide to abandon MPEG-2 and fully adopt MPEG-4 only when the majority of consumers have migrated to set-top boxes.
Moreover, capacity demand for new services, such as high-definition TV (HDTV) and potentially 3D-TV, will at least in the short to medium term, provide an additional upside for the potentially negative effect of capacity reduction –an HDTV channel uses four times as much capacity as an SDTV channel.
Overall, short-term and medium-term capacity demand for DTH TV channels is projected to continue to grow strongly, led by (1) the launch of new satellite TV bouquets in countries that previously have not had a dedicated bouquet; (2) an increase in the number of channels in any given bouquet; (3) the launch of HDTV channels; and (4) the simulcast of digital terrestrial TV channels over satellite DTH platforms. Of these, in Europe the wide adoption of HDTV is by far the greatest driver of capacity as HD transmission will be all incremental to existing SD transmissions. Only a small number of TV channels are currently offered in HDTV and those are simulcast in HD and SD over satellite. With SD and HD TVs likely to be in the market for the many years to come, simulcast will continue for the foreseeable future.
The long-term outlook for satellite operators may therefore only be challenged by the threat from fundamental technological and competitive changes in the TV market in support of non-linear TV. The importance of satellite bouquets for broadcasters and consumers may be diminished by triple-play packages from cable and IPTV players, who are focusing on non-linear TV services. Therefore, satellite operators may need to consider their hybrid satellite TV and fixed broadband offers, or satellite TV and broadband-based solutions, to counter this long-term threat. Satellite operators may also need to offer dual-play or triple-play solutions to current broadcaster clients to remain competitive. For example, BSkyB is about to launch its Xbox 360 service offering liveSky as well as the Sky Player catch-up service. This is essentially a hybrid satellite broadband offering for existing customers. SES Astra and Eutelsat are working on the combination of broadcasting and broadband-based satellite solutions.
The challenge for the satellite TV industry is to continuously innovate in order to retain market share. Given the long-term planning cycle due to the nature of the infrastructure, satellite operators need to consider long-term effects, not just the short or medium-term. In that context, although the outlook for short-term demand looks promising, operators need to plan now to adapt their offerings to accommodate non-linear forms of TV.
Analysys Mason works with leading broadcasters, retail TV platforms and leading worldwide satellite operators to review market trends and design winning strategies to address the challenges they face.