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DEVELOPMENTS IN THE UK TELEVISION MARKET

DEVELOPMENTS IN THE UK TELEVISION MARKET. June 2002. Contents. Technology in the home (How do people get digital TV?) Programming and Audiences (Who is watching what?) Economics (How are broadcasters financed?) Focus on ITV. 80. VCR 1980-1989. 70. 60. Colour TV 1969-1978. 50.

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DEVELOPMENTS IN THE UK TELEVISION MARKET

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  1. DEVELOPMENTS IN THE UK TELEVISION MARKET June 2002

  2. Contents • Technology in the home (How do people get digital TV?) • Programming and Audiences (Who is watching what?) • Economics (How are broadcasters financed?) • Focus on ITV

  3. 80 VCR1980-1989 70 60 Colour TV1969-1978 50 Digital TV 1998-2001 40 PC 1884-1993 30 20 Satellite1987-1996 10 0 0 1 2 3 4 5 6 7 8 9 Take-up of digital television compared with other home technologies Penetration (% of households) Year After Launch Source: ITC

  4. 12 Platform Households (‘000s) % of UK TV households Totalanaloguemultichannel 10 Millions of subscribers Digital Satellite 5,887 24.4% ITV Digital 8 Analogue Cable 1,516 6.2% 6 Sky Digital Digital Cable 2,028 8.3% 4 Digital Terrestrial 1,263* 5.2%* 2 Digital Cable 0 Total 10,694 43.9% Q1 Q3 Q1 Q3 Q1 Q3 Q1 1999 2000 2001 2002 Pay TV take-up by platform UK Multichannel Pay-TV Penetration, Quarter 1, 2002 UK Pay-TV Growth, 1999 - 2002 * Please note: As no figures are publicly available for subscribers as of 31 March 2002, ITV Digital subscribers are assumed to be equal to the latest figures released (i.e. for Q4, 2001). We have not allowed for churn, return of STBs or conversion to the other platforms. ITV Digital went into Administration on 27 March 2002. Source: Company literature.

  5. 100 90 Video recorder 80 Teletext % of homes 70 60 50 NICAM stereo television 40 Personal computer Computer with internet 30 Video games 20 DVD 10 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Take-up of various home entertainment equipment Base = All Viewers Source: ITC, the Public’s View 2001

  6. 35% 24% 24% % of individuals 12% 6% 1 2 3 4 5+ Number of TV sets Number of television sets in the home Base = All respondents Source: ITC, the Public’s View 2001

  7. Increased bandwidth enhances applications Current UK Broadband Connections,March 2002 Bandwidth 183,300 Fibre Multiple video streams 170,000 10 Mbps Cable modem(future)/ADSL Full motion video 125,900 2 Mbps EDGE/3G/ADSL/ Cable modem (current) Video conferencing; Fast internet access;File sharing; CD-quality audio; Real-time gaming 100-500Kbps GPRS/Modem E-mail; Instant messaging; Basic web browsing; e-commerce. 0-50 Kbps Telewest NTL ADSL Source: Company literature.

  8. Contents • Technology in the home (How do people get digital TV?) • Programming and Audiences (Who is watching what?) • Economics (How are broadcasters financed?) • Focus on ITV

  9. Programme services by Genre, 2002 600 180 Net licences issued in year 500 (all services) 160 Total programme services 140 400 120 300 100 80 200 60 40 100 20 0 0 Film Kids Sport Local Music Factual 1994 1995 1996 1997 1998 1999 2000 2001 Entertainment -100 Home Shopping Other (Unclassified) Issue of ITC licences, and programme services available in digital households by genre Issue of ITC licences and total number of licensed programme services Note: The negative figure for net licences issued in 2000reflects the replacement of many regional cable licences with fewer national licences. Source: ITC estimates

  10. BBCChoice UK Gold BBC1 BBC2 ITV1 C4 C5 ITV2 Sky 1 PM 6.00-6.30 6.30-7.00 7.00-7.30 85% 81% 7.30-8.00 73% % Agree 8.00-8.30 8.30-9.00 9.00-9.30 9.30-10.00 10.00-10.30 News Soap US Drama Comedy Drama Factual Digitalmultichannel All homes Multichannel Light Entertainment US Comedy Film Content available via basic multi-channel TV A selection of the content available with a basic package “The TV channels I receive at the moment give me all the choice I want” From: The Public’s View 2001 CBBC* *BBC Choice commences broadcasting at 7pm. Prior to this, CBBC uses the spectrum. Note: This is a representative schedule only, based on a week in January 2002.

  11. Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Audience share in all homes by channel, 2001-2002 35 % % 30 25 20 15 10 5 0 BBC1 BBC2 ITV1 Channel 4 Channel 5 Other Source: BARB

  12. Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Audience share in multi-channel homes by channel, 2001-2002 45 % 40 35 30 25 20 15 10 5 0 BBC1 BBC2 ITV CH4 CH5 Other Source: BARB

  13. 100 % Q1 2001 90 Q2 2001 Q3 2001 80 Q4 2001 70 Q1 2002 60 50 40 30 20 10 0 BBC1 BBC2 ITV Channel 4 Channel 5 Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002 Source: BARB

  14. 11% 22% Allhomes 31% 36% 14% Multi-channelhomes 28% 35% 22% 7% Analogueterrestrialhomes 15% 27% 51% ABC1 C2DE Viewer profiles by type of television received Profile of viewers by type of service and social class, Q1 2002 Profile of viewers by type of service and age, Q1 2002 40% All homes 60% Multi-channel homes 42% 58% Analogueterrestrialhomes 42% 58% Children 35-54 16-34 55+ Source: BARB

  15. 5 4.5 Q1 2001 4 Q2 2001 Q3 2001 3.5 Q4 2001 Q1 2002 3 2.5 2 1.5 1 0.5 0 All Individuals ABC1 C2DE All Individuals ABC1 C2DE All Homes Multichannel Homes Hours viewed per household per day by social class, 2001-2002 Source: BARB

  16. 6 5 Q1 2001 Q2 2001 Q3 2001 4 Q4 2001 Q1 2002 3 2 1 0 55+ Children 16-34 35-54 55+ Children 16-34 35-54 Hours viewed per household per day by age, 2001-2002 All Homes Multichannel Homes Source: BARB

  17. Contents • Technology in the home (How do people get digital TV?) • Programming and Audiences (Who is watching what?) • Economics (How are broadcasters financed?) • Focus on ITV

  18. Components of television revenue in 2001 £84 million 1% Sponsorship £312 million 4% Sale of goods £382 million 5% Other £1.7 billion 21% BBC licence fee spent on TV £2.0 billion 25% SubscriptionRevenue £3.4 billion 44% Net Advertising Revenue Sources of UK television revenue... ...and trend in share of main components,1995-2001 60.0% 50.0% NAR 40.0% 30.0% Subscription BBC licence fee spent on TV 20.0% Other 10.0% Sale of goods Sponsorship 0.0% 1995 1996 1997 1998 1999 2000 2001 Source: ITC

  19. 80% 70% 60% Channel 3 incl GMTV 50% 40% 30% Cable and Satellite and other 20% Channel 4 incl S4C 10% Channel 5 0% 1995 1996 1997 1998 1999 2000 2001 UK TV Net Advertising Revenue by channel over time... Source: ITC

  20. 500 450 400 Cash Bids £ million, nominal prices 350 PQR 300 250 200 150 100 50 0 2001 1994 1995 1996 1997 1998 1999 2000 Tender payments by Channel 3, Channel 5 and Additional Services licensees, 1993-2001 The Broadcasting Acts 1990 and 1996 require that certain kinds of licence are awarded by the ITC after a process of competitive tender. Licences awarded in this way are required to make additional payments to the Treasury (via the ITC). Additional payments are in two parts. The first is a percentage set by the ITC, of qualifying revenue (PQR). The second part is the cash bid, which on renewal is set by the ITC. This is index-linked and payable annually. Note: The drop in total tender payment in 1999 reflects the renewal of some Channel 3 licences. The increase in PQR in this year reflects the policy decision that more emphasis be given to the PQR component of tender payments. Source: ITC

  21. Contents • Technology in the home (How do people get digital TV?) • Programming and Audiences (Who is watching what?) • Economics (How are broadcasters financed?) • Focus on ITV

  22. 100 90 % Achieved in 2001 ITV 80 58% Channel 5 70 Channel 4 ITC LicenceRequirement 55% 60 Channel 5 50 40 69% Channel 4 60% 30 20 10 81% ITV 0 65% 1996 1997 1998 1999 2000 2001 Original programmes (including repeats) as a percentage of total output (hours) by channel ITV, Channel 4 and Channel 5 all have requirements in their licences to produce a set amount of original programming each year. ITC Licence Requirement for original programmes and actual performance, 2001 Original programmes as a percentage of total output, 1995-2001 % Note: Channel 4’s original programming target was only introduced as a licence requirement in 1998; prior to this the figures were reported in Channel 4’s Annual Report. Source: ITC; Channel 4 Annual Report

  23. 100 Achieved in 2001 90 % 80 73% Channel 5 Channel 5 70 ITC LicenceRequirement 25% Channel 4 60 50 61% 40 Channel 4 25% ITV 30 20 10 31% ITV 0 25% 1996 1997 1998 1999 2000 2001 Qualifying hours commissioned from independent producers as a percentage of total qualifying output by channel ITV, GMTV, Channel 4 and Channel 5 all have requirements in their licences to commission a set amount of programming from independent producers each year. ITC Licence Requirement for independently produced programmes and actual performance, 2001 Qualifying independents as a percentage of total qualifying output, 1995-2001 Source: ITC

  24. The ITV licensees Grampian Scottish Tyne Tees Ulster Yorkshire Border Central Granada Anglia HTV Carlton/LWT Westcountry Meridian Channel

  25. The ITV licensees - ownership structure ITV Granada Group Carlton Group Scottish Media Group Anglia Carlton Grampian Border Central Scottish Granada HTV Ulster LWT Westcountry Meridian Channel Tyne Tees Yorkshire

  26. Audience share by region, ITV1 compared with BBC1, Q1 2002 35 30 25 20 ITV1 15 BBC1 10 5 0 Ulster Border London Scotland Midlands Yorkshire HTV West North East HTV Wales North West South West East of England South & South East Source: BARB

  27. 50 45 % 40 35 30 25 20 15 10 5 0 East West Ulster Wales Border London Scottish Channel Midlands Yorkshire Grampian North East North West South West South & South East Audience share for regional news programmes by region, ITV1 compared with BBC1, 2001 ITV1 BBC1 Source: BARB

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