Ofcom Report Reveals New Trends in U.K.’s Communications Sector

LONDON, August 23: According to the results of the annual Communications Market Report from the British regulator Ofcom, time spent daily watching television among British consumers has declined by 4 percent to 3 hours and 36 minutes, with television advertising falling by 2.2 percent in 2006 to £3.5 billion, the first decline since 2002.

According to the 330-page report, the decline in overall U.K. television advertising revenues coincides with the greater availability and use of television-style content online and the growth of digital video recorders (DVRs) that allow users to skip adverts, with the report finding that up to 78 percent of DVR owners regularly use them to skip through commercials. By April 2007, 15 percent of respondents said they had a DVR, almost double the number at the end of 2006.

The report also notes that while television advertising overall is declining, revenues for digital-only free-to-air channels, such as ITV2, More4 and Five Life, are rising and for the first time topped the £1 billion mark in 2006, a 21-percent increase over 2005. Revenue for the three commercial terrestrial channels—ITV1, Channel 4 and Channel 5—stood at £2.4 billion in 2006, a 9.6-percent decrease on 2005.

Declining advertising revenue is also increasingly being supplemented by alternative sources of income. In 2006 subscription revenues increased to £4 billion (approximately £350 per subscription), up from £3.3 billion in 2005. Similarly, revenues from interactive services such as quiz television channels and participative voting in programs increased by 18.3 percent during 2006 to £123 million, but this new source of income may be affected in the future as broadcasters review their approach to interactive TV.

As television-advertising revenue declines, online advertising spending continues to surge, up 47 percent during 2006 and just breaking the £2 billion mark. Internet advertising spend is now equivalent to almost half (44 percent) that is spent on all TV advertising, 83 percent of advertising spend on ITV1, Channel 4 and Five and one quarter (24.2 percent) of all press advertising.

Ofcom also notes that digital television, in 80.5 percent of U.K. homes by April 2007, is changing what, when and how British consumers watch television. In the 450,000 homes that have access to high-definition television, 33 percent of viewing time is spent watching in HD and 43 percent of those surveyed said that they watch more television—especially premium content such as films and sport—as a result of having HD.

The report also indicated that average daily Internet use among U.K. consumers increased by 158 percent on 2002, and there was also a 58-percent increase in time spent on mobile phones. By April 2007, 53 percent of U.K. households had a broadband connection. Older people are also consuming more media, with some 16 percent of 65-year-olds and older using the Internet and spending an average of 42 hours online every month, more than any other age group. Among 25- to 34-year-olds, women spent more time using the Internet than men. In this age group, 2.18 million young women accounted for 55 percent of total time spent online. By comparison, just 1.83 million of 25- to 34-year old men in the U.K. use the Internet. The number of British consumers taking bundled communications services that provide landline, broadband, digital television and mobile in a single package rose to 40 percent of the population by April 2007, up by a third over a 12-month period.

In the U.K., consumers are also increasingly relying on their mobile phones, with the report revealing that by the end of 2006, there were more than double the number of mobile connections (69.7 million) than landline connections (33.6 million). Today’s consumers are using their mobiles for much more than just making phone calls. Some 41 percent of mobile phone users regularly use their phone as a digital camera, 13 percent use it for Internet access, 10 percent listen to FM radio broadcasts and 21 percent use it as a mini games console. Wireless networks are also allowing more people to access the Internet outside of their homes, with some 11.2 percent (7.8 million) of mobile phones now connecting to a 3G network (up 70 percent on 2005 at 4.6 million).

While consumers are getting more out of their communications services, the amount they are spending on them continues to fall. In 2006, average household spend on communications services was £92.65 per month, down from £94.03 in 2005.