Report: 165 Million Digital Homes in Western Europe, U.S. by 2012

LONDON, July 19: A new report by research firm Datamonitor
expects digital TV services to reach around 165 million homes in Western Europe
and the U.S. by 2012, with IPTV to experience the largest growth.

The new report, titled European and U.S. Digital TV,
2006-2012, estimates there are currently
around 105 million households subscribing to satellite, cable and IPTV services
in the U.S. and Western Europe. By 2012, Datamonitor estimates there will be
77.7 million satellite households in both regions. Digital cable is expected to
show significant growth particularly as analogue cable is switched to digital
services. By 2012 there will be an estimated 69 million digital cable
households, an average annual increase of 8.4 percent from 2006.

While IPTV is one of the most recent entrants into the
pay-TV arena, it is expected to experience the largest growth. By 2012 it will
be present in an estimated 19.3 million households— a compound annual
growth rate of 41.8 percent from 2006. Rising broadband penetration is
revolutionizing television, with the quantity and quality of IP-based video
services offered by TV service providers, Internet Service Providers (ISPs) and
telecoms operators set to escalate. According to Datamonitor, the proliferation
of high-speed connectivity is the most important factor in the transformation
of television, but could prove to be a double-edged sword for pay-TV service
operators. For instance, consumers are able to download pirated content via
peer-to-peer networks, stream it through an online aggregator, or access other
alternative forms of entertainment in much greater quantities as connectivity
speed increases.

The report also notes that service operators face massive
competition, with consumers able to access broadcast video content via a
variety of methods that include cable, satellite, IPTV, digital terrestrial TV
(DTT), online video aggregators and mobile broadcast TV. It warns that
innovation through digital service provision will be a crucial factor for
survival, with the likes of Apple TV, Joost and YouTube shifting the
competitive dynamics of the sector.

The report also acknowledged other content producers and
public service broadcasters who are beginning to push content through
proprietary or partnered online portals, such as the BBC’s iPlayer and the
recent move to deliver content via YouTube. This puts rising pressure on
traditional aggregators, who must boost the attractiveness of their service
offerings in order to acquire and retain customers.

The report also discusses the role that private investment is
playing in the television sector. For example, the Netherlands, Germany and the
U.S. have seen significant private investment into the national cable and
broadcasting sector. Private ownership brings a strong incentive to boost
return on investment (ROI). In many cases, this involves driving revenue growth
by creating additional synergies and value-add services such as triple-play
offerings.

“As the sector transforms, service operators and
broadcasters are searching for multiple strategies to ensure that their
offerings are kept attractive to consumers,” said Chris Khouri, the media and
broadcasting analyst at Datamonitor and author of the report. “Primary
strategies are found through bundling alternative communications services
(including voice and data) to traditional TV services. Triple and quadruple
play services, from operators like BSkyB, Canal Digital and Verizon, are
becoming a must to survive in the market and are helping to promote an
increasingly competitive sector. Further, these offerings are expected to aide
in the significant growth of digital TV services over the next few years.”