It has been a busy year for the major satellite pay-TV operators across Europe. All seem to have been involved in major initiatives as they bid to keep the pressure on the cable, terrestrial and in some cases the IPTV rivals. Despite the increased competition, satellite pay-TV operators still had a strong 2005, with those highlighted in this article adding just under two million subscribers in 2005 throughout the major European markets. Sky Italia continues to pace the market adding more than 25 percent of the new satellite pay-TV subs in Europe’s major markets. Sky Italia now has 3.6 million subscribers making it the second leading operator in terms of subscribers after BSkyB, which still has more than double the number of subscribers of any of the other pay-TV operators in our survey. We take our quarterly look at how satellite pay-TV operators have performed and analyze some of the key events in their respective digital television markets.

The United Kingdom

You have to admire BSkyB. At one point last year, it looked extremely unlikely that it would reach its stated target of eight million subscribers by the end of 2005, but a strong final quarter saw it add more than 200,000 subscribers, which meant that it hit its target. What is interesting is that in the three previous quarters, it had added less than 180,000 subscribers so the pre-holiday quarter proved to be an extremely profitable one for the operator. In fact, it even beat analysts’ expectations. Conor O’Shea, a media equity analyst at Teather & Greenwood said in a research note, "BSkyB beat our expectations on all measures. Net subscriber adds were 215,000, compared with our forecast of 180,000. To put this in context, this is the highest net growth since the equivalent period three years ago and the highest gross adds (426,000) for five years. This is something that looked inconceivable 18 months ago, when subscriber growth was slowing markedly."

The operator has also had a busy start to the year. In early January, it launched two new services, Sky by broadband and Sky by mobile, which enables subscribers to access Sky’s content across different platforms. For example, Sky by broadband is a new service that will allow a certain tier of Sky’s subscribers to legally download a wide range of movies and highlights and watch them on their home PC at no extra cost.

In other major developments, cable operators ntl and Telewest completed their merger, which in theory should put more pressure on BSkyB. The combined company has been renamed ntl Incorporated. BT continues to make progress as it nears the launch of its IPTV service in the United Kingdom. The operator announced a slew of content deals at the start of this year and is set to launch the service in the second half of this year.

Germany

Premiere, the German pay-TV operator, had a strong 2005 but faces a challenging 2006 on a number of fronts. The operator saw strong subscriber growth adding just under 320,000 subscribers, which represents a pretty solid run in 2005. However, its performance has been somewhat overshadowed by the fact it has lost the key Bundesliga (German national soccer) rights to Unity Media. While Premiere is negotiating, Sarah Simon, a media equity analyst, said in a research report that it is unlikely "Premiere will have any Bundesliga content as from August this year." The year 2006 could very well be a damage limitation exercise. If Premiere is unable to do a deal with Unity, its subscriber numbers are likely to see a strong fall, and possibly even fall back beyond the three million mark. Premiere CEO Georg Kofler’s number one priority will be solving the football rights issue. In the latest developments, the operator is proposing an open access solution. Simon added, "Premiere confirmed that Unity would be able to use Premiere set-top boxes and smart cards to reach Premiere subscribers, but for a fee. This could provide Premiere with revenues of 38 million euros ($45.7 million) per annum, but we think this scenario is unlikely. Unity would rather establish a platform of its own thereby bypassing Premiere’s platform." However, expect many more twists and turns here before this issue is resolved. Premiere has been one of the top performing pay-TV operators in Europe throughout recent years, but this undoubtedly represents one of the biggest challenges under Kofler.

France

There also have been significant developments in the French pay-TV market. The two platforms, TPS and Canalsat are set to merge in a move that will alter the pay- TV landscape in France. The two operators combined have just under five million subscribers. Canalsat performed relatively well in 2005 adding around 200,000 subscribers. TPS, however, struggled. The loss of the soccer rights was a key blow for the operator and it ended the year with around 25,000 less subscribers compared to the start of the year. The merger, which is likely to be approved this year, will lead to a much more powerful competitor.

In terms of how the competitive landscape is developing in France, Digital Terrestrial Television (DTT) continues to show some really positive numbers. According to French research organization, Mediametrie, the number of DTT households in France is now at around the two million mark.

One of the interesting trends of the French pay-TV market is the strong performance of IPTV compared to other major European markets. Here operators such as France Telecom (FT), Neuf Cegetel and Free are already making a strong impact in the market. FT has also announced a recent initiative to extend its plans here. It launched its Bouquet TV package last month, which offers a selection of free special-interest channels and seven exclusive events channels dedicated to the Olympic Winter Games. MaLigne TV now has more than 200,000 subscribers for premium TPS, Canalsat and Canal+ packages. It also offers all the free TV channels available on DTT, which gives it a strong line-up.

Italy

Sky Italia continues to be one of Europe’s top performing pay-TV operators and had another stellar year in 2005. The operator added half a million subscribers and ended the year with 3.6 million subscribers. The operator could well go beyond the four million subscriber number in 2006. It is also set to be a key year for the operator in terms of launching new services. At the end of last year, the operator launched Personal Video Recorder (PVR) services in Italy in a major new service launch. The operator also plans to launch HD services in Italy this year.

In terms of the competitive environment, the most interesting development in recent months has been the entrance of Telecom Italia (TI) into the market. Throughout the last few days, TI signed a collaboration agreement with Microsoft for the joint development of new telecom services and entertainment applications, available from fixed as well as mobile terminals. The partnership between the two companies will enable the development of new applications that will be accessible from PCs, cell phones and also via IPTV.

In fact, TI has announced a slew of deals for its TV service. As well as the recently announced Microsoft deal, in January of this year, TI and Sky signed an agreement to make Sky’s film channels available on "Alice Home TV", TI’s IPTV service. This started in February.

Spain

Digital+ has exhibited strong growth in the Spanish pay-TV market. The operator ended the year with close to two million subscribers and saw growth for the year of close to 310,000 subscribers. Spain still is one of the most under-penetrated markets in terms of digital television services in Europe. Telefonica is trying to make an impact in terms of IPTV with its ‘Imagenio’ offering, and cable competition is likely to be tougher now that Auna and ONO have merged. Also, telco Jazztel is trying to make an impact in the pay-TV market. This week the operator announced the launch of its nationwide IPTV service ‘Jazztelia TV’. It hopes to strike a chord with the younger generation of the Spanish market, which wants a combination of super-fast broadband (ADSL2+), telephony and TV services. Jazztelia TV, over ADSL 2+ is being sold at a promotion price of one euro ($1.2) per month until the 1st of July. The service will look to expand its product portfolio during 2006 by offering additional TV channel packs, video-on- demand and other services.

Conchi Ferreras, Jazztel’s head of content, said the offer will be attractive compared to Digital+. She said in a recent interview with Satellite News‘ sister publication, Inside Digital TV (Vol 9. No.4 Feb 15 2006), "I think Digital+ is very important in terms of content. They have a lot of exclusivity, but it is very expensive. You have to spend at least 60 euros ($71.5) to get their service, which is a lot of money for many people. They can only offer TV. The bill could be very big; more than 100 euros ($119.1) for voice, broadband (1 M) and TV services."

Another interesting development in the Spanish market was the recent relaunch of DTT services. According to Spanish industry forecasts, around one million households in Spain are now receiving DTT services. So, the competitive landscape is heating up.

Portugal

TV Cabo continues to see very little subscriber growth in Portugal. For the third successive quarter, the operator has seen zero subscriber growth for its DTH business. The operator still has more than one million cable subscribers in Portugal and remains the dominant force in the market.

Nordics

With the consolidation on the verge of happening in France, the only territories where satellite pay-TV operators will really compete head on is in the Nordic region where Canal Digital and Viasat compete head-to-head across Scandinavia. Throughout the course of the year, it appears as though Viasat had the edge adding around 120,000 subscribers compared to Canal Digital, which added just more than 80,000 subs. There is vibrant competition in the market. Things to look out for here is Canal Digital and a possible link-up with parent company, Telenor in terms of an IPTV offering. Viasat is also offering pay-TV services in the Baltic region and will hope to strengthen its performance. It recently announced the addition of 10 television channels to its premium pay-TV offering in Estonia, Latvia and Lithuania. The new channels will be available immediately. This could be a strong area of growth for the operator as it looks to bring digital TV to these markets.