Free-to-air TV may be losing its place as the leviathan of the ad industry, but it’s far from written off. However, pay TV will face more competition from online players unless it can gain exclusive broadcast rights to sports on the anti-siphoning list.
While many have been predicting the decline of TV advertising for years in the face of more viewer options to either skip ads or bypass broadcast TV altogether, PwC has predicted it will grow to $3.57 billion by 2017, a compound annual growth rate (CAGR) of 1.7%. This year, the industry should eke out a 0.7% increase to $3.31 million after a couple of years of small declines.
PwC’s Entertainment and Media Outlook said while FTA TV faced myriad challenges including piracy and online competition from streaming and over-the-top services, live sports and ‘event TV’ such as reality competition programs will continue to provide the sector will mass audiences.
However, the online space shouldn’t been seen merely as a threat to TV networks but an opportunity to piggy-back on the digital growth with second screen strategies such as companion apps and social media. Companion apps provided a starting point for TV networks, according to PwC, but full integration of multiple platforms will be the key to long-term sustainability and growth.
On the subscription TV front, the ad market will grow to $645 million by 2017 at a CAGR of 9.7%. But the vast majority of pay TV revenue (88.2%) comes from consumer spending. Foxtel, the most dominant player in the market, makes on average $99 per subscriber monthly.
PwC predicts pay TV subscription will grow to 35% by 2017, up from 31.1% in 2013. Pay TV penetration rates in Australia has always stagnated around the 30% mark but Foxtel chief executive Richard Freudenstein has said many times he would like to see that figure lift to the 50% mark. Foxtel has rolled out many strategies to get closer to its goal, including second screen solutions such as the Foxtel Go app and exclusive content deals with brands such as HBO and BBC.
But PwC’s report says one of pay TV’s biggest encumbrances is anti-siphoning legislation which prohibits it from obtaining exclusive rights to some sports content. As a result, pay TV is unable to build a significantly higher subscriber base as its counterparts in other markets have been able to.
IPTV and over-the-top services such as Apple TV will also present a challenge to traditional pay TV (Foxtel) as consumers demand more customised content. The report predicts 27% of Australians will sign up to an IPTV service by 2017. Video-on-demand will also prove to be another competitor.
However, where pay TV is at an advantage is its potential to embrace the greater data it holds on customers to enable advertisers to run highly targeted campaigns. Additionally, more bundling of services (Telstra owns 50% of Foxtel) will also provide new opportunities to grow its subscriber base.
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.
Have something to say? Send us your comments using the form below or contact the writer at wenleima@yaffa.com.au
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.