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DEVELOPMENTS IN THE UK TELEVISION MARKET

DEVELOPMENTS IN THE UK TELEVISION MARKET. September 2002. Contents. Digital TV Programming and Audiences Business Economics Focus on ITV. 80. VCR 1980-1989. 70. 60. Colour TV Sets 1969-1978. 50. Digital TV 1998-June 2002. Penetration (% of households). 40. PC 1984-1993. 30.

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DEVELOPMENTS IN THE UK TELEVISION MARKET

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  1. DEVELOPMENTS IN THE UK TELEVISION MARKET September 2002

  2. Contents • Digital TV • Programming and Audiences • Business Economics • Focus on ITV

  3. 80 VCR1980-1989 70 60 Colour TV Sets1969-1978 50 Digital TV1998-June 2002 Penetration (% of households) 40 PC1984-1993 30 Satellite1987-1996 20 10 0 0 1 2 3 4 5 6 7 8 9 Year After Launch Take-up of digital television compared with other home technologies Digital TV’s strong initial growth is, in part, a result of the move to switch existing subscribers from analogue to digital packages - in 1998 analogue multichannel TV had achieved penetration of some 25% Source: ITC

  4. UK Multichannel Pay-TV Penetration, Quarter 2, 2002 UK Pay-TV Growth, 1999 - 2002 12 Platform Households (‘000s) % of UK TV households Totalanaloguemultichannel 10 Digital Satellite 6,101 25.0% Millions of subscribers 8 ITV Digital* Analogue Cable 1,417 5.8% 6 Sky Digital Digital Cable 2,026 8.3% 4 2 Total 9,544 39.1% Digital Cable 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 Pay TV take-up by platform * Please note: ITV Digital went into Administration on 27 March 2002 and ceased trading on 1 May, therefore we have only included subscriber numbers up to 31 March 2002. As no figures were publicly available for subscribers as of this date, ITV Digital subscribers were assumed to be equal to the latest figures released (i.e. for Q4, 2001). Source: Company literature

  5. 100% 80% Digital 60% Analogue multichannel 40% Total multichannel 20% 0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2002 1999 2000 2001 -20% -40% Quarterly growth in digital pay-TV subscribers Source: Company literature

  6. Range of available digital basic packages (Satellite & Cable) Sky Cost: £10 £13 £16 Channels included: More than 14 channels, mostly free to air 4 ‘themed’ packs (Popular mix, Knowledge, Kids/music, Lifestyle pack), each offering some 25 channels More than 70 channels Telewest Cost: £15 £18.50 £21.50 £25.50 Channels included: More than 20 channels, mostly free to air More than 40 channels Some 44 channels More than 70 channels NTL Cost: £20 £23 £26 Channels included: More than 20 channels, mostly free to air 4 ‘themed’ packs (Variety; News & Documentary; Kids & Music; General Entertainment) each offering more than 50 channels More than 70 channels • Please note: prices for NTL and Telewest packages include phone line rental;installation charges are applicable for all three platforms Source: Company literature

  7. Contents • Digital TV • Programming and Audiences • Business Economics • Focus on ITV

  8. Issue of ITC licences and total number of licensed programme services, 1994-2001 600 Net licences issued in year 500 (all services) Total programme services 400 300 200 100 0 1994 1995 1996 1997 1998 1999 2000 2001 -100 Note: The negative figure for net licences issued in 2000 reflects the replacement of many regional cable licences with fewer national licences. Issue of ITC licences Source: ITC estimates

  9. Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 Audience share in all homes by channel, 1999-2002 35 % 30 BBC1 25 ITV1 Other 20 15 BBC2 10 C4 C5 5 0 Source: BARB

  10. Audience share in multi-channel homes by channel, 1999-2002 45 % Other 40 35 30 25 BBC1 20 ITV1 15 10 C4 BBC2 5 C5 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 Source: BARB

  11. Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002 100 % 90 BBC1 ITV1 80 BBC2 C4 70 60 C5 50 40 30 20 10 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 Source: BARB

  12. 11% Allhomes 23% 32% 40% Allhomes 35% 60% 13% Multi-channelhomes 28% Multi-channelhomes 43% 37% 57% 22% 7% Analogueterrestrialhomes Analogueterrestrialhomes 42% 18% 58% 25% 50% Children 35-54 ABC1 C2DE 16-34 55+ Viewer profiles by type of television received Profile of viewers by type of service and social class, Q2 2002 Profile of viewers by type of service and age, Q2 2002 Source: BARB

  13. 4.5 % 4 3.5 3 2.5 Q2 2001 Q3 2001 2 Q4 2001 Q1 2002 1.5 Q2 2002 1 0.5 0 ABC1 C2DE All Individuals ABC1 C2DE All Individuals All Homes Multichannel Homes Hours viewed per household per day by social class, 2001-2002 Source: BARB

  14. 6 % 5 4 Q2 2001 Q3 2001 3 Q4 2001 Q1 2002 Q2 2002 2 1 0 Children 16-34 35-54 55+ Children 16-34 35-54 55+ All Homes Multichannel Homes Hours viewed per household per day by age, 2001-2002 Source: BARB

  15. Contents • Digital TV • Programming and Audiences • Business Economics • Focus on ITV

  16. 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

  17. 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

  18. 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

  19. Contents • Digital TV • Programming and Audiences • Business Economics • Focus on ITV

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

  21. 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

  22. 40 % 35 30 25 ITV1 20 BBC1 15 10 5 0 West Ulster Wales Border London Scotland Midlands Yorkshire North East North West South West East of England South & South East Audience share by region, ITV1 compared with BBC1, Q2 2002 Source: BARB

  23. 50 % 45 40 35 30 ITV1 25 BBC1 20 15 10 5 0 West Ulster Wales Border London Scotland Midlands Yorkshire North East North West South West East of England South & South East Audience share for regional news programmes by region, ITV1 compared with BBC1, Q2 2002 Source: BARB

  24. 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

  25. 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

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