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U.K. Digital Market Ready to Take to the Air in 1998
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Now is the time to beef up your sales and distribution channels in the U.K. The country's position as Europe's most vibrant market for digital video playback and transmission gear is likely to be greatly enhanced in 1998 as new digital satellite and terrestrial channels hit the air.
Satellite provider BSkyB and leading terrestrial broadcasters Carlton Communications and Grenada Group are ready to move on the digital front. Sky recently contracted with SGS-Thomson to develop a settop box environment that the companies intend to license on an OEM basis. Carlton and Grenada, meanwhile, are said to be shopping for manufacturers for their DVB-based terrestrial settops.
These new services are likely to boost the U.K.'s already significant demand for professional digital equipment, namely transmitters, servers, routers and play-to-air equipment.
"The drive to digital is arguably the greatest in the U.K.," said Chris Daubney, senior director at Panasonic Europe. "Other countries have practical (terrestrial) frequency issues, so they are moving into digital satellite."
Under a digital environment, the number of channels available to U.K. viewers will see a dramatic increase. Terrestrial broadcasters obtaining digital licenses will multiplex up to eight channels, while Sky is planning a service of several hundred channels.
Digital studio production gear - already a booming market in the U.K. - isn't likely to see a surge because of digital transmission because most of the new channels will carry movies, television reruns or other existing content. However most observers expect to see increased demand for field acquisition equipment to program news and sports services.
"There is a view that this will all be driven by sports, movies and pay-per-view," said Anthony D'Abreu, director of U.K. consulting firm Entertainment and Information Projects. "In the short term, it's hard to get away from the proven commercial equation that works - sports and movies."
Analysts say that unlike the U.S., where there is growing uneasiness over the economic model behind multiplex services, the U.K. market, and Europe in general, is more receptive to multichannel than to high-definition services.
"In the U.S., you have 60 percent cable penetration. People are used to a multichannel environment," said Thomas Blonz, a market analyst with London-based media analysis firm Ovum. "This is not the case in Europe, where people will react differently to a multichannel environment."
And unlike the U.S., U.K. terrestrial broadcasters will be able to devote one or two channels to pay services without having to pay additional fees to the government.
While this slew of new channels will boost the market for video gear, it will also drive prices lower. New specialty or niche channels are likely to have very limited equipment budgets, meaning they will invest in low-cost digital solutions like Panasonic's DVC or DVCPRO systems, JVC's Digital S format or Sony's Beta SX.
At the same time, the increased market will produce better economies of scale and greater profitability per unit.
"There is clearly an opportunity for new (manufacturing) entrants," Blonz said. "You'll see new programmers that want to target niche markets. They'll buy equipment largely based on cost."
Niche programmers will not be the only ones buying new gear. Established broadcasters will lok to boost their playback and production capabilities.
"Mainstream broadcasters will look to obtain greater efficiency through equipment upgrades," D'Abreu said. "They may spend 50,000 pounds now if it means saving 500,000 pounds in the future."
Transmitter Heaven
Meanwhile, new digital terrestrial services will produce a healthy market for transmitters, antennas and related gear. However, unlike the U.S. where broadcasters for the most part maintain their own transmission sites, the U.K. transmission market is controlled by two companies: NTL [NTLI], which oversees sites for non-BBC networks, and Castle Tower, which runs the BBC's transmission services. Any transmitter contracts will have to go through one of these companies, although network officials are certain to have a say in whose gear is installed. (See VTN, Jan. 13).
Driving the industry, of course, will be the settop boxes. With Carlton, Grenada and the BBC on board with the DVB box - not to mention broadcast, cable and satellite services across Europe - the remaining U.K. digital broadcasters will certainly follow suit.
The British government is also helping to ensure a robust digital market by subsidizing the cost of the boxes. Normally costing upwards of US$500, government subsidies are expected to bring the cost down to about US$335.
BSkyB is expecting to launch digital services by May. Carlton and Grenada are looking to get on the air by the fall of 1998. (Panasonic Europe, 44-118/902-9202; Entertainment & Information Projects, 44-1491/413-550; Ovum, 44-171/312-7359)
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Sony Tokyo Revamp Not Tied to DVCPRO Sales
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Analysts were quick to jump on last week's announcement by Sony's corporate headquarters in Tokyo that it is combining its broadcast and sound/image companies as an indication the company was feeling the heat from Panasonic's DVCPRO sales.
However, a closer look at the move suggests it is more of a cost-saving plan aimed at reducing sales and marketing redundancy.
The two units sold primarily the same type of gear - mainly the company's lines of analog and digital tape equipment - although to different market segments. Broadcast, naturally, concentrated on the Asian terrestrial market, while the sound and image unit catered to the post market.
The consolidation brings the Tokyo office in line with Sony's U.S. and European subsidiaries, both of which merged their broadcast and post efforts years ago. As such, the move in Tokyo is not expected to have any material affect on business operations elsewhere.
'Tremendous Inter-relationships'
"With what's happening in the world - the adoption of high-definition, the emergence of digital technology - there are tremendous inter-relationships between the two companies," said Charlie Steinberg, CEO of Sony U.S.'s Business and Professional Group. "It allows us to make better use of technology and develop more integrated solutions."
The consolidation is clearly aimed at leveraging Sony's strengths in the digital video field. However, Steinberg rejected the notion by analysts quoted in a Reuters report that the move was a reaction to Panasonic's success with the DVCPRO line.
"It has zero to do with that," he said.
Panasonic has sold an estimated 30,000 DVCPRO units worldwide since its introduction last year. Company officials report most of the sales are to existing analog Beta SP users. Sony, meanwhile, reported at IBC that it had sold about 7,000 of its Beta SX decks, which was launched late last year. (See VTN, Sept. 22)
Ongoing Process
Analysts contacted by VTN were also doubtful that the consolidation was sparked by DVCPRO sales.
"I'm not sure that one has to do with the other," said Jeffrey Pittsburg, with the New York investment firm Goldis-Pittsburg. "Sony has been doing different kinds of consolidations for over a year now. This one between professional broadcast and post systems makes sense to me."
The new unit will be called Sony Broadcasting and Professional Systems Co. and will be headed by Mitsuru Ohki, current corporate vice president at Sony Corp. The consolidation is expected to be complete by January 1, 1998.
Sony is also forming a new group aimed at the satellite broadcasting market. The unit will develop new computer platforms and solutions for electronic content distribution.
Sony has partnered with News Corp.[NWS] to launch a digital satellite service aboard the Japan Sky Broadcasting (JSkyB) service in April. (Sony, 813/5448 |
