There is a reasonable chance that, by the middle of 2010, Ofcom will introduce regulations concerning the availability and pricing of wholesale premium movie and sports content, as outlined in its third pay-TV consultation released on 26th June 2009

The Ofcom wholesale remedy proposals are likely to provide rival retailers to Sky with modest benefits in new customer acquisition and customer retention in the first three years, whilst opening up the prospect of wider competition as the broadband infrastructure develops

The complexity of the wholesale pricing issues being addressed by Ofcom may yet stand in the way of achieving an effective “must offer” wholesale remedy

A last minute rescue proposition has postponed the threat of Setanta entering into administration by at least another week, subject to meeting its revised payment schedule of sums owing to the Premier League

The profound commercial difficulties experienced by Setanta highlight the weakness of EU efforts to ensure competition in the sale of live televised rights to top UK domestic football and underline the inflated rights costs that would face any other complementary premium pay-TV sports supplier

Setanta’s survival hinges on its ability to negotiate further cuts in its rights payments and persuade investors that it can become profitable by making the necessary revisions to its retail/wholesale business model

Under recession-induced financial stress, rival Spanish media groups Prisa and Mediapro have settled a three year battle over football rights, giving Digital+ secure access to domestic football for three seasons

A separate tentative deal to merge their TV assets still faces considerable hurdles if it is to be finalised by the end of June. Prisa needs to raise cash and may still dispose of Digital+ or bring new investors in the merged entity

Although Digital+ is unrivalled on the premium segment of the pay market, we doubt the economic gloom, plus strong competition from IPTV, cable and terrestrial TV, leaves much room for subscriber expansion

Against current annual losses in the order of £100 million, Setanta has the whole of June in which to attract the necessary investment that will allow it to continue. The alternative is closure

As complementary supplier of premium sports channels to Sky, Setanta has been more vulnerable to recessionary pressures, but it is not in the interest of any of its existing competitors/business associates for it to cease operations

There is a chance of survival, but it requires swapping the current retail/wholesale model for a wholesale only model as a start, with the possibility of further reductions in the costs of its sports rights

The OFT has delivered its verdict on ITV’s request for a review and modification of the CRR remedy that the Competition Commission imposed as a condition of the Carlton/Granada merger in 2003

In delivering its verdict, the OFT has chosen to sit on the fence. After recognising both the merits of the ITV case and the continuing concerns of the advertising community it reiterated earlier recommendations for minor changes in keeping with the times, but otherwise left it to the CC to decide what changes to make

The complexity of the CRR remedy and the polarised views of parties involved, as well as the burden of decision-making transferred to the CC, merely confirm the view that any significant modification to CRR will be a long time in coming, and almost certainly long after the start of the 2010 trading season, as previously suggested by ITV

Channel 4 broke even in 2008 despite a 5% fall in total TV NAR (net advertising revenues), through a combination of outperforming the market and £25 million in programme budget cuts. Its annual report also underlined its credentials as the alternative PSB voice, based on market research conducted over the year

The crunch time is likely to come in 2009 and 2010. Although financially better placed in many ways than ITV, and more flexible over committed programme spend, the recession threatens Channel 4 with a cumulative annual net deficit of around £150 million in 2010 without further action

Financial pressures facing Channel 4 highlight the need for urgent government action, in the absence of which much depends on the outcome of Virgin Media’s efforts to sell its content assets and the ultimate willingness of BBC Worldwide to engage in a JV with Channel 4. Consolidation would help even if it did not solve all of Channel 4’s pressing financial concerns

VMed’s Q1 results were again mixed, with declining group revenue and OCF margin but improving performance at Virgin Mobile and continuing strength in TV

The core cable business is facing a return to negative customer growth due to a combination of seasonality and stalling demand for broadband

But de facto price increases in broadband, TV and mobile should boost financial performance from the autumn; we expect this to be combined with reduced opex to generate significant cash flow growth from 2010

Another strong quarter of pay-TV subscriber growth, marked by record Sky+ HD sales, indicated continued resistance to recessionary pressures, supported by flat costs other than those associated with accelerated HD take-up

Results for the telecoms business again displayed strong volume growth in an increasingly difficult market. But original guidance for broadband subscribers, breakeven and standalone IRR looks challenging

Although the recession may yet take its toll on subscriber growth, the final outcome could work to Sky’s advantage due to the severe revenue losses being experienced by the free-to-air advertising sector. Constraints imposed by regulatory intervention remain a possibility, but unlikely to make a material difference over the next two to three years

Leading pay-TV operators Sky and Virgin Media (VMed) have shown little sign of recessionary damage in 2008 and the outlook for Q1 2009 remains positive. Difficulties are apparent at complementary pay-TV service provider Setanta

Ofcom’s pay-TV investigation enters its final stages in 2009. Ofcom faces a formidable challenge to devise a workable wholesale must-offer solution for premium film and sports content that fosters competition across all platforms

With prospects fading fast of a VMed sale of its UKTV and possibly VMTV assets to a BBCW/Channel 4 joint venture, Discovery looks an increasingly suitable candidate, as competition concerns could arise if Sky was the chosen partner

UK Digital TV (DTV) growth has finally started to slow significantly. By the end of 2008, 86% of TV homes and 91% of the population living in TV homes had DTV reception on one or more sets

Almost the only growth now is coming from the satellite sector, as Freeview digital terrestrial TV (DTT) reception reaches its upper limit prior to the full commencement of digital switchover (DSO) in spring 2009. This will see the digital technical household coverage of the main PSB channels extend from 80% to 98.5% by the completion of DSO in 2012. These forecasts update our previous forecasts issued in June 2008 (see UK DTV Homes to 2017 June update [2008-62])