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Multichannel TV - UK - January 2009

The multichannel TV market continues to grow at a healthy pace with the ongoing digital switchover and Freeview driving demand, however, the industry faces a number of challenges. The worsening economic situation threatens new subscription growth whilst changes in TV viewing habits have led to an increase in online viewing accounting for a higher share of adspend. Broadcasters face challenges from improvements in the provision of internet protocol television (IPTV), whilst games consoles are evolving into easy-to-use media centres.

Convergence of different technologies has enabled consumers to view TV in a number of ways and multichannel providers are constantly adapting their content for multi platforms. Whilst online viewing provides further opportunities for broadcasters to engage with their audiences, an improvement in broadband speeds also increases the threat of piracy, a serious concern for pay-TV providers. Younger consumers are key adopters of new viewing methods whilst light entertainment programmes are the most popular genre for regular viewing. The falling price of new technology has helped stimulate demand; personal video recorders (PVRs) are becoming commonplace whilst high-definition TV (HDTV) shows great potential. Multiplay bundling packages provide opportunities to attract new custom and boost retention levels.

This report explores the hypothesis: “Targeting viewers in a fragmented market”, and how multichannel providers are adapting to the changes in consumers’ TV viewing habits, and which services do consumers use, what types of programmes are preferred and what are their attitudes towards digital providers. It also explores the factors affecting market growth, identifies current trends and innovations, assesses how the market is changing and outlines future developments.

Main report themes:

  • How will the analogue switchover affect multichannel TV providers?

  • How to turn growing subscriber numbers into growing profits – bundling, packages etc.

  • How is the market affected by the changing TV viewing habits?

  • How the economic downturn will affect the market – for example, the reduction in adspend.

  • What are the ad innovations to combat new ways to watch TV ie Sky+?

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Table of contents

  1. Issues in the Market

      • Main issues
        • Definition
          • Abbreviations
          • Future Opportunities

            • Tune in, demand and flop out
              • Mintel trend: Over-Optioned Consumers
                • What's it about?
                  • Opportunities
                    • Interactive elders
                      • Mintel trend: Constant Change
                        • What's it about?
                          • Opportunities
                            • Nostalgia rules
                              • Mintel trend: Nostalgia
                                • What's it about?
                                  • Opportunities
                                  • Market in Brief

                                    • Multi market moves on up...
                                      • ...but faces a worsening economy
                                        • Online viewing drives engagement
                                          • Piracy threats
                                            • Advertising revenues squeezed
                                              • Competition comes in many forms
                                                • Sky under review
                                                  • Young are key adopters
                                                    • Entertain me but keep it light
                                                      • Product development leads the way
                                                      • Internal Market Environment

                                                        • Key points
                                                          • Digital switchover key market driver
                                                            • Freeview grows and improves its offer...
                                                              • …whilst Freesat is launched
                                                                • Internet penetration – a double-edged sword
                                                                  • Figure 1: British internet penetration at home/work/place of study or elsewhere, by gender, age, socio-economic group, region and working status, 2003-08
                                                                • Broadband boom – the pros...
                                                                  • Figure 2: UK broadband penetration, 2004-08
                                                                • …and the cons
                                                                  • Viewing hours on the up...
                                                                    • Figure 3: Trends in average daily viewing hours per person, by quarter, 2004-08
                                                                  • ...but advertising revenues under threat
                                                                    • Ofcom investigation into pay-TV industry drags on...
                                                                      • ...whilst Sky’s stake in ITV is in question
                                                                      • Broader Market Environment

                                                                        • Key points
                                                                          • Online adspend rockets
                                                                            • Figure 4: Advertising expenditure, at current prices, 2003-07
                                                                          • Economic effects
                                                                            • Figure 5: Trends in personal disposable income and consumer expenditure, 2003-13
                                                                          • Age structure impacts products, services and programming
                                                                            • Figure 6: Trends in the age structure of the UK population, by gender, 2003-13
                                                                          • Greying population to boost daytime TV
                                                                            • Figure 7: Forecast adult population trends, by lifestage, 2003-13
                                                                          • ABC all the way
                                                                            • Figure 8: Forecast adult population trends, by socio-economic group, 2003-13
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • Highest spend on out-of-home activities
                                                                              • Figure 9: Consumer expenditure on selected leisure goods and activities, 2002-07
                                                                            • Video gaming now a mainstream activity
                                                                              • Figure 10: Sales of video game hardware/software, 2003-13
                                                                            • Spending priorities
                                                                              • Figure 11: Expenditure priorities, 2007 and 2008
                                                                            • Growth of IPTV
                                                                            • Strengths and Weaknesses in the Market

                                                                                • Strengths
                                                                                  • The analogue switch-off
                                                                                    • Bundling
                                                                                      • Convergence
                                                                                        • On-demand/interactive services
                                                                                          • Affordable technology
                                                                                            • Programming
                                                                                              • Weaknesses
                                                                                                • Piracy
                                                                                                  • Threats to advertising income
                                                                                                    • IPTV provision
                                                                                                      • Economic crisis
                                                                                                      • Who's Innovating?

                                                                                                        • Key points
                                                                                                          • Project Kangaroo...
                                                                                                            • ...and a blank canvas
                                                                                                              • Advertising innovations
                                                                                                                • You’ve had HDTV, now what about 3DTV?
                                                                                                                  • Standalone online access
                                                                                                                    • View online before TV
                                                                                                                      • BBC looks to IPTV
                                                                                                                      • Market Size and Trends

                                                                                                                        • Key points
                                                                                                                          • Industry growth driven by Freeview
                                                                                                                            • Figure 12: UK multichannel TV households, by platform, 2002-08
                                                                                                                          • Past
                                                                                                                            • Present
                                                                                                                              • The future
                                                                                                                                • Digital take-up more than doubled since 2002
                                                                                                                                  • Figure 13: Take-up of digital TV services, by platform, 2002-08
                                                                                                                              • Segment Performance

                                                                                                                                • Key points
                                                                                                                                  • Freeview hits top spot
                                                                                                                                    • Figure 14: Platform share among main TV sets, Q1 2008
                                                                                                                                • Market Share

                                                                                                                                  • Key points
                                                                                                                                    • Terrestrial channels lose out to non-terrestrial rivals
                                                                                                                                      • Figure 15: Viewing share, by channel, 2002-07
                                                                                                                                    • Terrestrial channels retain their rank
                                                                                                                                      • Figure 16: The top channels, by share in multichannel homes, 2002 and 2007
                                                                                                                                  • Companies and Products

                                                                                                                                    • Key points
                                                                                                                                      • British Sky Broadcasting (BSkyB)
                                                                                                                                        • Channel 4
                                                                                                                                          • ITV
                                                                                                                                            • UKTV
                                                                                                                                              • Virgin Media Television
                                                                                                                                              • Brand Elements

                                                                                                                                                  • Brand map
                                                                                                                                                    • Figure 12: Attitudes and usage of multichannel TV provider brands, December 2008
                                                                                                                                                  • BSkyB
                                                                                                                                                    • What the brand is trying to achieve
                                                                                                                                                      • What the consumer thinks
                                                                                                                                                        • Figure 13: Attitudes towards the Sky brand, December 2008
                                                                                                                                                      • Virgin Media
                                                                                                                                                        • What the brand is trying to achieve
                                                                                                                                                          • What the consumer thinks
                                                                                                                                                            • Figure 14: Attitudes towards the Virgin Media brand, December 2008
                                                                                                                                                          • BT Vision
                                                                                                                                                            • What the brand is trying to achieve
                                                                                                                                                              • What the consumer thinks
                                                                                                                                                                • Figure 15: Attitudes towards the BT Vision brand, December 2008
                                                                                                                                                              • Freeview
                                                                                                                                                                • What the brand is trying to achieve
                                                                                                                                                                  • What the consumer thinks
                                                                                                                                                                    • Figure 16: Attitudes towards the Freeview brand, December 2008
                                                                                                                                                                  • Brand qualities of multichannel TV provider brands
                                                                                                                                                                    • Sky highly entertaining but Freeview the most user-friendly
                                                                                                                                                                      • Figure 17: Personalities of various multichannel TV provider brands, December 2008
                                                                                                                                                                    • Experience of multichannel TV provider brands
                                                                                                                                                                      • Freeview edges out Sky in terms of usage
                                                                                                                                                                        • Figure 18: Consumer usage of various multichannel TV provider brands, December 2008
                                                                                                                                                                      • Brand intentions for multichannel TV provider brands
                                                                                                                                                                        • Virgin Media shows the highest potential for future usage
                                                                                                                                                                          • Figure 19: Consideration of various multichannel TV provider brands, December 2008
                                                                                                                                                                        • Brand momentum for multichannel TV provider brands
                                                                                                                                                                          • Freeview is gaining most ground
                                                                                                                                                                            • Figure 20: Momentum of various multichannel TV provider brands, December 2008
                                                                                                                                                                          • Brand motivation for multichannel TV provider brands
                                                                                                                                                                            • Sky appears to be the brand for new technology
                                                                                                                                                                              • Figure 21: Motivation for choosing various multichannel TV provider brands, December 2008
                                                                                                                                                                            • Brand satisfaction for multichannel TV provider brands
                                                                                                                                                                              • Sky viewers are the most satisfied
                                                                                                                                                                                • Figure 22: Satisfaction with various multichannel TV provider brands, December 2008
                                                                                                                                                                              • Brand commitment to multichannel TV provider brands
                                                                                                                                                                                • Freeview rivals Sky in terms of recommendation
                                                                                                                                                                                  • Figure 23: Commitment to various multichannel TV provider brands, December 2008
                                                                                                                                                                                • Round-up
                                                                                                                                                                                • The Consumer and Which Services They Use

                                                                                                                                                                                  • Key points
                                                                                                                                                                                      • Figure 24: TV services/providers subscribed to/have at home, December 2008
                                                                                                                                                                                    • Sky high earners...
                                                                                                                                                                                      • ...Freeview savers
                                                                                                                                                                                        • Entertainment most regularly watched
                                                                                                                                                                                          • Figure 25: Programming subscribed and watched regularly, by services subscribed to/owned at home, December 2008
                                                                                                                                                                                        • No time for music
                                                                                                                                                                                          • Figure 26: Programming subscribed to but don’t watch regularly, by services subscribed to/own at home, December 2008
                                                                                                                                                                                        • A mixed bag for interactive services
                                                                                                                                                                                          • Figure 27: Use of interactive services, by services subscribed to/owned at home, December 2008
                                                                                                                                                                                      • The Consumer and Interactive Services

                                                                                                                                                                                        • Key points
                                                                                                                                                                                            • Figure 28: Usage of interactive services, December 2008
                                                                                                                                                                                          • Interactive ideal for busy lifestyles
                                                                                                                                                                                            • AB interactive
                                                                                                                                                                                            • The Consumer and Attitudes towards Digital TV Providers

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                  • Figure 29: Attitudes towards digital TV providers, December 2008
                                                                                                                                                                                                • What the young ones want
                                                                                                                                                                                                  • Sky vs Virgin
                                                                                                                                                                                                    • Sky customers looking to save money
                                                                                                                                                                                                      • Figure 30: Services subscribed to/owned at home, by attitudes towards digital TV providers, December 2008
                                                                                                                                                                                                  • The Consumer and Type of Programmes Watched

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                        • Figure 31: Programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                      • Battle of the sexes...
                                                                                                                                                                                                        • ...and the generation game
                                                                                                                                                                                                          • Sky’s the limit
                                                                                                                                                                                                          • The Consumer and Viewing Habits

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                • Figure 32: Frequency of TV viewing, December 2008
                                                                                                                                                                                                              • Affluent and young = selective viewers
                                                                                                                                                                                                                • Viewing habits by type of programming would like to subscribe to
                                                                                                                                                                                                                  • Figure 33: Which programming would you like to subscribe to, by frequency of watching TV, December 2008
                                                                                                                                                                                                                • Viewing habits by type of programming watched regularly
                                                                                                                                                                                                                  • Figure 34: Programming subscribed to and watched regularly, by frequency of watching TV, December 2008
                                                                                                                                                                                                                • Viewing habits by type of programming watched infrequently
                                                                                                                                                                                                                  • Figure 35: Programming subscribed to but not watched regularly, by frequency of watching TV, December 2008
                                                                                                                                                                                                                • PC linked to TV favoured by occasional viewers
                                                                                                                                                                                                                  • Figure 36: Services subscribed to/owned at home, by frequency of watching TV, December 2008
                                                                                                                                                                                                              • The Consumer and How TV is Viewed

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                    • Figure 37: How TV is viewed, December 2008
                                                                                                                                                                                                                  • Viewing when, where and how you want
                                                                                                                                                                                                                    • Online adapters
                                                                                                                                                                                                                      • Sky customers embrace new technology
                                                                                                                                                                                                                        • Figure 38: Services subscribed to/owned at home, by statements about TV viewing, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and Which Services They Use

                                                                                                                                                                                                                        • Figure 39: Most popular TV services/providers subscribed to/have at home, by demographic sub-group, December 2008
                                                                                                                                                                                                                        • Figure 40: Next most popular TV services/providers subscribed to/have at home, by demographic sub-group, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and Interactive Services

                                                                                                                                                                                                                        • Figure 41: Usage of interactive services, by demographic sub-group, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and Attitudes towards Digital TV Providers

                                                                                                                                                                                                                        • Figure 42: Most popular attitudes towards digital TV providers, by demographic sub-group, December 2008
                                                                                                                                                                                                                        • Figure 43: Next most popular attitudes towards digital TV providers, by demographic sub-group, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and Type of Programmes Watched

                                                                                                                                                                                                                        • Figure 44: Frequency of TV viewing, by demographic sub-group, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and Viewing Habits

                                                                                                                                                                                                                      • News/current affairs
                                                                                                                                                                                                                        • Figure 45: News/current affair programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Sport
                                                                                                                                                                                                                        • Figure 46: Sport programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Films
                                                                                                                                                                                                                        • Figure 47: Films subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Entertainment/variety
                                                                                                                                                                                                                        • Figure 48: Entertainment/variety programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Children/cartoon
                                                                                                                                                                                                                        • Figure 49: Children/cartoon programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Documentaries/factual
                                                                                                                                                                                                                        • Figure 50: Documentaries/factual programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Music
                                                                                                                                                                                                                        • Figure 51: Music programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                      • Music
                                                                                                                                                                                                                        • Figure 52: Music programming subscribed to/watched on a regular basis, December 2008
                                                                                                                                                                                                                    • Appendix – The Consumer and How TV is Viewed

                                                                                                                                                                                                                        • Figure 53: Most popular ways of how TV is viewed, by demographic sub-group, December 2008
                                                                                                                                                                                                                        • Figure 54: Next most popular ways of how TV is viewed, by demographic sub-group, December 2008

                                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                                    • Apple Computer UK Ltd
                                                                                                                                                                                                                    • Asda Group Ltd
                                                                                                                                                                                                                    • Barclays Bank plc
                                                                                                                                                                                                                    • Bebo Inc
                                                                                                                                                                                                                    • British Broadcasting Corporation (BBC)
                                                                                                                                                                                                                    • British Phonographic Industry Ltd (The) [BPI]
                                                                                                                                                                                                                    • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                                                                                    • British Video Association (BVA)
                                                                                                                                                                                                                    • Broadcasters' Audience Research Board Limited
                                                                                                                                                                                                                    • BT Group plc
                                                                                                                                                                                                                    • Carlton Communications PLC
                                                                                                                                                                                                                    • Channel 4
                                                                                                                                                                                                                    • Co-operative Group
                                                                                                                                                                                                                    • Competition Commission
                                                                                                                                                                                                                    • Discovery Channel
                                                                                                                                                                                                                    • ELSPA
                                                                                                                                                                                                                    • England and Wales Cricket Board (ECB)
                                                                                                                                                                                                                    • Ferrero UK Limited
                                                                                                                                                                                                                    • Five
                                                                                                                                                                                                                    • Football Association (The)
                                                                                                                                                                                                                    • Freeview
                                                                                                                                                                                                                    • Gfk NOP
                                                                                                                                                                                                                    • Gordon Ramsay Holdings
                                                                                                                                                                                                                    • Government Actuary's Department (GAD)
                                                                                                                                                                                                                    • HomeChoice
                                                                                                                                                                                                                    • Independent Television Commission
                                                                                                                                                                                                                    • Institute of Practitioners in Advertising
                                                                                                                                                                                                                    • ITV plc
                                                                                                                                                                                                                    • John Lewis Partnership
                                                                                                                                                                                                                    • Lidl (UK)
                                                                                                                                                                                                                    • Market & Opinion Research International (MORI)
                                                                                                                                                                                                                    • Marks & Spencer
                                                                                                                                                                                                                    • mmO2 plc
                                                                                                                                                                                                                    • MySpace.com
                                                                                                                                                                                                                    • National Football League Inc.
                                                                                                                                                                                                                    • National Lottery Commission
                                                                                                                                                                                                                    • Nickelodeon Networks
                                                                                                                                                                                                                    • Nintendo UK Entertainment Ltd
                                                                                                                                                                                                                    • Ofcom
                                                                                                                                                                                                                    • Office for National Statistics
                                                                                                                                                                                                                    • Orange plc (UK)
                                                                                                                                                                                                                    • Paramount Pictures Corporation
                                                                                                                                                                                                                    • Setanta Sports
                                                                                                                                                                                                                    • SMG plc (Scottish Media Group)
                                                                                                                                                                                                                    • T-Mobile (UK) Ltd
                                                                                                                                                                                                                    • Telewest Broadband
                                                                                                                                                                                                                    • The Society of London Theatre [SOLT]
                                                                                                                                                                                                                    • Tiscali UK
                                                                                                                                                                                                                    • Top Up TV
                                                                                                                                                                                                                    • UKTV
                                                                                                                                                                                                                    • Virgin Media Ltd
                                                                                                                                                                                                                    • Virgin Mobile
                                                                                                                                                                                                                    • Vodafone Group Plc (UK)
                                                                                                                                                                                                                    • Walt Disney Company, The
                                                                                                                                                                                                                    • WightCable
                                                                                                                                                                                                                    • World Advertising Research Center

                                                                                                                                                                                                                    Multichannel TV - UK - January 2009

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