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TV Service Providers - UK - October 2013

“Whilst the pay TV sector is in a healthy position, providers will be under greater pressure to stay ahead of subscription-free products and services. Although pay TV providers have so far seen off much of the threat from free-view-view platforms, smart TVs and wireless streaming services will arguably present an even greater challenge in years to come. As these devices reach more people, consumers will start to expect a strong on-demand platform as standard, which could put a cap on the premium that companies can charge for TV subscriptions”.

– Paul Davies, Senior Technology Analyst

Some questions answered in this report include:

  • Will the improvement of subscription-free services limit the value of pay TV?
  • How can BT use sport to win customers from its rivals?
  • How can providers retain consumers beyond initial contracts?
  • Are free-to-view services set to decline beyond 2013?

The number of homes relying solely on free-to-view services declined for the first time in over five years in 2013, as pay TV providers have encouraged more Freeview users to upgrade from the ‘default’ platform.

Whilst Sky has added a small number of new subscribers in 2013, lower-cost ADSL providers such as TalkTalk have driven most volume, as the on-demand focused YouView box has helped TalkTalk to prompt upgrades. The introduction of BT Sport has also presented the market leader with a new challenge, with Sky losing some its hold over exclusive live sport in the pay TV sector.

This report investigates current pay TV subscription levels amongst consumers, whilst also assessing the reach of subscription-free services. Consumer uptake and interest in BT’s new sports channels is also measured, whilst we look at attitudes amongst existing pay TV subscribers.

Finally the report analyses the ways in which pay TV providers may be able to encourage non-subscribers to upgrade from free-to-view platforms.

Definition

The TV service market refers to providers of digital TV, including both non-subscription services (eg Freeview, Freesat and YouView) and pay TV providers, such as BSkyB, Virgin Media, BT and TalkTalk.

Pay TV providers tend to offer broadband and landline services alongside a TV package, but consumers are not obliged to take up a ‘triple-play’ bundle (that includes all three), except in the case of BT and TalkTalk (ADSL providers) where the TV service is sent down the line. Other providers tend to broadcast content over the air (eg Freeview), via cable (eg Virgin Media) or satellite dish (eg Sky).

BT Vision was renamed BT TV (to reflect its BT Vision and BT YouView boxes) in August 2013. Consumer research for this report was carried out prior to this change; therefore the company name is sometimes displayed as ‘BT Vision’ when referring to the consumer research.

For the purposes of this report, paid online streaming services (such as LOVEFiLM and NOW TV) represent an alternative way of receiving content, and are therefore not included within the market size data.

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Volume
                • Figure 1: Forecast volume of pay TV subscribers, 2008-18
              • Value
                • Figure 2: Forecast value of pay TV subscriptions, 2008-18
              • Market drivers
                • Providers focus on triple-play bundles in order to improve retention
                  • Figure 3: Take-up of bundled communications services, 2005-13
                • A third of smart TV users reconsidering pay TV subscription
                  • Figure 4: Attitudes towards smart TV, 2013
                • Sports segment pushed on by BT cash injection
                  • Figure 5: Multichannel spend (by broadcasters and service providers) and subscription revenue, by genre, 2012
                • The consumer
                  • Sky still leads the way as its focus changes to maximising revenue from existing customers
                    • Figure 6: Consumers’ subscription status and awareness of pay TV service providers, August 2013
                  • Freeview received by over two thirds of consumers
                    • Figure 7: TV services have in the home, August 2013
                  • ‘Free’ BT Sport offers ensure early sign-ups
                    • Figure 8: BT Sport subscription uptake, August 2013
                  • On-demand is now in demand amongst pay TV subscribers
                    • Figure 9: Attitudes towards pay TV services, August 2013
                  • Almost half of non-subscribers could be tempted to sign up to pay TV
                    • Figure 10: Factors that could encourage non-subscribers to pay for TV services, August 2013
                  • What we think
                  • Issues in the Market

                      • Will the improvement of subscription-free services limit the value of pay TV?
                        • How can BT use sport to win customers from its rivals?
                          • How can providers retain consumers beyond initial contracts?
                            • Are free-to-view services set to decline beyond 2013?
                            • Trend Application

                                • Trend: Nouveau Poor
                                  • Trend: Make it Mine
                                    • Mintel Futures: Access Anything, Anywhere
                                    • Market Drivers

                                      • Key points
                                        • Providers focus on triple-play bundles in order to improve retention
                                          • Figure 11: Take-up of bundled communications services, 2005-13
                                          • Figure 12: Fixed broadband market share, 2007-12
                                        • Television has divorced from the TV
                                            • Figure 13: Sky Go app, shown on an iPad, launched 2011 (formerly known as Sky Player and Sky Mobile TV)
                                          • A third of smart TV users reconsidering pay TV subscription
                                              • Figure 14: Attitudes towards smart TV, 2013
                                            • Service bundling: should providers embrace competition?
                                              • Standard of TV programming alienating older consumers…
                                                • Figure 15: Opinion on programme standards over the last 12 months, by age, 2012
                                              • …. but watching television still the most popular media activity by far
                                                • Figure 16: Which media activity would UK adults miss the most 2005-12
                                              • Sports segment pushed on by BT cash injection
                                                • Figure 17: Multichannel spend (by broadcasters and service providers) and subscription revenue, by genre, 2012
                                              • TV advertising revenue curbed by move to digital
                                                • Figure 18: Total TV advertising expenditure (all channels), July-June 2008/09-2012/13
                                            • Who’s Innovating?

                                              • Key points
                                                • Sky trials personalised advertising scheme
                                                  • TalkTalk launches ‘The Big Free’
                                                    • Virgin and Netflix in unlikely partnership
                                                      • Self-installations help Sky to reduce operating costs
                                                      • Market Size and Forecast

                                                        • Key points
                                                          • Package upgrades and more new subscriptions see growth continue
                                                            • Figure 19: Total volume and value of pay TV subscriptions, 2008-18
                                                          • Forecast
                                                            • Figure 20: Forecast volume of pay TV subscribers, 2008-18
                                                            • Figure 21: Forecast value of pay TV subscriptions, 2008-18
                                                          • Forecast methodology
                                                          • Segment Performance

                                                            • Key points
                                                              • ADSL segment cashes in on Freeview upgrades
                                                                • Figure 22: UK multichannel TV households by platform 2008-13
                                                              • Number of homes to only use free-to-view services is set to decline in 2013
                                                                • Figure 23: UK multichannel TV households, by subscription type, 2008-13
                                                            • Market Share

                                                              • Key points
                                                                • Pay TV share stabilising despite the introduction of BT Sport
                                                                  • Figure 24: Volume of UK TV households, by provider, 2012 and 2013
                                                              • Companies and Products

                                                                • Key points
                                                                  • British Sky Broadcasting Group PLC (BSkyB)
                                                                      • Figure 25: British Sky Broadcasting (BSkyB), financial information, 2012-13
                                                                    • Virgin Media Inc.
                                                                        • Figure 26: Virgin Media, financial information, 2011-12
                                                                      • BT TV (part of BT Retail)
                                                                          • Figure 27: BT Retail (including BT TV), financial performance, 2012-13
                                                                        • TalkTalk Telecom Group PLC
                                                                            • Figure 28: TalkTalk, financial performance 2012-13
                                                                          • Freeview (DTV Services Ltd)
                                                                            • Freesat
                                                                              • YouView TV Ltd
                                                                              • Brand Communication and Promotion

                                                                                • Key points
                                                                                  • Sky increases ad expenditure as competition intensifies
                                                                                    • Figure 29: TV service advertising expenditure, by company, 2008/09-2012/13
                                                                                  • Sky ads move online and outdoors
                                                                                    • Figure 30: TV service advertising expenditure, by media channel, 2008/09-2012/13
                                                                                    • Figure 31: TV service advertising expenditure, by media channel, 2012/13
                                                                                • TV Services in the Home

                                                                                  • Key points
                                                                                    • Sky still leads the way as its focus changes to maximising existing customers
                                                                                      • Figure 32: Consumers’ subscription status and awareness of pay TV service providers, August 2013
                                                                                      • Figure 33: TV services subscribed to – all TV owners, August 2013
                                                                                    • Market stabilises, but TalkTalk shows promise
                                                                                      • Figure 34: TV services subscribed to – all paid TV subscribers, July 2012 and August 2013
                                                                                    • BT TV has said goodbye to over half of its all-time customers
                                                                                      • Figure 35: Proportion of ‘all-time’ TV subscribers who are currently taking a TV subscription from that same provider, August 2013
                                                                                    • Sky customers more likely to be young men
                                                                                      • Figure 36: Sky TV subscribers, by age and gender, August 2013
                                                                                    • Lack of cable prevents Virgin Media from reaching more rural areas
                                                                                      • Figure 37: TV services currently subscribed to, by area, August 2013
                                                                                    • TalkTalk success could depend on reputation overhaul
                                                                                      • Figure 38: Pay TV complaints per 1,000 customers/connections, Q4 2011-Q1 2013, by quarter
                                                                                    • Freeview received by over two thirds of consumers
                                                                                      • Figure 39: TV services have in the home, August 2013
                                                                                    • YouView mobile service could attract more young people
                                                                                      • Figure 40: TV services have in the home, by age, August 2013
                                                                                  • Consumer Uptake of and Interest in BT Sport

                                                                                    • Key points
                                                                                      • ‘Free’ BT Sport offers ensure early sign-ups
                                                                                        • Figure 41: BT Sport subscription uptake, August 2013
                                                                                      • A quarter of non-BT Sport subscribers show interest in signing up
                                                                                        • Figure 42: Interest in signing up to BT Sport, August 2013
                                                                                      • Upcoming bidding wars could decide the fate of BT Sport
                                                                                        • Figure 43: Preferred methods of subscribing to BT Sport, August 2013
                                                                                      • Freeview could use smart TV apps as a defence mechanism
                                                                                        • Figure 44: Interest in signing up to BT Sport, by TV services subscribed to, August 2013
                                                                                      • Sky could offset the cost of BT Sport
                                                                                        • Lack of interest goes beyond apathy towards sport
                                                                                          • Figure 45: Reasons for not being interested in BT Sport, August 2013
                                                                                      • Attitudes towards Pay TV Services

                                                                                        • Key points
                                                                                          • On-demand is now in demand amongst pay TV subscribers
                                                                                            • Figure 46: Attitudes towards pay TV services, August 2013
                                                                                          • Providers can reward loyalty with long-term deals
                                                                                            • Bundles could help Sky to address value concerns
                                                                                              • Figure 47: Attitudes towards paid TV services, by TV services subscribed to, August 2013
                                                                                          • Ways of Attracting Non-subscribers

                                                                                            • Key points
                                                                                              • Figure 48: Factors that could encourage non-subscribers to pay for TV services, August 2013
                                                                                            • Younger consumers the most likely to upgrade
                                                                                              • Figure 49: Factors that could encourage non-subscribers to pay for TV services, by age, August 2013
                                                                                            • Providers can lessen churn by learning from ex-customers
                                                                                              • Figure 50: Factors that could encourage non-subscribers to pay for TV services, by TV services subscribed to, August 2013
                                                                                          • Appendix – Market Size and Forecast

                                                                                              • Figure 51: Forecast volume of pay TV subscribers, 2013-18
                                                                                              • Figure 52: Forecast value of pay TV subscriptions, 2013-18
                                                                                          • Appendix – TV Services in the Home

                                                                                              • Figure 53: TV services subscribed to, August 2013
                                                                                              • Figure 54: TV services subscribed to – Sky, by demographics, August 2013
                                                                                              • Figure 55: TV services subscribed to – Virgin Media, by demographics, August 2013
                                                                                              • Figure 56: TV services subscribed to – BT Vision, by demographics, August 2013
                                                                                              • Figure 57: TV services subscribed to – TalkTalk, by demographics, August 2013
                                                                                              • Figure 58: TV purchasing plans, by TV services subscribed to – Sky, August 2013
                                                                                              • Figure 59: TV purchasing plans, by TV services subscribed to – Virgin Media, August 2013
                                                                                              • Figure 60: TV purchasing plans, by TV services subscribed to – BT vision, August 2013
                                                                                              • Figure 61: TV purchasing plans, by TV services subscribed to – TalkTalk TV, August 2013
                                                                                              • Figure 62: TV services have in the home, August 2013
                                                                                              • Figure 63: Most common TV services in the home, by demographics, August 2013
                                                                                              • Figure 64: Next most common TV services have in the home, by demographics, August 2013
                                                                                              • Figure 65: TV services have in the home, by TV services subscribed to – Sky, August 2013
                                                                                              • Figure 66: TV services have in the home, by TV services subscribed to – Virgin Media, August 2013
                                                                                              • Figure 67: TV services have in the home, by TV services subscribed to – BT vision, August 2013
                                                                                              • Figure 68: TV services have in the home, by TV services subscribed to – TalkTalk TV, August 2013
                                                                                          • Appendix – Consumer Uptake of and Interest in BT Sport

                                                                                              • Figure 69: BT sport subscription uptake, August 2013
                                                                                              • Figure 70: BT Sport subscription uptake, by demographics, August 2013
                                                                                              • Figure 71: Interest in signing up to BT Sport, August 2013
                                                                                              • Figure 72: Interest in signing up to BT Sport, by demographics, August 2013
                                                                                              • Figure 73: Preferred methods of subscribing to BT Sport, August 2013
                                                                                              • Figure 74: Preferred methods of subscribing to BT Sport, by demographics, August 2013
                                                                                              • Figure 75: Reasons for not being interested in BT Sport, August 2013
                                                                                              • Figure 76: Most common reasons for not being interested in BT Sport, by demographics, August 2013
                                                                                              • Figure 77: Next most common reasons for not being interested in BT Sport, by demographics, August 2013
                                                                                          • Appendix – Attitudes towards Pay TV Services

                                                                                              • Figure 78: Attitudes towards paid TV services, August 2013
                                                                                              • Figure 79: Most common attitudes towards paid TV services, by demographics, August 2013
                                                                                              • Figure 80: Next most common attitudes towards paid TV services, by demographics, August 2013
                                                                                              • Figure 81: Least common attitudes towards paid TV services, by demographics, August 2013
                                                                                              • Figure 82: Attitudes towards paid TV services, by TV services subscribed to – Sky, August 2013
                                                                                              • Figure 83: Attitudes towards paid TV services, by TV services subscribed to – Virgin Media, August 2013
                                                                                              • Figure 84: Attitudes towards paid TV services, by TV services subscribed to – BT Vision, August 2013
                                                                                              • Figure 85: Attitudes towards paid TV services, by TV services subscribed to – TalkTalk, August 2013
                                                                                          • Appendix – Ways of Attracting Non-subscribers

                                                                                              • Figure 86: Factors that could encourage non-subscribers to pay for TV services, August 2013
                                                                                              • Figure 87: Most common factors that could encourage non-subscribers to pay for TV services, by demographics, August 2013
                                                                                              • Figure 88: Next most common factors that could encourage non-subscribers to pay for TV services, by demographics, August 2013
                                                                                              • Figure 89: Factors that could encourage non-subscribers to pay for TV services, by TV services have in the home, August 2013
                                                                                              • Figure 90: Factors that could encourage non-subscribers to pay for TV services, by TV services subscribed to – Sky, August 2013
                                                                                              • Figure 91: Factors that could encourage non-subscribers to pay for TV services, by TV services subscribed to – Virgin Media, August 2013
                                                                                              • Figure 92: Factors that could encourage non-subscribers to pay for TV services, by TV services subscribed to – BT Vision and TalkTalk, August 2013

                                                                                          Companies Covered

                                                                                          • Advertising Standards Authority
                                                                                          • Argos
                                                                                          • Barclays Bank plc
                                                                                          • British Broadcasting Corporation (BBC)
                                                                                          • British Sky Broadcasting Group plc (BSkyB)
                                                                                          • BT Group plc
                                                                                          • Channel 4
                                                                                          • Currys
                                                                                          • ESPN, Inc.
                                                                                          • Facebook, Inc.
                                                                                          • Freeview
                                                                                          • Netflix, Inc.
                                                                                          • Ofcom
                                                                                          • TalkTalk Telecom Ltd.
                                                                                          • Telewest Communications plc
                                                                                          • Tesco Plc
                                                                                          • The Carphone Warehouse Ltd
                                                                                          • TiVo Inc
                                                                                          • Virgin Media Ltd
                                                                                          • Virgin Mobile
                                                                                          • YouTube, Inc.
                                                                                          • YouView TV Ltd

                                                                                          TV Service Providers - UK - October 2013

                                                                                          £1,995.00 (Excl.Tax)