The Philippines in View

Transcription

1 The Philippines in View Executive Summary May 2010

2 The Philippines in View Executive Summary 1.1 A DTH Shake up? Despite the global economic crisis and the many structural problems faced by the Philippines economy, the pay TV market should see an overall market expansion of around 5% this year ahead of a % growth for the economy as whole. Indeed, the Philippine pay TV industry should expect some modest increase in revenue over the next few years but piracy, lack of legislative reforms and economics will restrict the pace of growth. Major urban centers where there is critical mass are the main focus for investors. With a population of 92 million (18.26 million households), GDP per person stands at US$1,866, just below Mongolia and Sri Lanka, and just above Pakistan and Vietnam. The number of TV households stands at 13.5 million. By far the highest penetration of pay TV households is in Metro Manila (population 14 million) where 27% of homes passed by a cable service view subscription TV services. Nationally, 51% of the population is under the age of 25 and more than half live in urban areas. Mobile teledensity stands at 73 million subscribers, with fixed line subscribers at 4 million households. Almost all TV households have colour television. Broadband penetration stands at 4%. Thus the legitimate pay TV market has been slow to grow with an estimated 1.5 million and 100,000 cable TV and DTH subscribers respectively. A key factor holding back national growth remains poverty the World Bank estimates 40% of the population lives on less than US$2 a day or US$60 per month. The Philippines: Subscribers by Monthly Household Income Below P7,500 P8,000 9,999 P10,000 14,999 P15,000 24,999 P25,000 59, 999 P60,000+ % Philippines population Access Any Subscription TV at Home Source: Synovate Media Atlas Q108 Q408 2 Copyright CASBAA 2010

3 The Philippines: Subscribers by Operator Any Subscription TV SkyCable Destiny Home Cable % Access at Home (People 15+) Others Source: Synovate Media Atlas Q108 Q408 But other factors restraining the growth of subscription TV have been the overbuilding of cable systems (multiple operators competing solely on price within franchise areas) and a lack of enforcement of an already weak intellectual property rights regime (signal theft). The weak regulatory environment has led to either outright piracy by commercial entities or endemic under reporting of subscriber numbers by licensed operators. Both issues are major problems for legitimate domestic operators and the suppliers of international programming (the bulk of cable content) alike. However, the gradual deployment of digital systems should create greater transparency of subscriber numbers, permit an increase in ARPU as more premium tiers are rolled out and make individual line tapping more difficult. Meanwhile, the deployment of new DTH platforms may energise the nationwide market, buoyed by the fact that MediaQuest, the media partner of telco behemoth Philippines Long Distance Telephone Company (PLDT), has recently joined the DTH fray through Cignal TV. 1.2 Cable TV Services Currently, there are some 700 CATV systems under management (out of 1,500 entities holding cable licenses from the National Telecommunications Commission) that provide a broad range of services, from basic tier analogue delivery to broadband internet and even Pay Per View services. The majority of cable TV subscription rates remain low thanks to the high level of poverty even where there is critical mass in areas such as Metro Manila, Cebu, Davao City and Baguio. This leaves much room for further growth. Monthly cable subscriber rates vary from P (US$5.65 $6.40) in the provinces to P1000 (US$22.60) in the upscale areas of Manila. The dominant cable player is SkyCable, accounting for an estimated one third of national cable penetration if we include partial investments in subsidiaries such as Home Cable and Sun Cable in Cebu, Davao City and Baguio. SkyCable, which launched in the late 1980s, is owned and operated by the Lopez Group, which also owns and operates ABS CBN, one of three dominant free to air broadcasting networks. The Lopez Group and its related Benpres Holdings until recently held a firm grip on the Manila Electric Company (Meralco), the biggest power company in the country with management of a significant percentage of the electricity poles in Metro Manila (used for electricity and cable TV distribution) and nearby suburbs and provinces. Through its First Philippine Holdings and Benpres units, the Lopez Group controls a 13.4% stake, while the First Pacific group, through national telco PLDT and Metro Pacific Investments, owns 34.7%. 3 Copyright CASBAA 2010

4 The Philippines in View 2010 The SkyCable system has now digitized around 90% of its network in Metro Manila enabling it to better control individual households illegally tapping into its network, among other advantages. Other MSO style operators include Global Destiny Cable, Cable Link, Central CATV and Pacific CATV. 1.3 DTH Services A major shake up of the Philippines pay TV market could be in the offing, as new investment comes online from MediaQuest, which in July 2009 launched its Cignal TV DTH platform. The Cignal TV platform is distributed via Ku band transponders on the NSS 11 satellite. Cignal TV offers 22 Standard Definition channels, of which 11 are free to air, plus a bouquet HDTV and VOD channels. The MediaQuest DTH offering may be strengthened by the recent purchase of a stake in ABC Development which operates the country's thirdlargest free to air network TV5 (formerly ABC 5) and holds a 100% stake in Primedia, which in turn is a programme producer and air time wholesaler. TV5 currently ranks third in the Philippines after the Lopez Group s ABS CBN and GMA Network. MediaQuest s other investments include a 30% stake in business newspaper BusinessWorld and a 51% interest in Nation Broadcasting. In July 2007 it also acquired licensed DTH firm GV Broadcasting Systems, which later changed its name to Mediascape. The related MediaQuest also has a minority stake in The Philippine Star newspaper. Another relatively new entrant to the DTH market is G SAT, which is owned by Global Broadcasting and Multimedia (GBMI), a joint venture between cable operator Global Destiny Cable and the Tieng family s Solar Group. The Solar Group holds rights to sports, film and TV distribution, production and broadcast divisions. It controls several free to air and CATV channels, including ETC, 2nd Avenue, Basketball TV, Solar Sports and CS9. The third DTH provider is Dream Satellite TV, which claims around 45,000 subscribers. Owned by the Cojuangco family and operating from the Agila 2 satellite, the Dream platform comprises some 30 channels, many of which have been available regionally via unauthorised IRDs. 1.4 Pay TV Content Wholesalers Two competing organisations dominate the wholesale distribution of pay TV content in the Philippines, Cable Boss and ACCION. Cable Boss, its affiliate Omnicontent Management, and ACCION represent almost all of the major international channel brands such as HBO Asia, CNN, Discovery, ESPN and Fox International Channels for sales of international cable TV programming. (Contracts with SkyCable are negotiated directly by programmers.) The Philippines: Share of Viewing in Subscription TV Homes All Youth Upmarket Kids Men Women % Subscription TV % Terrestrial TV Source: Nielsen Audience Measurement Q109 Q209 4 Copyright CASBAA 2010

5 1.5 Fixed broadband, Mobile and Internet Fixed broadband penetration in the Philippines stands at 4% of households with PLDT controlling 63% of the DSL market. PLDT also leads the mobile broadband market through Smart Communications which has 700,000 subscribers. PLDT had 1.2 million broadband subscribers at the end of June 2009 while nearest rival Globe Telecom had 379,308 with smaller players BayanTel (Benpres) and Sun Cellular a distant third and fourth. The NTC announced in June last year it would issue new rules to liberalize the broadband industry to spur universal access by Under the government s Medium Term Philippine Development Plan, all municipalities should have 100% access to broadband by However, the plan is seriously delayed and a long time off becoming a reality. Meanwhile, PLDT s Smart Communications had 35.3 million mobile subscribers at the end of Globe Telecom (45% owned by SingTel and 34% by the local Ayala group) had 25 million mobile customers. 1.6 Digital Transition The transition from analogue to digital terrestrial television (DTT) has moved slowly with the migration deadline now extended to The NTC is said to be in favor of the European Digital Video Broadcast Terrestrial (DVB T) as the preferred platform for DTT. The US based Advanced Television Systems (ATS) and Japan s Integrated Services Digital Broadcast (ISDB) technical standards are also being considered but most of the industry favors the European platform. ASEAN has already adopted the European standard. A number of players have already started testing the European platform including the country s two biggest television networks ABS CBN and GMA7 and Smart has tested DVB H for mobile TV. 1.7 Regulatory Environment Politics plays a significant part in the pay TV regulatory environment within the Philippines and there is not expected to be significant movement on this front until well after early May s presidential election. The late president Corazon Aquino signed an order in June 1987 regulating the operation of cable antenna television (CATV) systems in the Philippines. In the meantime, a bill to regulate the pay TV industry (the Convergence Bill) has been stalled in the House of Representatives for 10 years. Under the current constitution, cable TV is defined as "Media" and is thus barred from any foreign investment. Passage of the draft Convergence Bill would open pay TV infrastructure up for a level of Foreign Direct Investment (FDI), at least. At present, industry infrastructure regulation is covered by the NTC whose composition is influenced largely by major operators and political leaders. The NTC, much of whose agenda is driven by traditional telecoms issues, has had four commissioners in two years, apparently largely due to lobbying related to the Digital TV standard as well as telco issues. Intellectual property rights enforcement for the pay TV sector remains weak despite a 2006 Memorandum of Agreement signed between the NTC and the Intellectual Property Office (IPO) to cooperate fully on issues pertaining to pay TV piracy. In theory, the IPO is mandated to process piracy complaints and pass them to the NTC for action against infringing operators. In practice this has yet to deliver a decisive decision in favour of the rights holders. The criminal justice system for copyright issues within the Philippines remains frozen and, despite complaints filed by industry groups on behalf of content owners, has yet to deliver a decisive result. The Movie and Television Review and Classification Board (MTRCB) is mandated to have oversight of content issues but is largely passive within the pay TV sector. Meanwhile, the technical standard for digital pay TV services seems to have been settled as DVB. 5 Copyright CASBAA 2010

6 ABOUT CASBAA The Cable & Satellite Broadcasting Association of Asia (CASBAA) is dedicated to the promotion of multi channel television via cable, satellite, broadband and wireless video networks across the Asia Pacific. CASBAA represents some 130 Asia based corporations, which in turn serve more than 3 billion people. Among the highest priorities for CASBAA are the promotion of free and fair markets and the protection of intellectual property rights, as well as the development of thriving and competitive domestic communications industries. The Association is also dedicated to the development of regulatory best practices which assist the interests of both domestic and international participants within the multi channel and communication communities. CASBAA undertakes a number of initiatives including the pursuit of copyright enforcement, promotion of cable and satellite as a key advertising medium, lobbying activities, the promotion of regional technical standards, regulatory roundtables, and educational seminars. CASBAA Executive Office 802 Wilson House, Wyndham Street, Central, Hong Kong Tel: Fax: [email protected] The Cable & Satellite Broadcasting Association of Asia holds all copyrights to this report unless otherwise stated, and no part thereof may be reproduced or replicated without prior explicit and written permission.