The Communications Market 2006 (August)
Key points: The communications market
- Total retail revenue in the UK communications sector reached £50bn in 2005, a 5% increase compared to 2004. The biggest annual rise (£2bn) came from the telecoms sector, while television revenue grew by £500m. Total radio funding (BBC spend plus commercial revenue) remained broadly flat year-on-year.
- Average household spend on communications rose slightly in 2005 – by 54 pence (less than 1%) to £87.67 per month. The largest single component was mobile communications at £30.50 per month (35% of total spend).
- However, for the first time in five years, as a proportion of total household expenditure, average UK household spend on communications services fell slightly – from 4.63% in 2004 to 4.60% in 2005. This decrease was predominantly down to falling prices, particularly in fixed line telecoms, which more than offset increases in take-up and usage.
- Consumption of many communications services is rising. On average in 2005, mobile subscribers made more calls and sent more texts than they did in 2001, internet users spent almost 20 minutes more time online per week and TV viewers watched for 11 minutes longer; however, over the same period, radio listening fell by 24 minutes while fixed line calling remained flat.
- There is also evidence of a significant difference in communications usage patterns between young adults and the general population: for example, 16-24 year olds spend on average 21 minutes more time online per week, send 42 more SMS text messages, but spend over seven hours less time watching television.
- Availability of several new digital services increased during 2005; 3G mobile services are now available to over 90% of the population and the proportion of unbundled exchanges is up ten percentage points on 2004.
- Take-up of digital services continued to increase over the year: by March 2006 18.3 million UK homes took digital TV services, 11 million homes and small businesses had broadband connections, and there were around five million 3G subscribers.
- In 2005 and early 2006 a number of ‘converged’ services came to market including various IPTV (internet TV) offerings, television to mobile devices, and new voice over IP (internet telephony) products. In addition, operators are increasingly bundling their services, with fixed line/broadband bundles becoming particularly widespread.
Key points: Radio
- Total funding for the UK ’s radio industry stood at £1.15bn in 2005, down 2.2% on 2004. We estimate that BBC radio expenditure reached £626m or 55 % of the total. National commercial radio earned £270m from net advertising revenue (24%), while local commercial radio added a further £164m (14%). Commercial sponsorship made up the final £86m (7.5%).
- Listening has risen by 3% over the last five years. National commercial and BBC radio picked up listener hours across most age groups; by contrast, local commercial radio suffered losses, particularly among 25-34 year olds (down 30%).
- The BBC ’s share of radio listening rose to 55.4% in Q1 2006, up 3.4 percentage points since 2000. In Q3 2005, for the first time, the BBC ’s UK-wide station share exceeded that of all commercial radio; by Q3 2006 the gap between the two had widened to 1.7 percentage points.
- Three main groups account for 71.4% of all commercial radio listening, a rise of 7.8 percentage points on 2004. GCap Media had a 34% share (36% in 2004), Emap 25% (17%) and Chrysalis 12% (11%).
- GCap also has the largest share of commercial station licences with 22% of the total, up two percentage points on 2004. Emap held 16% of licences (a six percentage point increase) and The Local Radio Company 9% (no change).
- DAB sales exceeded 3m during Q1 2006 and an estimated 11% of UK homes now own a DAB digital radio set, up six percentage points on 2004.
- Some 51% of listeners say they have accessed radio through one of the digital platforms – accounting for around 10.5% of all radio listening.
- There are now 133 services which are available only through digital radio platforms and these services have a collective listening share of 2.3%.
- Sixteen new FM licences were awarded by Ofcom during 2005, with a further six awarded by May 2006. Ofcom has also awarded a total of 102 community radio licences since August 2005.
- Restricted service licences (RSLs) awards reached 498 during 2005, the highest number yet in a single year.
Key points: Telecommunications
- Total 2005 telecoms revenue reached £46.6 billion, of which £38.3 billion was retail revenue (i.e. revenue from end-users). Retail revenue rose by 5.5% compared to 2004.
- In residential telecoms, average household spend fell slightly during 2005, to just under £61 per month – this was in part due to falling prices: the real price of a typical ‘basket’ of residential telecoms services fell from £80/month to £76/month during the year.
- Mobile telecoms comprised £13.1 billion (34%) of total retail telecoms revenue – up from £12.0 billion in 2004 – and fixed line revenue fell from £10.9 billion in 2004 to £10.1 billion in 2005; internet (including broadband) showed the highest revenue growth of the major telecoms platforms – up by 17% to £3.4bn.
- Some 31% of UK call volumes in 2005 were from mobiles – a rise of three percentage points from 2004, and 11 percentage points higher than in 2001.
- Average mobile terminations rates (the wholesale charge paid by operators to terminate a call on a mobile network) fell by 24% during 2005, to stand at 5.9 pence per minute by the end of the year; this compares to an average rate of over 14 pence per minute in 2002.
- By the end of March 2006, 6.1 million of BT’s fixed exchange lines took some or all of their voice services from another operator using carrier pre-selection ( CPS ) – 1.2 million more lines than a year previously.
- By the end of March 2006, 11.1 million of the UK ’s homes and small businesses had broadband internet connections; over eight million of these connections were via DSL , compared with five million a year previously.
- Average broadband speeds rose during 2005, prices continued to fall, and choice increased. However our research suggests that consumers may not be fully aware of all the factors affecting the actual speed and cost of the service they receive such as: their distance from the exchange; the quality of their phone; the fact that they might be subject to usage caps and may be sharing elements of their broadband connection with other users
- 2005 saw rapid growth in the reach and usage of social networking websites (such as MySpace, Friends Reunited and Bebo), which allow users to create online profiles and connect with friends or others with similar interests. Our research shows that over 40% of adults with internet access have used these sites; that figure rises to 70% among 16-24 year-olds, with over half in this age group using them at least weekly.
Key points: Television
- Total television revenue exceeded £10.5bn in 2005, up 4% in 12 months. Subscription revenue rose by 9% while net advertising revenue increased by 2%. Subscriptions now exceed advertising revenue by a 10% margin.
- Homes with multichannel television broke through the 70% barrier in 2006 and by the end of the first quarter of 2006 the figure had risen to 18.6m, or 72.8% of homes.
- The main driver of multichannel television growth was Freeview, which added 2.0m homes in the 12 months to the end of March 2006. There are now 7.1m homes in which the main set receives television via digital terrestrial.
- Total hours of output from entertainment, factual, news, leisure, children’s and sport channels increased by 13% in 2005 to 713,227 – 19% of that output was originated material.
- Public service broadcasters launched a range of new free-to-air channels in 2005/06, including ITV4, CITV and More4. Channel 4 took E4 free-to-view and ITV and Channel 4 launched quiz-based channels ITVPlay and Quiz Call.
- The viewing share of digital-only channels reached 30% during 2005. Spin-offs from the five main channels featured prominently amongst those that performed most strongly, helping to hold up the overall portfolio share of the biggest broadcasters in multi-channel homes.
- Reflecting a strengthening multichannel line-up on Freeview, the collective share of the digital-only channels exceeded that of any one of the five main channels for the first time in 2005.
- The Secretary of State for Culture, Media and Sport announced a firm date for digital switchover, which will commence in 2008 with the Border region and come to its conclusion four years later. Digital UK launched the first advertising campaign to raise awareness of switchover in June 2006.
- Telewest and Sky launched high-definition TV services in time for the World Cup, offering a combination of broadcast channel content and pay-per-view films.
- The BBC launched a pilot of its internet media player (now re-named BBC iPlayer) offerings triallists on-demand access to a range of downloadable television programmes and radio content. Meanwhile a range of channel operators participated in trials of television to mobile handsets in 2005 to test consumers’ appetite for content on the move.